Justia Energy, Oil & Gas Law Opinion Summaries

Gasoline consumers alleged that various oil producers colluded with the U.S. government, including then-President Trump, to negotiate with Russia and Saudi Arabia to cut oil production, limit future oil exploration, and end a price war on oil. Plaintiffs claimed this agreement fixed gas prices in violation of Sherman Act § 1, suppressed competition in violation of Sherman Act § 2, and involved anticompetitive mergers in violation of Clayton Act § 7.The United States District Court for the Northern District of California dismissed the case, finding it lacked subject-matter jurisdiction under the political question and act of state doctrines. The court also found that Plaintiffs failed to adequately plead an antitrust conspiracy. Additionally, the court dismissed Defendant Energy Transfer for lack of personal jurisdiction and denied Plaintiffs leave to amend their complaint, as well as requests for additional discovery and oral argument.The United States Court of Appeals for the Ninth Circuit affirmed the district court’s dismissal. The court held that the political question doctrine barred judicial review of the President’s foreign policy decisions, as these decisions are committed to the political branches of government. The court also found no judicially manageable standards to resolve the claims under antitrust laws. Additionally, the act of state doctrine barred the claims because they involved evaluating the petroleum policies of foreign nations. The court further held that Plaintiffs failed to state a plausible antitrust conspiracy claim regarding Defendants’ private conduct. Finally, the court found no abuse of discretion in the district court’s procedural rulings. View "D'Augusta v. American Petroleum Institute" on Justia Law

This case involves TRC Operating Co., Inc. and TRC Cypress Group, LLC (collectively TRC) and Chevron U.S.A., Inc. (Chevron), oil producers operating adjacent well fields in Kern County, California. Both companies pump from a shared underground oil reservoir and engage in a process known as “cyclic steaming” to make oil extraction more efficient. In 1999, a “surface expression” formed near a Chevron well, which occurs when the steaming process causes a lateral fracture from the wellbore, allowing oil and other effluent to escape to the surface. Despite Chevron’s attempts at remediation, in 2011, an eruption occurred in the area of the well, causing a sinkhole to form, which killed a Chevron employee. The state oil and gas regulator issued various orders preventing steaming in the area, which lasted four years. TRC sued Chevron, claiming Chevron’s negligent maintenance and operation of its property led to dangerous conditions which made it unsafe to perform cyclic steaming operations. These conditions led to the regulator's shut-down orders, and to TRC’s harm and damages. Chevron countersued, claiming TRC’s failure to adequately maintain its own wells was the cause of the surface expression, the eruptions, and damages suffered by Chevron. The jury found in favor of TRC, awarding approximately $120 million in damages against Chevron. Nothing was awarded to Chevron. Chevron filed motions for a new trial and for judgment notwithstanding the verdict (JNOV). The trial court denied the JNOV, but granted a new trial based on misconduct by a juror. TRC appealed the granting of this motion. The Court of Appeal reversed the grant of a new trial, finding that the juror was not ineligible and no prejudice resulted from the juror’s failure to disclose his prior criminal conviction or the previous civil lawsuit. Chevron also filed a protective cross-appeal, in the event the Court of Appeal found against it on TRC’s appeal. Chevron appealed the denial of its JNOV, arguing that the regulator's orders to stop steaming were the superseding cause of any harm suffered by TRC and precludes it from bearing any liability. The Court of Appeal concluded sufficient evidence was introduced to sustain the verdict, demonstrating TRC did not stop any of its steaming operations solely because of the regulator's orders, which were therefore not a superseding cause. The Court of Appeal reversed the trial court’s order granting a new trial, and remanded with instructions to reinstate the judgment against Chevron. View "TRC Operating Co. v. Chevron USA, Inc." on Justia Law

In 2016, Venezuela's state-owned oil company, Petróleos de Venezuela S.A. (PDVSA), offered a bond swap whereby its noteholders could exchange unsecured notes due in 2017 for new, secured notes due in 2020. PDVSA defaulted in 2019, and the National Assembly of Venezuela passed a resolution declaring the bond swap a "national public contract" requiring its approval under Article 150 of the Venezuelan Constitution. PDVSA, along with its subsidiaries PDVSA Petróleo S.A. and PDV Holding, Inc., initiated a lawsuit seeking a judgment declaring the 2020 Notes and their governing documents "invalid, illegal, null, and void ab initio, and thus unenforceable." The case was taken to the United States Court of Appeals for the Second Circuit, which certified three questions to the New York Court of Appeals.The New York Court of Appeals, in answering the first question, ruled that Venezuelan law governs the validity of the notes under Uniform Commercial Code § 8-110 (a) (1), which encompasses plaintiffs' arguments concerning whether the issuance of the notes was duly authorized by the Venezuelan National Assembly under the Venezuelan Constitution. However, New York law governs the transaction in all other respects, including the consequences if a security was "issued with a defect going to its validity." Given the court's answer to the first certified question, it did not answer the remaining questions. View "Petróleos de Venezuela S.A. v MUFG Union Bank, N.A." on Justia Law

