Justia Energy, Oil & Gas Law Opinion SummariesArticles Posted in Louisiana Supreme Court
Gloria’s Ranch, LLC. v. Tauren Exploration, Inc.
A landowner brought suit against several mineral lessees for breach of the obligations of the mineral lease. The mortgagee of one of the lessees was also named as a defendant. The lower courts held all lessees and the mortgagee jointly liable for damages resulting from the failure to furnish a recordable act evidencing the expiration of the lease (i.e., failure to release the lease). The Louisiana Supreme Court granted consolidated writ applications to determine: (1) whether the mortgagee was properly held jointly liable as an “owner” of the lease under La. Mineral Code art. 207 and a “lessee” under La. Mineral Code art. 140; (2) whether the imposition of joint liability was correct with regard to the owner of a portion of the shallow rights; (3) whether La. Mineral Code art. 140’s calculation of damages contemplated the inclusion of unpaid royalties (the amount due) in addition to double the amount of unpaid royalties (as a penalty) or whether the maximum damage award allowed is twice the amount of unpaid royalties; and (4) whether $125,000 in attorney fees for work done on appeal was excessive. The Court found: (1) the mortgagee was not an “owner” for purposes of La. Mineral Code art. 207 and was, therefore, not liable for failure to release the lease. For the same reasons, the Court found the mortgagee was not a “lessee” for purposes of La. Mineral Code art. 140 and, was, therefore, not liable for failure to pay royalties that were due. (2) The Court found Tauren is jointly liable for the damages because the failure to release the lease was an indivisible obligation under the particular facts of this case. (3) The Court held La. Mineral Code art. 140 authorized as damages a maximum of double the amount of unpaid royalties. (4) Last, the Court amended the award of attorney fees. View "Gloria's Ranch, LLC. v. Tauren Exploration, Inc." on Justia Law
Bridges v. Nelson Industrial Steam Co.
Nelson Industrial Steam Company (“NISCO”) was in the business of generating electric power in Lake Charles. In order to comply with state and federal environmental regulations, NISCO introduces limestone into its power generation process; the limestone acts as a “scrubbing agent.” The limestone chemically reacts with sulfur to make ash, which NISCO then sells to LA Ash, for a profit of roughly $6.8 million annually. LA Ash sells the ash to its customers for varying commercial purposes, including roads, construction projects, environmental remediation, etc. NISCO appealed when taxes were collected on its purchase of limestone over four tax periods. NISCO claimed its purchase of limestone was subject to the “further processing exclusion” of La. R.S. 47:301(10)(c)(i)(aa), which narrowed the scope of taxable sales. The Louisiana Supreme Court granted NISCO’s writ application to determine the taxability of the limestone. The trial court ruled in the Tax Collectors' favor. After its review, the Supreme Court found that NISCO’s by-product of ash was the appropriate end product to analyze for purposes of determining the “further processing exclusion’s” applicability to the purchase of limestone. Moreover, under a proper “purpose” test, the third prong of the three-part inquiry enunciated in "International Paper v. Bridges," (972 So.2d 1121(2008)) was satisfied, "as evidenced by NISCO’s choice of manufacturing process and technology, its contractual language utilized in its purchasing of the limestone, and its subsequent marketing and sale of the ash." Therefore the Court reversed the trial court and ruled in favor of NISCO. View "Bridges v. Nelson Industrial Steam Co." on Justia Law
Posted in: Business Law, Energy, Oil & Gas Law, Environmental Law, Government & Administrative Law, Louisiana Supreme Court, Tax Law
Hayes Fund for the First Untied Methodist Church of Welsh, LLC v. Kerr-McGee Rocky Mountain, LLC
This case was brought by the plaintiffs, mineral royalty owners, against defendants, mineral lessees and working interest owners, for unrecovered hydrocarbons after two wells ceased production. Following a lengthy bench trial, the district court concluded plaintiffs had not proven the operators caused any loss of hydrocarbons and dismissed their claims with prejudice. The single issue before the Louisiana Supreme Court was whether the district court committed manifest error in ruling in favor of defendants, finding their experts more credible than plaintiffs' expert. The Court of Appeal reversed. The Supreme Court found that the appellate court was incorrect in its analysis of the manifest error review standard, and after reviewing the record, the Supreme Court concluded there was a reasonable basis for the district court's conclusion on causation. Therefore, it's conclusion was not clearly erroneous. The Court reversed the Court of Appeals and reinstated the judgment of dismissal. View "Hayes Fund for the First Untied Methodist Church of Welsh, LLC v. Kerr-McGee Rocky Mountain, LLC" on Justia Law
McCarthy v. Evolution Petroleum Corp.
