MEALEY’STMTM
Fracking Report May 2014 Volume 1, Issue #1
5th Circuit Panel Vacates Summary Judgment, Remands To Decide Int...
Bill Lowe
editor
Thomas E. Moylan
managing editor
Jennifer Hay
copy desk manager
Amy Bauer
marketing brand manager
Toria D...
In this Issue
Assignment Of Rights
5th Circuit Panel Vacates Summary
Judgment, Remands To Decide
Intervenor’s Status.........
News
5th Circuit Panel Vacates
Summary Judgment, Remands
To Decide Intervenor’s Status
NEW ORLEANS — A unanimous Fifth Cir...
Freeman, Freeman Capital, Buffco and Harleton Oil
appealed.
Judges Patrick E. Higginbotham, W. Eugene Davis
and Catharina ...
issuedMarch28(Powder River Basin Resource Council,
et al. v. Wyoming Oil & Gas Conservation Commis-
sion, et al., No. 13-1...
‘‘In order to maintain an open and accountable govern-
ment, the Wyoming legislature enacted WPRA in
1969. The Act provide...
Co., Shlumberger Limited and Union Drilling Inc. was
granted May 3, 2012, by Judge A. Richard Caputo.
The plaintiffs alleg...
land. In seeking to support their claim of breach of
implied duty to develop the land, the royalty interest
owners sought ...
Claim: Personal injury, property damage
Injury: Chronic nose bleeding, irregular heartbeat,
muscle spasms, open sores, emo...
In support of their claims, the Boones alleged the dis-
covery of abandoned debris and equipment on the land
and asserted ...
included their ownership of the surface, according to the
panel. ‘‘We disagree. As previously discussed, Lagneaux
withheld...
to explore for, produce, or reduce to possession and
ownership any minerals are transferred through the
document. Thus, by...
Donald T. Carmouche, Diane Adele Owen, John
Hogarth Carmouche, Ross Joseph Donnes, Victor
Lynn Marcello and William Robert...
James P. Dore of Kean Miller, Amy DeGeneres Berret,
Benn Vincent and Shelly J. Harrison in Baton Rouge
represent BP Americ...
By disposing of the waste and fly ash at the dump, the
AES defendants have caused the release of arsenic, bar-
ium, chromiu...
that Appellants have met the pleading standards set
forth under Fed.R.C.P. 8(a).’’
Counsel
Clark O. Brewster, Montgomery L...
represent Highland Oil & Gas. Truman B. Ruckler Jr.
of Tulsa in represents Sedna Energy. Rick D. Wescott
of Wescott Law Of...
‘‘We note that here, as in El Apple, contemporaneous
evidence may not exist. But the attorneys may recon-
struct their wor...
Warren Drilling filed a claim in November 2010 against
Ace American Insurance Co. for coverage and a defense
in the Hagy li...
Leeper in Marietta, Ohio, represent Warren Drilling.
Lyle B. Brown and J. Kevin West of Steptoe & John-
son in Columbus re...
‘‘Even though Range’s activities in beginning the well
on the neighboring Null property satisfied the com-
mencement clause...
and Anna C. Burig with The Manufacturers Light and
Heat Co. John and Anna Burig are deceased; it is pre-
sumed Flora Burig...
Defendants had not discussed the assignment clause
in the lease, the history of the separate assignments
of the production...
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Download the inaugural issue of Mealey's Fracking Report, May 2014. To order, call 800.223.1940 or visit the LexisNexis Store at http://www.lexisnexis.com/store/catalog/booktemplate/productdetail.jsp?pageName=relatedProducts&skuId=sku9550313&catId=22&prodId=prod20560379&?utm_campaign=165769_Sample&utm_medium=social&utm_source=slideshare&utm_content=052814_0pct_AB&utm_term=print

MORE > Known for extensive asbestos and toxic tort litigation coverage, the legal news journalists from Mealey Publications announced this new Report to follow the federal state and local litigation involving hydraulic fracturing. The report also covers federal and state regulatory and legislative developments, as well as rulings by administrative agencies tasked with enforcing laws that impact hydraulic fracturing. The newsletter will report on civil tort actions by property owners, including causes of actions for nuisance, trespass, negligence and strict liability; causation disputes regarding contamination of land and water supplies, noise and air pollution, damages caused by vibrations; personal injury lawsuits; citizen suits; government enforcement actions, including issues of land use, zoning and preemption; challenges to government enforcement actions, laws and regulations, including freedom of information and Fifth Amendment takings claims; oil and gas lease disputes; land use and property rights disputes, including quiet title actions and easement disputes; contract disputes; and insurance coverage claims.

