2014 OCS Workshop“Getting Back to Business”

Anadarko TowerThe Woodlands, Texas

January 23, 2014

Recent Offshore Oil and GasLitigation, Impact and Interpretation

Lambert M. Laperouse

Gulf Restoration Network, Inc. v. Salazar, 683 F. 3d 158 (5th Cir. 2012).

Challenges to DOI approvals of Exploration Plans (EPs) and Development Operations Coordination Documents (DOCDs)

Alleged violations of Outer Continental Shelf Lands Act (OCSLA) and of National Environmental Policy Act of 1969 (NEPA)

“Categorical exclusions” from NEPA requirements for environmental assessment (EA) or environmental impact statement (EIS)

Gulf Restoration Network, Inc. v. Salazar, 683 F. 3d 158 (5th Cir. 2012).

Continued:

4 Administrative Stages

• 5 year leasing plan• Lease sales• Exploration by Lessee• Development and Production by Lessee

Participation in administrative proceedings

Defenders of Wildlife v. Bureau of Ocean Energy Management, 684 F. 3d. 1249 (11th Cir. 2012).

Challenge to BOEM approval of Exploration Plan (EP)

Finding of No Significant Impact (FONSI)

Agency compliance with National Environmental Policy Act of 1969 (NEPA) and Endangered Species Act (ESA)

Total E & P USA, Inc. v. Kerr-McGee Oil & Gas Corp., 719 F.3d 428 (5th Cir. 2013).

Section 304 of the Outer Continental Shelf Deep Water Royalty Relief Act (DWRRA)

87.5 million barrels of oil equivalent

“… shall be calculated and paid in the same manner and subject to the same terms and conditions as the land owner’s royalty …” [“Calculate and Pay” provision]

“Terms of art”, “ambiguous”, “extrinsic evidence”

Wuellner Oil & Gas, Inc. v. EnCana Oil & Gas (USA) Inc., 861 F.Supp.2d 775 (W.D. La. 2012).

Binding effect of unrecorded agreements on third parties

Personal obligations vs. real obligations

Stipulation pour autrui

• stipulation manifestly clear• certainty as to benefit provided• benefit is not mere incident of the contract

Eagle Pipe and Supply, Inc. v. Amerada Hess Corp., 79 So.3d 246 (La. 2011).

“Subsequent purchaser rule”

Assignment or subrogation of personal rights is required

Cimarex Energy Company v. Chastant, No. 13-30049, 2013 WL 3964121 (5th Cir. 2013).

Calculation of lessor’s royalty

Does Lessor royalty include revenues obtained by Lessee through “hedging” transactions?

Fairfield Royalty Corp. v. Island Operating Company, Inc., No. 10-3446, 2012 WL 3613102 (E.D. La. 2012).

Are employees of contract operator “borrowed employees” of designated operator?

Claim of overriding royalty interest owner for “lost profits” resulting from shutting-in platform

In re ATP Oil & Gas Corp., 12-36187ADV 12-03443, 2014 WL 61408 (Bankr. S.D. Tex. Jan. 6, 2014).

Transfer of overriding royalty interests and net profits interests

• Conveyances of Real Right transfers or disguised financing transactions?

• Recharacterization standard under Louisiana law• Inconsistencies with a term ORRI• Inconsistencies with a loan

Cutting Underwater Technologies USA, Inc. v. Eni U.S. Operating, 671 F. 3d 512 (5th Cir. 2012).

Louisiana Oil Well Lien Act (LOWLA)

• “Operations” are “every activity conducted by or for a Lessee on a well site for the purpose of … abandoning a well.”

Does “abandoning a well” encompass removal of a platform?

Does “abandoning a well” mean “plugging and abandoning”?

Oracle 1031 Exchange, LLC v. Bourque, 85 So. 3d 736 (La. App. 3 Cir. 2012).

Liability in solido of Lessee, and its subsidiaries, for royalty payment obligations

• Pierce the corporate veil

Will filing concursus/interpleader proceedings eliminate right to damages for nonpayment of royalties?

Grand Isle Shipyards, Inc. v. Black Elk Energy, L.L.C., No. 13-2496, 2013 WL 3974536 (E.D. La. Aug. 2, 2013).

Federal Arbitration Act (FAA)

• Is there a valid arbitration agreement between the parties?• Does the dispute in question fall within the scope of the agreement?

Binding vs. permissive arbitration

W&T Offshore, Inc. v. Apache Corp., 918 F. Supp. 2d 601 (S.D. Tex. 2013).

Dispute over Production Handling Agreement (PHA) allocations and charges

• Claims for conversion, negligent misrepresentation, gross negligence and fraud

Application of Louisiana law under OCSLA

Application of doctrine of contra non valentem

Mendez v. Anadarko Petroleum Corp., 466 F. App'x 316 (5th Cir. 2012), cert. denied) 133 S. Ct. 979 (2013).

Jones Act Claim

Is the Red Hawk spar a “vessel”?

Riley v. Alexander/Ryan Marine Services Co., No. 3:12-CV-00158, 2013 WL 5774872 (S.D. Tex. Oct. 24, 2013).

Jones Act Claim

Is the Mad Dog spar a “vessel”?

Hall Ponderosa, L.L.C. v. Petrohawk Properties, L.P., 90 So.3d 512 (La. App. 3 Cir. 2012).

Claim for reformation of contract

• Clear and explicit provisions• Mutual mistake• Failure to read contract not a defense

Elite Coil Tubing Solutions, L.L.C. v. Guillory, 93 So. 3d 861 (La. App. 2 Cir. 2012).

Violation of non-competition covenant

Geographical restriction requirement

Description of protected business required

Arthur J. Gallagher & Co. v. Babcock, 703 F.3d 284 (5th Cir. 2012).

Violation of non-competition covenant

Geographical restriction requirement

Clovelly Oil Co., L.L.C. v. Midstates Petroleum Co., L.L.C., 112 So. 3d 187 (La. 2013).

Public Records Doctrine

Binding effect of unrecorded operating agreement on working interest owner’s mortgagee

In Re: Oil Spill by the Oil Rig “Deepwater Horizon” in the Gulf of Mexico, on April 20, 2010, Multi District Litigation No. 2179.

BOPCO, L.P. v. Ward, 103 So. 3d 1159 (La. App. 3 Cir. 2012).

Forfeiture of rights due to non-consent of lease saving operation

• Is liability for existing plug and abandonment obligations eliminated?

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