Justia Energy, Oil & Gas Law Opinion Summaries

The Third Circuit Court of Appeals certified a question of Pennsylvania law to the Pennsylvania Supreme Court. In August 2007, Appellee Wayne Harrison entered into a lease with Appellant Cabot Oil & Gas Corporation, per which Cabot obtained the exclusive right to explore oil-and-gas resources on Harrison's property. In exchange, the company agreed to pay an initial bonus plus a one-eighth royalty on oil or gas successfully produced from the land. Approximately halfway through the primary lease term, Harrison and his wife commenced a civil action against Cabot in a federal district court, seeking a declaration that the lease was invalid. The Harrisons alleged the company had fraudulently induced Mr. Harrison to enter into the lease via an agent's representation that Mr. Harrison would never receive any more than $100 per acre as a threshold bonus payment from a gas producing company. The Harrisons learned of other landowner-lessors receiving higher payments. The Pennsylvania Court accepted certification from the Third Circuit to address whether the primary term of an oil-and-gas lease should have been equitably extended by the courts, where the lessor pursued an unsuccessful lawsuit challenging the validity of the lease. In its counterclaim, Cabot sought a declaratory judgment that, in the event the Harrisons' suit failed, the primary term of the lease would be equitably tolled during the period of time during which the suit was pending, and, concomitantly, the lease would be extended for an equivalent period of time beyond what was provided by its actual terms. The district court awarded summary judgment in Cabot's favor on the suit to invalidate the lease. The court, however, resolved the counterclaim in the Harrisons' favor, concluding that Pennsylvania law does not provide for equitable extensions of oil and gas leases under the circumstances. Cabot appealed, arguing that it would be deprived of the full benefit of the bargained-for terms of its contract with the Harrisons by their "meritless lease challenges." Cabot contended Pennsylvania law provided that a party repudiates a contract, and thus effectuates an essential breach, when he makes an unequivocal statement that he will not perform in accordance with his agreement. The Pennsylvania Supreme Court disagreed with Cabot's contention, holding that the Harrisons' lease challenge was not an anticipatory breach of the lease. "Our reluctance, in this respect, is bolstered by the Harrisons' observation that oil-and-gas-producing companies are free to proceed according to their own devices to negotiate express tolling provisions for inclusion in their leases. [. . .] Certainly, in light of the voluminous decisional law, such companies are on sufficient notice of the prospect for validity challenges to warrant their consideration of such protective measures. [ . . .] Our determination is only that, consistent with the prevailing substantive law of this Commonwealth, the mere pursuit of declaratory relief challenging the validity of a lease does not amount to such." View "Harrison v. Cabot Oil & Gas Corp." on Justia Law

Ohio Rev. Code 1509 gives state government “sole and exclusive authority” to regulate the permitting, location, and spacing of oil and gas wells and production operations within Ohio. Beck Energy Corporation obtained a permit from the Ohio Department of Natural Resources in order to drill an oil and gas well on property within the corporate limits of the City of Munroe Falls. When Beck Energy began drilling, the City filed a complaint seeking injunctive relief and alleging that Beck Energy was violating several provisions of the Munroe Falls Codified Ordinances. The trial court issued a permanent injunction prohibiting Beck Energy from drilling until it complied with all local ordinances. The court of appeals reversed, concluding that section 1509.02 prohibited the City from enforcing the five ordinances. In so holding, the court rejected the City’s argument that the Home Rule Amendment to the Ohio Constitution allowed the City to impose its own permit requirements on oil and gas drilling operations. The Supreme Court affirmed, holding that the Home Rule Amendment does not grant the City the power to discriminate against, unfairly impede, or obstruct oil and gas activities and production operations that the State has permitted under chapter 1509. View "State ex rel. Morrison v. Beck Energy Corp." on Justia Law

