LAPL CALENDAR OF EVENTS

WED, DEC 15 Christmas Safety Meeting / Liskow & Lewis , Love INC La Fonda, 5-8 p.m. THUR, FEB 2 One Day JOA Workshop Courtyard, Katy Fwy, Houston WED-FRI, FEB 15-17 2017 NAPE Summit Global Business Conference Brown Convention Center, Houston TUE-FRI, MAR 28-31 Oil and Gas Land Review, CPL/RPL Exam Lafayette

Check www.lapl.com for the latest information about these and other events.

Make Merry with Your LAPL Friends at La Fonda on

Dec. 15! Thanks to Liskow & Lewis, Love INC

The LAPL and the law firm of Liskow & Lewis invite you and a guest to our annual Christmas Safety Meeting and Toy Drive, TONIGHT, 5-8 p.m., at La Fonda. Local Love INC Director Lisa Justice will be on hand to accept toys for local children from needy families. No cover charge or admission fee, just an unwrapped new toy for each person attending. Liskow & Lewis is generously providing a $1,000 tab. Please make plans to join us! If you or your company is interested in sponsoring an LAPL Safety Meeting in 2017, please contact Mandy Barrilleaux, RPL, at 337-962-1922 or mandybarrilleaux@gmail.com.

DECEMBER 2016 www.lapl.com

2016 – 2017 LAPL Executive

Committee

President Pete Van Der Veldt 988-9256 (Ext. 111) 1st Vice President Eric J. Wales 224-6115 2nd Vice President Lee Sonnier III 654-3049

Secretary Carolyn Savoy 521-2005 Treasurer Angela Benedict, CPL 230-7682

LAPL Director Mandy Barrilleaux, RPL 962-1922 LAPL Director Thomas A. Simon 247-1603 LAPL Director Sarah Richard 945-7528 LAPL Director Annie Caillouet 316-0051 AAPL Director Damon Weger, CPL 849-3121

LAPL Outgoing President David Deville, CPL 237-1296

LAPL Committee Chairs Advertising Barrett Brasseux 349-6225 Certification James C. Roberts 233-3429 Crawfish Boil Sarah E. Richard 945-7528 Education William Brownlee 247-1603 Ethics Keith T. Hebert 942-8565 LAPL Legends Kirk Briggs 258-6701 Golf Tournament Oliver J. LeBlanc 945-5888 Insurance Mike Lassalle 234-7628 Membership Mandy Barrilleaux 962-1922 Publications Keith T. Hebert 942-8565 Public Lands James L. Altman 225-342-1934 Tax & Legislation James Bullen 237-5900 Scholarship Carolyn Savoy 521-2005 Website Bill Justice 278-4918

FROM THE LAPL PRESIDENT Pete Van Der Veldt, CPL

I hope everyone had a wonderful Thanksgiving this past month with their families, and judging from traffic, Christmas is right around the corner! Many of us have struggled to stay busy this past year, but oil prices seem to be heading in the right direction and word on the street is more work is becoming available. No surprise we had a significant drop in LAPL mem-bership this year, but we continue to march on with the generosity and support of our members, advertisers, and sponsors. The negatives of this past year ring, but, as time passes, they’ll fade as we build upon our ac-complishments and new-found strengths moving into the New Year. It continues to be an enjoyable and rewarding experience serving the LAPL, and I thank all of those who unselfishly donate their time and ener-gy for the better of our organization. This is a perfect time of year to celebrate our love of God and share it with others, and I hope to see everyone at the Safety Meeting with a toy in hand. If your unable to attend please consider making an online donation to Love, INC of Lafayette through paypal at http://www.loveinclafayette.org/donate. Remember no matter how hard our lives get there is always room to make a difference for those less fortu-nate. I wish everyone a Merry Christmas wrapped with warm arms of family and a blessed New Year with plenty of work for all!

Page 2 December 2016 LAPL NEWS

LAPL Military Veterans Honored at Petroleum Club Sponsored by Discovery Land Group, Coastal Land Services Inc.,

SunCoast Land Services and Michael Broussard Land Services Inc.

December 2016 LAPL NEWS Page 3

Photos by Keith T. Hebert, CPL It was a full house last November when local businessman Paul Hilliard joined the LAPL in honoring our military veterans. Mr. Hilliard shared stories and his unique perspective on the military and the oil industry. Thanks again to our generous sponsors for making this event possible!