This case arose from a petition filed by vendors of mineral rights, plaintiff John C. McCarthy, individually and as trustee of the Kathleen Balden Trust, and plaintiff Marjorie Moss. Plaintiffs named as defendant Evolution Petroleum Corporation, which was formerly known as Natural Gas Systems, Inc. Plaintiffs also named as a defendant NGS Sub. Corp. (“NGS”). Plaintiffs sought damages and rescission of their sale of royalty interests in mineral leases within the Delhi Field Unit, located in Richland Parish. Plaintiffs alleged fraud and error as grounds for rescission. The defendants filed a peremptory exception of no cause of action, which the district court granted, and the case was dismissed. In the first of two appeals in this case, the appellate court affirmed the exception of no cause of action, but reversed the dismissal with instructions to the district court on remand to allow the plaintiffs the opportunity to amend their petition to state a cause of action. The cause of action that plaintiffs came up with was, according to the appellate court, "novel and untested," and the Supreme Court granted review to determine whether that cause of action comported with Louisiana mineral law. The purported cause of action imposed a duty on a mineral lessee purchasing the lessor’s mineral royalty rights to disclose to the lessor that the lessee has already negotiated the resale of the mineral rights to a third party for a significantly higher price. Finding the lessee’s duties upon which the appellate court premised its cause of action to be expressly excluded in the Mineral Code, the Supreme Court reversed the appellate court’s decision, and reinstated the district court’s decision, which ruled plaintiffs failed to state a cause of action and dismissed this case with prejudice. View "McCarthy v. Evolution Petroleum Corp." on Justia Law
Opelousas Trust Authority v. Cleco Corporation
The Supreme Court granted certiorari in this case to determine whether the district court or the Louisiana Public Service Commission (LPSC) has subject matter jurisdiction to adjudicate a claim by a putative class of utility ratepayers in the City of Opelousas against Cleco Corporation and Cleco Power, LLC (Cleco). The ratepayers sought reimbursement for alleged overcharges for electricity for a period of nearly twenty years, based on a franchise agreement Cleco signed with the City of Opelousas in 1991. Upon review of the matter, the Supreme Court reversed the judgment of the district court and sustained Cleco's exception of lack of subject matter jurisdiction because this is primarily a rate case that must be decided, in the first instance, by the LPSC. Furthermore, the Court found that LA. CONST. art. IV, section 21 (C) was inapplicable, which excludes from the LPSC's exclusive authority a public utility owned, operated, or regulated by a political subdivision, as this case did not involve a municipally-owned public utility company. Accordingly, the rulings of the lower courts were vacated and the ratepayers' claims were dismissed. View "Opelousas Trust Authority v. Cleco Corporation" on Justia Law
Posted in: Constitutional Law, Energy, Oil & Gas Law, Government & Administrative Law, Louisiana Supreme Court
ANR Pipeline Co v. Louisiana Tax Comm’n
"This matter has a complicated and convoluted procedural history, which has ultimately resulted in a 'cobweb of litigation.'" This case has its genesis in 1994 when ANR Pipeline Company (ANR) first challenged the ad valorem taxes assessed against its public service pipelines by filing a protest with the Louisiana Tax Commission (LTC). Thereafter, through 2003, ANR filed annual protests with the LTC. Tennessee Gas Pipeline Company (TGP) and Southern Natural Gas Company (SNG) also filed protests with the LTC regarding the ad valorem taxes assessed against their public service pipelines from 2000 to 2003.The issues before the Supreme Court concerned whether the reassessment of public service properties issued on remand of this matter in accordance with a court order constituted a local assessment by the local assessors or a central assessment by the Louisiana Tax Commission (LTC) and whether, in this taxpayers’ action, the assessors have a right to challenge a decision of the LTC relative to those reassessment valuations. Upon review, the Supreme Court concluded that the reassessments were central assessments governed by the provisions of La. Const. art. VII, sec. 18 and La. R.S. 47:1851, et seq. Furthermore, the Court found that once joined by the taxpayers as defendants in the taxpayers’ Section 1856 action for judicial review, the assessors are entitled to challenge the LTC’s final determination of the reassessment valuations. Accordingly, the Court found the lower courts erred in sustaining the taxpayers’ exceptions of no right of action and dismissing the assessors’ cross-appeals. View "ANR Pipeline Co v. Louisiana Tax Comm'n" on Justia Law
Wells v. Zadeck Energy Group