In 2008, the General Assembly passed a senate bill that was codified as Mo. Rev. Stat. 393.1050, a statute exempting electric utilities that met a certain renewable energy target on a certain date from any solar energy requirements. A ballot initiative (“Proposition C”) was subsequently passed that imposed solar energy requirements on all electric utilities. Earth Island Institute, doing business as Renew Missouri, and additional parties filed a complaint with the Public Service Commission claiming that section 393.1050 was invalidated by the passage of Proposition C. The Commission determined that Proposition C did not impliedly repeal section 393.1050 because the two laws could be harmonized. The Supreme Court reversed, holding that section 393.1050 was impliedly repealed by the adoption of Proposition C because section 393.1050 in its entirety was in conflict with Proposition C. View "Earth Island Inst. v. Union Elec. Co." on Justia Law

Anadarko Petroleum Corporation, which acquired Kerr-McGee Oil & Gas Onshore L.P. in 2006, operated oil and gas wells from 2008 to 2011 and filed severance tax returns during this period. The severance tax rate an owner of oil and gas interests must pay depends on the fair market value of the owner’s interest. At issue in this case was how the value of such an interest is to be calculated. In 2010, the Auditing Division of the Utah State Tax Commission issued notices to Anadarko and Kerr-McGee (collectively Anadarko) informing Anadarko of a deficiency in its 2009 severance tax and assessing additional taxes and interest, and informing Kerr-McGee that its claimed 2009 refund was being reduced. Anadarko filed a petition for determination with the Commission. At issue before the Commission was whether the Auditing Division had applied the correct tax rate. The Commission granted summary judgment for the Auditing Division. The Supreme Court reversed, holding that the Commission improperly disallowed deductions Anadarko made for tax-exempt federal, state, and Indian tribe royalty interests under the severance tax statute. Remanded. View "Anadarko Petroleum Corp. v. Utah State Tax Comm’n" on Justia Law

Based on an agreement, an oilfield operator was authorized to charge certain costs against revenues prior to paying the oilfield owners. After a dispute arose, an auditor examined the oilfield operator's costs charged to the oilfield owners and found approximately $1 million as being unsubstantiated and, therefore, impermissibly charged to the owners by the operator. The arbitrator reached a different conclusion regarding what charges were permissible and awarded the owners approximately $1.6 million. Satisfied with the arbitrator's decision, the oilfield brought an action in the district court to confirm the award. The oilfield operator, however, moved to vacate the award. The operator argued that the arbitrator improperly considered certain employment documents and that the arbitration was limited in scope by the auditor's findings of the unsubstantiated charges. The district court confirmed the award and denied the operator's motion. The court of appeal affirmed, with one judge dissenting. The issue this case presented for the Supreme Court's review as whether an accountant, serving as an arbitrator, exceeded his arbitral authority. Finding that the arbitrator acted pursuant to the authority lawfully and contractually vested in him by the parties, the Supreme Court affirmed. View "Mack Energy Co. v. Expert Oil & Gas, LLC" on Justia Law

Power Fuels, operator of a facility that receives, blends, stores, and delivers coals for a power plant located across the road, petitioned for review of the Commission's final order, challenging the Secretary's assignment of jurisdiction to the MSHA, rather than to the nonspecialized OSHA. The court held that the Secretary permissibly concluded that a facility that blends coal for a nearby power plant was subject to the Federal Mine Safety and Health Act of 1977, 30 U.S.C. 802(h)(1)(C), (i). Therefore, the MSHA's assertion of jurisdiction was proper because the Mine Act covers this kind of activity. Accordingly, the court denied the petition for review. View "Power Fuels, LLC v. Federal Mine Safety & Health" on Justia Law