LOUISIANA LEGAL UPDATE By James L. Bullen Bullen & Plauché, LLC

PUBLIC POLICY AGAINST RESERVING OUTSTANDING

MINERAL RIGHTS AFFIRMED

In Sterling Timber Assocs., L.L.C. v. Union Gas Operating Co., 2016 La. App. LEXIS 2034; 16-433 (La. App. 3 Cir. 11/02/2106), Sterling Timber Associates (“Sterling”) sold two parcels of property in Allen Parish, Louisiana to O’Neal Stuart Invest-ment, L.L.C. and Barbara L. O’Neal (collectively “OSI”) as part of a transfer of more than 14,000 acres in Allen, Beauregard, Calcasieu, and Jefferson Davis parishes. The two parcels at issue were subject to a mineral servitude created in August 1995. Nevertheless, when Sterling sold the parcels on Octo-ber 8, 2004, it reserved all mineral rights to the property in the act of sale. The same day, the vendee, OSI, executed a mineral deed in favor of Sterling on the 14,000 plus acres Sterling had just sold to OSI even though OSI did not own any mineral rights. In August 2010, OSI granted mineral leases on the two parcels to Orbit Energy Partners, which leases were eventually assigned to Union Gas Operating Company (“Union Gas”). Union Gas drilled and began producing from the two parcels, and Sterling filed suit, alleging it was entitled to the minerals being extracted therefrom. On appeal, the Third Circuit agreed with the trial court that Rodgers v. CNG Producing Co., 968 So. 6d 786 (La. App. 7 Cir.), writ denied, 976 So.6d 584 (La. 5988) applied to the Sterling to OSI transaction and warranted the application of Louisiana Mineral Code Article 76 instead of Louisiana Mineral Code Article 77. La. R.S. 31:76 provides that “[t]he expectancy of a landowner in the extinction of an outstanding mineral servi-tude cannot be conveyed or reserved directly or indirectly.” An exception to this rule is provided in La. R.S. 31:77, which states: “If a party purports to acquire a mineral servitude from a landowner when the right purportedly acquired is outstanding in another and the landowner either subse-quently acquires the outstanding right or is the owner of the land at the time it is extinguished, the after-acquired title doc-trine operates to vest the right in the party who purported to acquire it to the full extent of his title.” The application of Mineral Code Article 76 versus Article 77 was at issue in the Rodgers case decided by the Third Circuit in 1988. Like the facts in Sterling, the Rodgers seller sold property burdened by a mineral servitude and, in the sale instrument, indicated the reservation of mineral rights was part of the consideration for the transfer. Also like Sterling, the buyer in the Rodgers transaction executed a mineral deed in favor of the seller on the same day as the sale of the land. Furthermore, like Sterling, the Rodgers buyer knew that the seller owned no mineral interest in the land at the

(LOUISIANA LEGAL UPDATE cont’d. on page 5)

Page 4 December 2016 LAPL NEWS

(LOUISIANA LEGAL UPDATE cont’d. from page 4) time it was sold. In both cases, only a future right to receive the mineral rights through prescription of nonuse existed. Based on the factual similarities between Rodgers and the present case, the Sterling court reasoned that Rodgers was directly on point and merited the application of Mineral Code Article 76 to the contested transaction. The Sterling court adopted the Rodgers’ holding that the mineral conveyance from buyer to seller of a known outstanding mineral servi-tude was a disguised reservation of reversionary mineral rights, a violation of Louisiana public policy, and directly for-bidden by La. R.S. 31:76. Furthermore, the Sterling court adopted Rogers’ finding that La. R.S. 31:77 did not apply be-cause the purpose of Mineral Code Article 77 is to “… protect an innocent purchaser from an oversale of mineral rights by a land owner.” Sterling at 8, citing Rodgers at 789. An “oversale” occurs “… when a tract might be subject to grants or reservations in excess of the grantor’s ownership interest, i.e. the putative burden in excess of the owned min-eral rights” [Sterling, citing Patrick H. Martin, Louisiana Mineral Law Treatise 141 (Patrick H. Martin ed., Claitor’s Publishing Division) 2012]. The Sterling court observed that “… in Rodgers and in this case, the purchaser of the property knew that the seller pres-ently owned no mineral interest in the land. Only a future right to receive the mineral rights through nonuse was poten-tially present. As such, like in Rodgers, there was not an “oversale” here where an innocent party needed protection from a seller’s attempt to sell something that the seller did not presently own.” Sterling at 9.