Defendant-Appellant Petróleos de Venezuela, S.A. (“PDVSA”), an oil company wholly owned by the Bolivarian Republic of Venezuela, entered into two Note Agreements and a Credit Agreement with the predecessor-in-interest to now-Plaintiff-Appellee Red Tree Investments, LLC (“Red Tree”). PDVSA became delinquent on its obligations under the contracts. Red Tree’s predecessor-in-interest accelerated the outstanding debt. Then Red Tree initiated these actions in Supreme Court, New York County, which Defendants removed to district court. PDVSA claimed that any further payment under the Agreements was impossible and should therefore be excused. The district court granted summary judgment against PDVSA on the grounds that PDVSA had failed to provide sufficient evidence that payment was impossible or in the alternative, that any impediment to payment was not reasonably foreseeable. It therefore entered judgment in favor of Red Tree and imposed post-judgment interest. On appeal, PDVSA contends that the district court erred in concluding that no reasonable trier of fact could find that payment was impossible or that U.S. sanctions were unforeseeable. PDVSA further asserts that the district court incorrectly calculated post-judgment interest.   The Second Circuit affirmed. The court agreed with the district court that payment by PDVSA was not impossible. Further, the court concluded that the district court did not err in its calculation of post-judgment interest. The court explained that under the plain language of the Note and Credit Agreements, the outstanding principal and interest that accrued prejudgment—including both default and ordinary interest—are subject to default interest post-judgment. View "Red Tree Investments, LLC v. PDVSA, Petróleo" on Justia Law

In January 2017, Defendant-Appellant Petróleos de Venezuela, S.A. (“PDVSA”), an oil company wholly owned by the Bolivarian Republic of Venezuela, entered into a Note Agreement with then-Plaintiff-Appellee Dresser-Rand Company. PDVSA made two of the twelve payments due under the Note Agreement in April and July 2017 but failed to make any subsequent payments. In February 2019, Dresser-Rand declared PDVSA to be in default, accelerated the debt, and initiated this action in Supreme Court, New York County, which Defendants removed to the district court. PDVSA claimed that any further payment was impossible and should therefore be excused. The district court concluded that PDVSA had failed to prove that repayment was impossible. It therefore entered judgment in favor of Dresser-Rand. On appeal, PDVSA contends that the district court erred in concluding that payment was not impossible. PDVSA further asserts that the district court incorrectly calculated post-judgment interest.   The Second Circuit affirmed. The court agreed with the district court that payment by PDVSA was not impossible, and the court further concluded that PDVSA forfeited any arguments relating to post-judgment interest. The court explained that the evidence demonstrates that PDVSA never attempted payment to a different bank or in an alternative currency, nor did it investigate whether this manner of payment would have been truly impossible. Instead of the evidence shows, did nothing. PDVSA cannot benefit from the impossibility defense on speculation. View "Siemens Energy, Inc. v. PDVSA" on Justia Law