The Supreme Court granted certiorari to consider whether the doctrine of "contra non valentem" applied to suspend a ten year liberative prescriptive period applicable to an action by a mineral interest owner against the operator of a unit well who failed to pay the owner share of the proceeds for mineral production. Plaintiff James Wells filed suit after being contacted by a landman concerning leasing of his mineral interest in lands inherited from his parents. In the 1950s, Plaintiff's parents sold the land but reserved the mineral interests. Plaintiff's mother executed a mineral lease which was released a few years later because the well drilled resulted in a dry hole. However, the landowners executed their own mineral lease, which achieved production in 1965, and continued producing until 2007. Plaintiff filed suit against Defendants Donald Zadeck and Zadeck Energy Group and several other companies who were allegedly conducting oil and gas exploration and production activities from his unleased unitized acreage without tendering to him (or his parents) their rightful share of proceeds from the production. In response, Zadeck filed a Peremptory Exception of Prescription, urging that Plaintiff's claim to recover payments was a quasi contract that prescribed ten years from Zadeck's successor's cessation of involvement with the "dry hole." Plaintiff argued that the doctrine of "contra non valentem" applied to suspend the running of prescription since he had no knowledge of the existence of the mineral interests or production until December 2008. Plaintiff contended that his ignorance was not attributable to any fault of his own, and he clearly exercised due diligence in discovering the relevant facts once he learned from the landman that he owned the mineral interests. Upon review, the Supreme Court concluded the doctrine of contra non valentem applied to suspend the running of prescription because the mineral interest owners did not know nor reasonably should they have known of the mineral production until December 2008. View "Wells v. Zadeck Energy Group" on Justia Law
Louisiana Dept. of Transport. & Dev. v. Oilfield Heavy Haulers, LLC
The issue before the Supreme Court was whether scheduling a discovery conference pursuant to Rule 10.1 of the Rules for Louisiana District Courts constitutes a "step" in the prosecution or defense of an action sufficient to prevent abandonment of the action under La. Code Civ. Proc. art. 561. After Plaintiff Louisiana Department of Transportation and Development (DOTD) failed to timely respond to discovery requests, Defendant Oilfield Heavy Haulers, L.L.C. (OHH) sent a letter to DOTD requesting a Rule 10.1 discovery conference. Subsequently, DOTD served its discovery responses on OHH, but neglected to serve the other defendants. No formal action occurred in the case until April 22, 2010, when the District Court granted defendants’ ex parte motion for an order of dismissal on the basis of abandonment. The Court of Appeal affirmed, finding DOTD's discovery responses and OHH's letter did not constitute "steps" in the prosecution or defense of the action. The Supreme Court granted certiorari to address the correctness vel non of the appellate court's decision. The Court found that scheduling a Rule 10.1 conference constitutes a "step" in the prosecution or defense of an action sufficient to interrupt abandonment. Therefore, the Court reversed the judgment of the Court of Appeal and remand to the District Court for further proceedings. View "Louisiana Dept. of Transport. & Dev. v. Oilfield Heavy Haulers, LLC" on Justia Law
Glasgow v. PAR Minerals Corp.
In September 2007, Petitioner Mitchell Glasgow was severely burned from a fire at an oil well at which he worked. At the time, Therral Story Well Service (TSWS) directly employed Mr. Glasgow. The mineral owners contracted with another company, PAR Minerals, Inc., to produce oil and gas. In turn, PAR Minerals contracted with TSWS to drill a well. The well penetrated into formations that were pressurized with hydrocarbons. Mr. Glasgow was circulating water trough the well while waiting for heavier drilling mud to be pumped into the well to control the pressure. A TSWS employee told Mr. Glasgow to stand away from the well because the pressure was dangerous, but a PAR Minerals "on-site supervisor" ordered Mr. Glasgow to get on his station at the pump, and jump away only if gas escaped from the well. Gas escaped, ignited, and severely burned Mr. Glasgow. Mr. Glasgow filed suit against PAR Minerals and its insurer. PAR Minerals would receive service of process one year later. PAR Minerals moved for summary judgment, arguing that it was Mr. Glasgow's "statutory employer" and therefore immune to lawsuits like his. The district court granted PAR Minerals' motion, holding that because of the year delay in getting PAR Minerals notice of the lawsuit, Mr. Glasgow's suit was prescribed and untimely. A split appellate court affirmed the district court's dismissal, and Mr. Glasgow appealed. After a thorough review of the record, the Supreme Court found that the lower courts erred in dismissing Mr. Glasgow's claims as prescribed. The Court reversed the lower courts' holdings and remanded the case for further proceedings.