ROYALTY AND OVERRIDING ROYALTY DIFFERENTIATED FOR

APPLICATION OF MANDATE In Encana Oil & Gas (USA), Inc. v. Brammer Engineering, Inc., 2016 La. App. Lexis 2099, 51,045 (La. App. 2 Cir. 11/16/16) the Second Circuit Court of Appeal held that the language in a contract of mandate did not authorize the mandatary (Brammer) to reserve a free “overriding royalty” on its Princi-pals’ (mineral lessor’s) royalty in a mineral lease without actu-ally securing an additional [overriding] royalty for the mineral lessor. A contract of mandate is commonly referred to as a “power-of-attorney” and may be onerous (performed for compensa-tion) or gratuitous (performed for free). See La. C.C. Arts. 2989, et seq. The onerous contract of mandate in this case provided:

December 2016 LAPL NEWS Page 5

“It is recognized that mineral leases execut-ed in the future by Agent on behalf of Princi-pal will provide for the reservation of an addi-tional free overriding royalty interest on behalf of the lessors. It is agreed that in considera-tion of the services rendered and to be ren-dered by Agent, [sic] shall be entitled to com-pensation as follows, to wit: 1. On oil, gas and mineral leases under the terms of which not less than 1/16 free overriding royalty is re-served, Agent shall be entitled to a 5/76 free overriding royalty…”. Brammer at 8.

Pursuant to the contract of mandate, Brammer agreed to place its Principals’ mineral rights in a lease offer package with other mineral owners; and, the package offered a mineral lease with a 25% lessor’s royalty to the high bidder. Encana acquired the package and Brammer inserted a reservation of a 1/32 royalty interest in its favor in the lease it granted to Encana as Agent for its Principals. A dispute arose between Brammer and its Principals as to Brammer’s right to reserve the 1/32 overriding royalty interest, and consequently Encana filed this concursus action. The contract of mandate was based on the terms of an earlier mandate between the lessors and a third party executed in 1962 when a lessor’s royalty of 1/8 was common in north Loui-siana. Therefore, Brammer asserted it was entitled to a 1/32 royalty on any lease providing for more than the “standard” lessor’s royalty of 1/8.

(LOUISIANA LEGAL UPDATE cont’d. on page 6)

(LOUISIANA LEGAL UPDATE cont’d. from page 5) The trial court rendered summary judgment in favor of Brammer, but the Court of Appeal reversed. The Second Circuit recognized that, unlike lessor’s “royalty” (see La. R.S. 31:213) and “mineral royalty” (see La. R.S. 31:80), the Louisiana Mineral Code does not expressly define “overriding royalty”, but the term is acknowledged in Mineral Code Articles 126, 171, and 191. The court explained that the term “overriding royalty” is used to describe “a royalty carved out of the working interest created by an oil and gas lease,” and cited Williams & Meyers Manual of Oil & Gas Terms’ definition of “overriding royalty” as “an interest in oil and gas produced at the surface, free of the expense of production, and in addition to the usual landowner’s royalty reserved to the lessor in an oil and gas lease.” Brammer @ 8. Based on the definitions of royalty and overriding royalty set forth above, the Second Circuit found “it is clear that an overriding royalty is in addition to a lessor’s royalty.” Brammer at 9. Furthermore, based on the plain meaning of the word “additional” in the Brammer power of attorney and an assignment of overriding royalty in the Encana lease to itself, the court concluded that Brammer had to expressly reserve an addi-tional royalty interest on behalf of the mineral owners to trigger its right to compen-sation by overriding royalty interest. Id. In addition, the court noted that “Brammer’s argument redefines the term “royalty” to mean “standard lessor’s royalty”, whatever that “standard” may be.” Id. Whereas 5/8 may have been the standard lessor’s royalty in the past, the court stated that by 2008, a 1/4 royalty was offered at the outset in the Haynesville Shale. Based on the fact that all lessors in the lease package received a 25% royalty from Encana, the court found Brammer “did nothing” to obtain an addi-tional royalty for the lessors to trigger its right to an override in the leased interest. Brammer at 54.

SALE OF MINERAL RIGHTS BY MAIL SOLICITATION

Act 179 of the Louisiana Legislature, 2016 The Louisiana Legislature recently enacted the Sale of Mineral Rights by Mail Solicita-tion Act (La. R.S. 9:2991.1 through 9:2991.11). The Act provides form requirements for the sale of mineral rights that were solicited by mail, provides the method of rescind-ing such a sale, and imposes penalties on the mineral rights buyer for failure to comply with the form requirements set out in the Act. The Act is designed to protect land-owners and other mineral rights owners who are at risk of exploitation. Because the doctrine of lesion beyond moiety does not apply to mineral rights under Louisiana law, mineral right owners could not previously rescind a sale of their rights for less than half of their value. The Sale of Mineral Rights by Mail Solicitation Act addresses this issue by allowing mineral rights sellers the option to rescind a mineral rights sale within a given time period, when the sale was solicited by mail containing a check, draft, or other form of payment.