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Mealey's Fracking-Report-sample-issue-may-2014

  1. 1. MEALEY’STMTM Fracking Report May 2014 Volume 1, Issue #1 5th Circuit Panel Vacates Summary Judgment, Remands To Decide Intervenor’s Status NEW ORLEANS — A unanimous Fifth Circuit U.S. Court of Appeals panel ruled May 7 that an Eastern District of Texas judge lacked jurisdiction over an assignment of rights dispute among natural gas well operating companies because a nondiverse intervenor destroyed subject-matter jurisdiction; the panel vacated a summary judgment order and remanded the lawsuit with instructions to determine if the intervenor is an indispensable party. SEE PAGE 4. Wyoming Supreme Court Defines Trade Secrets, Remands Fracking Fluid Disclosure Case CHEYENNE, Wyo. — The Wyoming Supreme Court issued a unanimous opinion March 12 vacating a lower ruling that the components of hydraulic fracturing fluid are exempt from disclosure as trade secrets and instructing the lower court to apply the federal definition of trade secrets to review a Wyoming Oil & Gas Conservation Commission order denying requests for disclosure of the chemicals in the fluid; the mandate issued March 28. SEE PAGE 5. Order To Produce Seismic Data Affirmed; Water Well Suit Fact Discovery Ends May 23 SCRANTON, Pa. — Phase 1 fact discovery in a lawsuit in the U.S. District Court for the Middle District of Pennsylvania alleging contamination of residential water wells with hydraulic fracturing chemicals closes May 23; a motion by the natural gas extraction company defendants for reconsideration of an October 2013 order to produce seismic data and open hole logs was denied in January. SEE PAGE 7. Louisiana Appeals Panel Rules Plaintiffs Lack Standing To Seek Restoration Damages LAKE CHARLES, La. — A unanimous Third Circuit Louisiana Court of Appeal panel on May 7 affirmed summary judgment against surface estate owners seeking damages from oil and natural gas operators for allegedly failing to restore the surface estate; the panel applied the subsequent purchaser doctrine and concluded that the plaintiffs lack standing to seek damages for alleged injuries before they purchased the subject land. SEE PAGE 10. Legacy Oil Pollution Claims Dismissed Without Prejudice In Louisiana Federal Court NEW ORLEANS — Defense motions to dismiss were granted in part on April 22 with leave to amend in a well field legacy contamination lawsuit pursued by landowners in the U.S. District Court for the Eastern District of Louisiana. SEE PAGE 12. Oklahoma Class Plaintiffs Appeal Dismissal Of Claims For Waste Hauling Pollution DENVER — Class action representatives of an Oklahoma action alleging fly ash and produced water contamination filed an appellant brief April 21 in the 10th Circuit U.S. Court of Appeals seeking reversal of an order denying remand under the local controversy exception to the Class Action Fairness Act of 2005 or, alternatively, vacating summary judgment for defendants for failing to state a claim. SEE PAGE 15. Texas Supreme Court Remands Attorney Fee Award Dispute Arising From Royalty Suit AUSTIN, Texas — The Supreme Court of Texas issued a per curiam opinion on April 25 remanding an attorney fee dispute with instructions for the trial court to develop a record sufficient to calculate attorney fees with the lodestar method; the disputed attorney fees are from a lawsuit to enforce an assignment of working interests in oil and natural gas producing wells. SEE PAGE 18. Natural Gas Operator Held Liable To Indemnify Driller For Contamination Litigation COLUMBUS, Ohio — A natural gas operating company sued by a drilling company with which it contracted to spud wells in West Virginia is liable under the drilling contract to reimburse settlement and litigation costs for a related well-water contamination lawsuit naming both companies as defendants, the presiding U.S. District Court for the Southern District of Ohio judge ruled April 16. SEE PAGE 19.