The Boardwalk Master Limited Partnership's (“MLP”) limited partnership agreement (the “Partnership Agreement”) disclaimed the general partner’s fiduciary duties, and included a conclusive presumption of good faith when relying on advice of counsel. At issue in this appeal was whether Boardwalk’s general partner properly exercised a call right to take the Boardwalk MLP private. Under the Partnership Agreement, the general partner could exercise a call right for the public units if it received an opinion of counsel acceptable to the general partner that a change in FERC regulations “has or will reasonably likely in the future have a material adverse effect on the maximum applicable rate that can be charged to customers.” The Boardwalk MLP general partner received an opinion of counsel from Baker Botts that a change in FERC policy met the call right condition. Skadden advised that: (1) it would be reasonable for the sole member, an entity in the Boardwalk MLP structure, to determine the acceptability of the opinion of counsel for the general partner; and (2) it would be reasonable for the sole member, on behalf of the general partner, to accept the Baker Botts Opinion. The sole member followed Skadden’s advice and caused the Boardwalk MLP general partner to exercise the call right and to acquire all the public units through a formula in the Partnership Agreement. The Boardwalk MLP public unitholders filed suit and claimed that the general partner improperly exercised the call right. In a post-trial opinion, the Delaware Court of Chancery concluded the general partner improperly exercised the call right because the Baker Botts Opinion had not been issued in good faith; the wrong entity in the MLP business structure determined the acceptability of the opinion; and the general partner was not exculpated from damages under the Partnership Agreement. After its review, the Delaware Supreme Court agreed with the Boardwalk entities that: (1) the sole member was the correct entity to determine the acceptability of the opinion of counsel; (2) that the sole member, as the ultimate decisionmaker who caused the general partner to exercise the call right, reasonably relied on Skadden’s opinion, and that the sole member and the general partner were therefore conclusively presumed to have acted in good faith in exercising the call right. Thus, the general partner and others were exculpated from damages under the Partnership Agreement. The Court of Chancery’s judgment was reversed and the matter remanded for further proceedings. View "Boardwalk Pipeline v. Bandera Master Fund LP" on Justia Law

The United States District Court for the Western District of Oklahoma certified two questions of law to the Oklahoma Supreme Court relating to the Oklahoma Consumer Protection Act, and whether it applied to conduct outside of Oklahoma. The matter concenred a dispute between Continental Resources, Inc. (Continental), an oil and gas producer headquartered in Oklahoma, and Wolla Oilfield Services, LLC (Wolla), a North Dakota limited liability company that operated as a hot oil service provider in North Dakota. Continental alleged the parties entered into an agreement for Wolla to provide hot oil services at an hourly rate to Continental's wells in North Dakota. As part of the contract, Wolla agreed to submit its invoices through an "online billing system" and to bill accurately and comprehensively for work it performed. A whistleblower in Wolla's accounting department notified Continental about systematic overbilling in connection with this arrangement. Continental conducted an audit and concluded Wolla's employees were overbilling it for time worked. Wolla denies these allegations. The Oklahoma Supreme Court concluded: (1) the Oklahoma Consumer Protection Act does not apply to a consumer transaction when the offending conduct that triggers the Act occurs solely within the physical boundaries of another state; and (2) the Act also does not apply to conduct where, even if the physical location is difficult to pinpoint, such actions or transactions have a material impact on, or material nexus to, a consumer in the state of Oklahoma. View "Continental Resources v. Wolla Oilfield Services" on Justia Law

Gulf LNG Energy, LLC owned and operated a liquefied natural gas (“LNG”) terminal in Mississippi (the “Pascagoula Facility”). Gulf LNG Pipeline, LLC (collectively with Gulf LNG Energy, LLC, “Gulf”), owned and operated a five-mile long pipeline that distributed LNG from the Pascagoula Facility to downstream inland pipelines. Eni USA Gas Marketing LLC (“Eni”), marketed natural gas products and offered related services to customers in the U.S. In 2007, Gulf and Eni entered into a Terminal Use Agreement (the “TUA”), whereby Gulf would construct the Pascagoula Facility, and Eni would use the Facility to receive, store, regasify, and deliver imported LNG to downstream businesses. Under the TUA, Eni agreed to pay Gulf fees for using the Facility, including monthly Reservation Fees and Operating Fees. In 2016, Eni filed for arbitration, alleging the U.S. natural gas market had undergone a “radical change” due to “unforeseen, vast new production and supply of shale gas in the United States [that] made import of LNG into the United States economically irrational and unsustainable.” Eni alleged the essential purpose of the TUA had been frustrated and thus terminated because of “fundamental and unforeseeable change in the United States natural gas/LNG market,” and sought a declaration that Eni could terminate the TUA at any time because Gulf breached warranties and covenants. After the first arbitration, the panel order Eni to pay Gulf "just compensation ...for the value their partial performance of the TUA conferred upon Eni." Gulf subsequently sued Eni to collect the arbitration award; judgment was entered in Gulf's favor. Eni initiated a second arbitration, again asserting breaches of the TUA. Gulf moved to dismiss the second arbitration. The Court of Chancery ruled the issues raised in the second arbitration were already decided in the first (and subsequent court case). The Delaware Supreme Court, after its review of these proceedings, determined: (1) the Court of Chancery had jurisidction to enjoin a collateral attack on the first arbitration award; and (2) the Court of Chancery should have enjoined all claims in the second arbitration between the parties, because the admitted goal of the second arbitration was to "raise irregularities and revisit the financial award in the first arbitration." The Court, therefore, affirmed part of the Court of Chancery's judgment affirming dismissal of the second arbitration, and reversed any part of the lower court's judgment allowing certain issues in the second arbitration to be considered. View "Gulf LNG Energy v. ENI USA Gas Marketing" on Justia Law