In 1979, plaintiff Morristown Associates purchased commercial property located in Morristown. The property contained a strip-mall-style shopping center known as Morristown Plaza. Among the tenants was Plaza Cleaners, a dry cleaning business owned at the time by Robert Herring. Herring and his wife had entered into a lease with the property's previous owner, Morris Center Associates, in 1976. Due to construction, Herring was unable to occupy and operate Plaza Cleaners until 1978. At some point before moving in, Herring installed a steam boiler in a room at the rear of the leased space and an underground storage tank (UST) for fuel to operate the boiler. In 1985, Herring sold Plaza Cleaners to defendants Edward and Amy Hsi. The Hsis owned the business until 1998 when it was sold to current owner and third-party defendant, Byung Lee. In August 2003, a monitoring of a well installed near Plaza Cleaner's UST revealed fuel oil contamination. A subsequent investigation revealed that although the UST was intact, the fill and vent pipes were severely deteriorated, with large holes along a significant portion of their lengths. Plaintiff's experts concluded that those holes had developed as early as 1988 and, since that time, oil had been leaking from the pipes each time the tank was filled. Each of the named oil company defendants in this case allegedly supplied fuel oil to Plaza Cleaners at various times between 1988 and 2003. The issue in this appeal was whether the general six-year statute of limitations contained in N.J.S.A. 2A:14-1 applied to private claims for contribution made pursuant to the New Jersey Spill Compensation and Control Act, N.J.S.A. 58:10-23.11f(a)(2)(a). Based on the plain language of the Spill Act, reinforced by its legislative history, the New Jersey Supreme Court held that N.J.S.A. 2A:14-1 s six-year statute of limitations was not applicable to Spill Act contribution claims. The Court therefore rejected the contrary determination of the Appellate Division and reversed and remanded this case to the Appellate Division for its consideration of other issues raised on appeal that were unaddressed. View "Morristown Associates v. Grant Oil Co." on Justia Law

In 2013, Duke Energy Carolinas filed an application with the North Carolina Utilities Commission requesting authority to adjust and increase its North Carolina retail electric service rates. The Commission entered an order granting a $234,480,000 annual retail revenue increase, approving a 10.2 percent return on equity (ROE), and authorizing the use the single coincident peak (“1CP”) cost-of-service methodology. The Supreme Court affirmed, holding (1) the Commission made sufficient findings regarding the impact of changing economic conditions upon customers, and these findings were supported by competent, material, and substantial evidence in view of the entire record; (2) the use of 1CP did not unreasonably discriminate against residential customers; and (3) no improper costs were included in the Commission’s order. View "State ex rel. Utils. Comm'n v. Cooper" on Justia Law

In 2006, Tellus Operating Group, LLC, sought to integrate the interests of various owners for the purpose of drilling a well unit in Jefferson Davis County. In accordance with its statutory duty to make a good-faith effort to negotiate the voluntary integration of the owners’ interests on reasonable terms, Tellus mailed option forms to the owners in June and July of 2006. In this case, the issue this case presented for the Supreme Court's review was a challenge to a Mississippi Oil and Gas Board pooling order force-integrating various owners’ interests in a proposed drilling unit. After review, the Court held that the Board’s order was supported by substantial evidence. The Court also found that one owner’s attempt to voluntarily integrate his interest within twenty days of the Board’s pooling order did not satisfy Section 53-3-7(2)(g)(iii). View "Tellus Operating Group, LLC v. Maxwell Energy, Inc." on Justia Law

In 2012, after auditing Cloud Peak Energy Resources, LLC’s Montana Coal Tax payments for years 2005-2007, the Department levied a deficiency assessment for additional taxes owing from sales involving non-arm’s length (NAL) agreements. Cloud Peak filed a complaint alleging that the Department’s methodology for determining market value was illegal and that it had also illegally assessed taxes on coal additives for the years 2005-2007. The district court (1) held in Cloud Peak’s favor on the first issue, concluding that the market value of coal sold under NAL agreements is determined by comparing its price with that of coal sold under arm’s length contracts negotiated in a similar timeframe; and (2) ruled in the Department’s favor on the issue regarding additives. The Supreme Court affirmed in part and reversed in part, holding that the district court (1) correctly found that market value is properly based upon similarly negotiated contracts, but the additional language included in the order was inappropriate; and (2) did not err in holding that coal additives used from 2005-2007 are subject to Montana Coal Taxes. View "Cloud Peak Energy Res., Inc. v. Dep’t of Revenue" on Justia Law