Justia Energy, Oil & Gas Law Opinion Summaries

TXU Portfolio Management Company (TXU) entered into a contract with FPL Energy, LLC to receive electricity and renewable energy credits (RECs) from wind farms owned by FPL. After FPL failed to provide the electricity and RECs, TXU filed a breach of contract action against FPL. FPL counterclaimed, arguing that TXU failed to provide it with sufficient transmission capacity. The trial court granted two partial summary judgments declaring (1) the contracts required TXU to provide transmission capacity, and (2) the contracts’ liquidated damages provisions were unenforceable. After a jury trial on the remaining issues, the trial court entered take-nothing judgments for both parties. The court of appeals reversed both summary judgment rulings. The Supreme Court (1) affirmed the court of appeals’ holding that TXU owed no contractual duty to provide transmission capacity; but (2) reversed the portion of the court of appeals’ judgment regarding liquidated damages, holding that the liquidated damages provisions applied only to RECs and were unenforceable as a penalty. Remanded for a determination of damages.View "FPL Energy, LLC v. TXU Portfolio Mgmt. Co., L.P." on Justia Law

Williams Alaska Petroleum owned and operated a refinery, which ConocoPhillips Alaska supplied with crude oil. ConocoPhillips demanded that Williams tender a payment of $31 million as adequate assurances of Williams’s ability to perform if an ongoing administrative rate-making process resulted in a large retroactive increase in payments that Williams would owe ConocoPhillips under the Exchange Agreement. ConocoPhillips offered to credit Williams with a certain rate of interest on that principal payment against a future retroactive invoice. Williams transferred the principal of $31 million but demanded, among other terms, credit corresponding to a higher rate of interest. Williams stated that acceptance and retention of the funds would constitute acceptance of all of its terms. ConocoPhillips received and retained the funds, rejecting only one particular term in Williams’s latest offer but remaining silent as to which rate of interest would apply. Years later, after the conclusion of the regulatory process, ConocoPhillips invoiced Williams retroactively pursuant to their agreement. ConocoPhillips credited Williams for the $31 million principal already paid as well as $5 million in interest calculated using the lower of the two interest rates. Williams sued ConocoPhillips, arguing that a contract had been formed for the higher rate of interest and that it was therefore owed a credit for $10 million in interest on the $31 million principal. The superior court initially ruled for Williams, concluding that a contract for the higher rate of interest had formed under the Uniform Commercial Code when ConocoPhillips retained the $31 million while rejecting one offered term but voiced no objection to Williams’s specified interest term. On reconsideration, the superior court again ruled for Williams, this time determining that a contract for the higher rate of interest had formed based on the behavior of the parties after negotiation under the UCC, or, in the alternative, that Williams was entitled to a credit for a different, third rate of interest in quantum meruit. The superior court also ruled in favor of Williams on all issues related to attorney’s fees and court costs. ConocoPhillips and Williams both appealed. Upon review, the Supreme Court concluded that the superior court was right the first time and that the parties entered into a contract for the higher rate of interest under the UCC.View "ConocoPhillips Alaska, Inc. v. Williams Alaska Petroleum, Inc." on Justia Law

The companies obtained an oil and gas lease from the government for a 5760-acre tract on the Outer Continental Shelf. They made an initial bonus payment of $23,236,314 and have paid additional rental payments of $54,720 per year. The lease became effective on August 1, 2008, and had an initial term running through July 31, 2016. It provided that it issued pursuant to and was subject to the Outer Continental Shelf Lands Act of August 7, 1953, (OCSLA) 43 U.S.C. 1331 and “all regulations issued pursuant to the statute in the future which provide for the prevention of waste and conservation of the natural resources of the Outer Continental Shelf and the protection of correlative rights therein; and all other applicable statutes and regulations.” In 2010, an explosion and fire on the Deepwater Horizon semi-submersible oil drilling rig in the Gulf of Mexico killed 11 workers and caused an oil spill that lasted several months. As a result, the government imposed new regulatory requirements, Oil Pollution Act (OPA), 33 U.S.C. 2701. The companies sued for breach of contract. The Claims Court and Federal Circuit ruled in favor of the government, finding that the government made the changes pursuant to OCSLA, not OPA. View "Century Exploration New Orleans, LLC v. United States" on Justia Law

Plaintiff filed suit alleging that he was the owner of certain fractional work interests in four Ritchie County mining partnerships. The court certified the following question to the Supreme Court of Appeals of West Virginia: Whether the proponent of his own working interest in a mineral lease may prove his entitlement thereto and enforce his rights thereunder by demonstrating his inclusion within a mining partnership or partnership in mining, without resort to proof that the lease interest has been conveyed to him by deed or will or otherwise in strict conformance with the Statute of Frauds.View "Valentine v. Sugar Rock, Inc." on Justia Law

Drillers filed a mineral lien on Debtor's well after Drillers performed work on the well and were never paid. The bankruptcy court dismissed Drillers' constructive trust and equitable lien claims and granted summary judgment to Debtors on Drillers' mineral contractor's and subcontractor's lien claims. The district court affirmed. The court affirmed the dismissal of Drillers' constructive trust and equitable lien claims. However, the court reversed and remanded the grant of summary judgment on Drillers' mineral subcontractors' lien claims because Drillers submitted sufficient evidence to survive summary judgment. The court held that it is possible under Texas law for an owner to also be a contractor, and for a laborer to secure liens against both the contracting and non-contracting owners. Viewed in the light most favorable to Drillers, the facts demonstrate that Drillers were subcontractors with regard to Debtors. View "Endeavor Energy Resources, L.P, et al. v. Heritage Consolidated, L.L.C., et al." on Justia Law

