Justia Energy, Oil & Gas Law Opinion Summaries

Renaissance Resources Alaska, LLC (Renaissance) partnered with Rutter & Wilbanks Corporation (Rutter) to develop an oil field. Renaissance and Rutter acquired a lease to the entire working interest and the majority of the net revenue interest of the field. They then formed a limited liability company, Renaissance Umiat, LLC (Umiat), to which they contributed most of the lease rights. But when they formed Umiat, Renaissance and Rutter did not contribute all of their acquired lease rights to the new company: they retained a 3.75% overriding royalty interest (ORRI). Rutter was eventually unable to meet the capital contributions required by Umiat's operating agreement and forfeited its interest under the terms of the agreement. Rutter filed suit against Renaissance seeking a declaratory judgment that it was entitled to half of the retained 3.75% ORRI. Renaissance argued why it deserved the entire 3.75%: (1) Renaissance held legal title to the 3.75% ORRI; and (2) Rutter could only obtain title through an equitable remedy to which Rutter is not entitled. Upon review, the Supreme Court affirmed the superior court’s conclusion that Renaissance's characterization was inaccurate and that Rutter was entitled to title to half of the 3.75% ORRI. Furthermore, Renaissance argued that the superior court should have found an implied term that Rutter would forfeit its share of the 3.75% ORRI if Rutter failed to contribute its share of expenses. The Supreme Court affirmed the superior court’s determination that there was not such an implied term in the agreement. View "Renaissance Alaska, LLC, v. Rutter & Wilbanks Corporation" on Justia Law

Appellant Alaskan Crude Corporation operates an oil and gas unit known as the "Arctic Fortitude Unit." Alaskan Crude’s unit agreement with the Department of Natural Resources set work obligation deadlines that Alaskan Crude was required to meet to continue operating the Unit. In July 2008 the Commissioner found that Alaskan Crude had failed to meet its work obligations, gave notice that Alaskan Crude was in default under its unit agreement, and specified that the Unit would be terminated if Alaskan Crude did not cure the default by a new set of deadlines. Alaskan Crude appealed the Commissioner’s decision to the superior court, arguing that a pending judicial decision in a separate appeal qualified as a force majeure under the unit agreement, preventing Alaskan Crude from meeting its work obligations. It also argued that the Commissioner’s proposed default cure was an improper unilateral amendment of Alaskan Crude’s unit agreement. The superior court affirmed the Commissioner’s findings and decision and Alaskan Crude appealed. Upon review, the Supreme Court concluded that: (1) the pending judicial decision in Alaskan Crude’s separate appeal did not trigger the force majeure clause of the unit agreement; and (2) the Commissioner’s proposed default cure was not a unilateral amendment of Alaskan Crude’s unit agreement. Thus the Court affirmed the decision of the superior court upholding the decision of the Commissioner. View "Alaska Crude Corp. v. Alaska Dept. of Natural Resources" on Justia Law

Gas producers that lease land from Alaska must pay royalties calculated on the value of the gas produced from the leased area. The royalty may be calculated in one of two methods: the “higher of” pricing or contract pricing. “Higher of” pricing is the default method of calculating royalties and is calculated using market data and the prices of other producers. The Department of Natural Resources (DNR) usually does not calculate the royalty payments under “higher of” pricing until years after production. Under contract pricing, the lessee’s price at which it sells gas is used to determine the royalty payment. Appellant Marathon Oil requested contract pricing from 2008 onward and sought retroactive application of contract pricing for 2003-2008. The DNR approved contract pricing from 2008 onward but denied the retroactive application. The superior court affirmed the DNR’s decision. On appeal to the Supreme Court, Marathon argued that the statute that governs contract pricing permitted retroactive application of contract pricing. Upon review of the arguments and the applicable legal authority, the Supreme Court concluded that though the statute was ambiguous, it would defer to the DNR’s interpretation. Accordingly, the Court affirmed the superior court’s decision to uphold the DNR’s order.