Thomas Lockhart appealed an order finding him in contempt, imposing a sanction requiring the forfeiture of $300,000 to Douglas Arnold and Thomas Arnold, and divesting him of any management rights in Trident Resources, LLC. In 2013, Lockhart and the Arnolds entered into business capturing and compressing natural gas. The parties formed Trident Resources, with Lockhart owning a 70% interest and each of the Arnolds owning a 15% interest. Trident Resources owned two well processing units (WPUs), each purchased for $300,000. In 2015, the Arnolds initiated this action seeking reformation of the Trident Resources’ member control and operating agreement to clarify the parties’ respective ownership interests. Following a bench trial, the court ordered the entry of a judgment confirming Lockhart’s ownership of a 70% interest and each of the Arnold’s 15% ownership interest in Trident Resources. Before the entry of the judgment, Lockhart informed the Arnolds he had received an offer from Black Butte Resources to purchase one of the WPUs for $300,000. The Arnolds consented to the sale, provided the proceeds were deposited into their attorney’s trust account. When it appeared Lockhart had failed to deposit the funds into the trust account, the Arnolds filed a motion seeking to discover the location of the WPU and the sale proceeds. Before the hearing on the Arnolds’ motion, Lockhart deposited $100,000 into the account. The trial court ordered Lockhart to provide information regarding the WPU sold and the date the remaining $200,000 would be deposited. Lockhart eventually deposited $200,000 into the trust account and filed an affidavit stating Black Butte had purchased the WPU and the WPU had been transferred to Black Butte. Subsequent to Lockhart filing his affidavit, the Arnolds learned the WPU had not been sold to Black Butte for $300,000, but had instead been sold to another party for $500,000. The Arnolds filed a motion requesting the court to find Lockhart in contempt and for the imposition of appropriate sanctions. At the hearing on the motion, Lockhart conceded his affidavit was false and stipulated to the entry of a finding of contempt. On appeal, Lockhart argued the district court’s order improperly imposed a punitive sanction for his contempt. The North Dakota Supreme Court concluded the circumstances necessary for the imposition of a punitive sanction were not present prior to the imposition of the sanction in this case. The Court was left with an insufficient record to review the appropriateness of the imposition of a remedial sanction in the amount ordered by the trial court. reverse and remand this case to the district court for further findings in support of the sanction imposed for Lockhart’s contempt. The trial court judgment was reversed and the matter remanded for further findings. View "Arnold, et al. v. Trident Resources, et al." on Justia Law

North Star Water, LLC, provided water to oil drilling companies. In September 2014, North Star hired Northwest Grading, Inc., to construct an underground water pipeline from the Missouri River to North Star’s various pumping stations. Northwest Grading sent regular invoices to North Star during the course of construction. In August 2015, Northwest Grading informed North Star it owed a balance of $91,072.99. Northwest Grading notified North Star it would repossess the pipeline if it were not paid immediately. Northwest Grading did not receive payment. Employees of Northwest Grading made the pipeline inoperable by closing valves and filling the valve boxes with dirt and concrete. As a result, North Star was temporarily unable to sell water to at least one of its customers. Northwest Grading sued North Star for breach of contract, quantum meruit, and foreclosure of a construction lien. North Star counterclaimed for fictitious billing, trespass, and damage to property through unlawful repossession. The district court entered findings of fact, conclusions of law, and an order for judgment in October 2018. The court found a business relationship existed between Northwest Grading and North Star, but not based on a written contract. The court concluded Northwest Grading was not authorized to repossess the pipeline by pouring concrete in the valve boxes, and its doing so was a breach of the peace. The North Dakota Supreme Court concluded the district court did not err as to either party’s damages and did not abuse its discretion by denying Northwest Grading’s motion to strike testimony. The Court modified the judgment to correct the calculation of interest, and affirmed the judgment as modified. View "Northwest Grading, Inc. v. North Star Water, LLC, et al." on Justia Law