In 2002 oil companies filed breach of contract actions against the government, concerning sales of offshore oil and glass leases in the 1980s. The Claims Court held that the government had breached its contracts by preventing the companies from drilling for oil in the offshore areas covered by the leases. The Federal Circuit affirmed the judgment and restitution awards of approximately $1 billion. Nycal, which held a 4.25 percent interest in two of the leases, waived its right to restitution and pursued a claim for lost profits. The Claims Court held that it was permissible for Nycal to seek lost-profits damages even though the other owners of the leases in which Nycal held a partial share had accepted restitution, but concluded that Nycal had not proved its case for lost profits. The Federal Circuit affirmed, noting the government’s evidence that Nycal could not have made a profit on its share of the leases.View "NYCAL Offshore Dev. Corp. v. United States" on Justia Law

At issue in this case was a joint operating agreement (JOA) for Wyoming oil and gas interests entered into in 2000 by the predecessors in interest to Windsor Energy Group, LLC and Windsor Beaver Creek, LLC (together, Windsor) and Noble Energy, Inc. (Noble). In 2004, Noble’s predecessor assigned its interest to another party. In 2010, Windsor filed suit against Noble’s predecessor, claiming it was obligated for costs under the JOA. The district court ruled (1) an assignor of an interest who was not formally released was still obligated under the JOA, but (2) Windsor’s claim against Noble for breach of the JOA was barred by laches. The Supreme Court affirmed the district court’s judgment without addressing the contract issue, holding that the district court (1) did not err in ruling that the equitable doctrine of laches was an available defense to Windsor’s claim for breach of the JOA even though the statute of limitations had not expired; and (2) did not abuse its discretion by finding the elements of laches were satisfied in this case. View "Windsor Energy Group, LLC v. Noble Energy, Inc." on Justia Law

Lessors appealed the district court's grant of summary judgment in favor of the lessee, Chesapeake, in this dispute over oil and gas lease royalty provisions. The court concluded that the value of the lessors' royalty is a percentage of the market value at the point of sale, which in this case is at the well; a "net-back" method of calculation does not "burden" or reduce the value of the royalty; Chesapeake has sold the gas at the wellhead and that is the point of sale at which market value must be calculated under the terms of the lessors' lease; and the Texas court's decision in Heritage Res., Inc. v. NationsBank, remains binding law. Therefore, the court affirmed the judgment of the district court. View "Potts, et al. v. Chesapeake Exploration, L.L.C." on Justia Law

In approximately twenty years PCS Nitrogen, Inc. contributed to environmental contamination by manufacturing fertilizer and disturbing contaminated soil during various demolition activities. In 2003, Ashley II of Charleston, Inc. purchased 27.62 acres of the PCS's property. Since that time, Ashley II has incurred substantial costs in remediating the environmental contamination. In July 2008, Ashley II filed a complaint against PCS seeking a declaration of joint and several liability under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) due to costs of the environmental cleanup at the Site. Additionally, PCS asserted a third-party indemnification claim against the site's previous owner based on the indemnity provision in a 1966 purchase agreement, seeking indemnification for attorney's fees, costs, and litigation expenses incurred in establishing that the predecessor contributed to the contamination. The South Carolina Supreme Court anwered the following certified question from the United States District Court for the District of South Carolina: "Does the rule that a contract of indemnity will not be construed to indemnify the indemnitee against losses resulting from its own negligent acts, unless such intention is expressed in clear and unequivocal terms, apply when the indemnitee seeks contractual indemnification for costs and expenses resulting in part from its own strict liability acts? " In the context of the underlying claim in federal court, the South Carolina Court answered the question, "no." View "Ashley II v. PCS Nitrogen" on Justia Law

In 1983 Bitler leased gas stations to Marathon. The Environmental Protection Agency adopted new regulations so that that underground petroleum tanks and pipes at the gas stations had to be removed, upgraded, or replaced, 40 C.F.R. 280.21(a). In 1992 the parties amended the leases to make Marathon “fully responsible for removing” the tanks and pipes, filling holes created by the removal, complying with all environmental laws, “leav[ing] the Premises in a condition reasonably useful for future commercial use,” and “replac[ing] any asphalt, concrete, or other surface, including landscaping.” Marathon agreed to return the Premises “as nearly as possible in the same condition as it was in prior to such remediation work,” and to be responsible “for any and all liability, losses, damages, costs and expenses,” and to continue paying rent. The properties can be restored as gas stations with above‐ground storage tanks, and may be suitable for other commercial outlets. After completion of the work Bitler sued Marathon, alleging breach of contract and “waste.” The Seventh Circuit vacated to waste regarding Michigan properties, with directions to double those damages. The court affirmed dismissal of some of the contract claims. It would not conform to the reasonable expectations of the parties to limit liability for waste or other misconduct by a tenant simply because a lease had to be extended for an indefinite period to allow a response to unforeseen changes. View "Bitler Inv. Venture II v. Marathon Petroleum Co. LP" on Justia Law