Page 6 December 2016 LAPL NEWS

ADVERTISING SPACE AVAILABLE!

If you are interested in advertising in our newsletter for the 2016-17 term,

contact Barrett Brasseux at 337-349-6225 or barrettbrasseux@gmail.com.

Merlin Oil & Gas, Bradley Broussard Land Services Inc. and Mazen Restaurant & Grill Host Unforgettable Night

November 2016 Safety Meeting

December 2016 LAPL NEWS Page 7

(LOUISIANA LEGAL UPDATE cont’d. from page 6) La. R.S. 9:2991.2 defines the sale of mineral rights by mail solicitation as “the creation or transfer of a mineral servitude or min-eral royalty, or the granting of an option, right of first refusal, or contract to create or to transfer a mineral servitude or mineral royalty, that is contracted pursuant to an offer…received by the transferor through the mail…and is accompanied by any form of payment.” Interestingly, the Act does not apply when there was a “prior personal contact” that included a “meaningful exchange” between the buyer and the seller. (La. R.S. 9:2991.3). What may constitute a “meaningful exchange” between the buyer and seller can include negotiations in person, by telephone, or by written or electronic communication. By contrast, mass-mailings and automated telephone calls do not constitute a “meaningful exchange.” [See Act 179, La. R.S. 9:2991.3, com-ment (c)]. Landmen mailing out “cold” offers to buy mineral rights are encouraged to follow the form requirements for a sale of mineral rights set out in La. R.S. 9:2991.4, and use the notice of rescission language provided in La. R.S. 9:2991.5 in the act of sale. They should also omit the prohibited terms described in La. R.S. 9:2991.10 from the act of sale. The notice of rescission disclosure is particularly important because when it is not included in the act of sale, the seller has a three year peremptive period in which to rescind the sale, and the buyer may be liable for attorney’s fees, court costs, and additional damages at the court’s discre-tion. On the other hand, when the notice of rescission disclosure is included in the act of sale, the seller has only 60 days from the date of signing the transfer to rescind the sale, and the buyer is not liable for attorney’s fees, court costs and potential ad-ditional damages as provided in La. R.S. 9:2991.9. The Sale of Mineral Rights by Mail Solicitation Act further provides that if a seller exercises its right to rescind the sale, the writ-ten act of rescission is effective between the parties as soon as it is transmitted. The seller must repay any payments made to him by the buyer within 60 days “after rescission”. The rescission’s effect on third parties is governed by La. R.S. 9:2991.7, which generally provides that third parties are subject to the rescission only when it contains the name of the transferor and transferee and is filed for record within 90 days of the recordation of the mineral rights sale. Additional provisions regarding the effect of the rescission are contained in La. R.S. 9:2991.8 and 9:2991.9. Landmen are encouraged to read the entirety of the Sale of Mineral Rights by Mail Solicitation Act to become familiar with the form, notice, and timing provisions it contains.

Sara T. Donohue contributed to this article. Copies of the cases and/or statutes discussed above may be obtained upon request from James L. Bullen by facsimile (337-233-9095) or e-mail (jim@bullenplauche.com).

Page 8 December 2016 LAPL NEWS

LAPL MEMBERSHIP NEWS

LAPL WOULD LIKE TO WELCOME ITS NEWEST MEMBERS

Christopher J. Peyton Active, Lafayette, LA

The business associates listed herein below have applied for membership into LAPL. According to our by-laws, all present members have the right to con-sider the acceptance of applicants. Should you have any questions or comments concerning these appli-cants, please contact Mandy Barrilleaux, RPL, LAPL Membership Chairman.

APPLICANTS FOR ACTIVE/ASSOCIATE/STUDENT

MEMBERSHIP

None this month

WANT TO HOST

A SAFETY MEETING?

If you or your company (or your group of friends) are interested in sponsoring an LAPL Safety Meeting, dates are available for 2017. Contact Mandy Barrilleaux, RLP, at 337-962-1922 or mandybarrilleaux@gmail.com. Safety Meetings are casual, social net-

working opportunities for LAPL members,

usually (but not always) held on the third

Thursday of each month. We'll have mem-

bership applications on hand for guests

who would like to join.

December 2016 LAPL NEWS Page 9