  2. 2. Bill Lowe editor Thomas E. Moylan managing editor Jennifer Hay copy desk manager Amy Bauer marketing brand manager Toria Dettra production associate To contact the editor: Bill Lowe (215) 988-7733 email: bill.lowe@lexisnexis.com The Report is produced monthly by LexisNexisâ Mealey’sä 1600 John F. Kennedy Blvd., Suite 1655 Philadelphia, PA. 19103 (215) 564-1788 Customer Service: 1-800-MEALEYS (1-800-632-5397) Email: mealeyinfo@lexisnexis.com Web site: www.lexisnexis.com/mealeys Print: $995* for a full year * Plus sales tax, shipping and handling where applicable. An online version of this report with email delivery is also available through LexisNexis on www.lexis.com. Contact your LexisNexis representative or call 1-800-223-1940 for details. PRINT ISSN 2372-9457 ONLINE ISSN EBOOK ISBN 9781630445232 LexisNexis and the Knowledge Burst logo are registered trademarks of Reed Elsevier Prop- erties Inc., used under license. Mealey’s is a trademark of LexisNexis, a division of Reed Elsevier Inc. ª 2014, LexisNexis, a division of Reed Elsevier Inc. All rights reserved. MEALEY’STMTM Fracking ReportMay 2014 Volume 1, Issue #1 Cases in this Issue Page Chesapeake Louisiana v. Buffco Production Inc., et al., No. 13-40458, 5th Cir. ........................................................................................................... 4 Powder River Basin Resource Council, et al. v. Wyoming Oil & Gas Conservation Commission, et al., No. 13-120, Wyo. Sup. ........................... 5 Susan Berish, et al. v. Southwestern Energy Production Co., et al., No. 10-1981, M.D. Pa........................................................................................ 7 Lisa Parr, et al. v. Aruba Petroleum Inc., No. 11-1650, County Court at Law No. 5 of Dallas County, Texas ........................................................... 9 Carlos Boone, et uxor v. ConocoPhillips Co., et al., No. 13-1106, La. App., 3rd Cir. ........................................................................................................... 10 Catherine P. Alford, et al. v. Chevron USA Inc., et al., No. 13-5457 (consolidated), E.D. La........................................................................................ 12 William Reece, et al. v. AES Corp., et al., No. 14-7010, 10th Cir. .......................... 15 Larry T. Long, et al. v. Robert M. Griffin, et al., No. 11-1021, Texas Sup.............. 18 Warren Drilling Inc. v. Equitable Production Co., No. 12-425, S.D. Ohio............. 19 Thomas A. Neuhard, et uxor v. Range Resources-Appalachia, No. 11-1989, M.D. Pa. ......................................................................................................... 21 Rugh A. Mason, et uxor v. Range Resources-Appalachia, et al., No. 12-369, W.D. Pa............................................................................................................... 22 Edward E. Kamuck v. Shell Energy Holdings, et al., No. 11-1425, M.D. Pa........... 24 Joe Rath, et al. v. BHP Billiton Petroleum (Arkansas) Inc., et al., No. 13-602, E.D. Ark.............................................................................................................. 25 Daniel W. Nicholson v. XTO / Exxon Energy Inc., No. 13-899, N.D. Texas ........ 26 Sheila Russell, et al. v. Chesapeake Appalachia, et al., No. 14-148, M.D. Pa............ 28 Bobbie Hill, et al. v. Southwestern Energy Co., No. 12-500, E.D. Ark.................... 30 Mary L. Vermillion, et al. v. Mora County, N.M., et al., No. 13-1095, D. N.M.... 31 Columbia Gas Transmission v. Gary Galloway, No. 14-77, E.D. Ky. ...................... 33 Thomas Chaffee, et al. v. Talisman Energy USA Inc, et al., No. 14-690, M.D. Pa............................................................................................................... 33 Tennessee Gas Pipeline Co. v. Permanent Easements, et al., No. 14-1821, 3rd Cir................................................................................................................. 35 Dr. Alfonso Rodriguez, M.D., v. Michael L. Krancer, et al., No. 12-1458, M.D. Pa............................................................................................................... 36 Published document is available at the end of the report. For other available documents from cases reported on in this issue, visit www.mealeysonline.com or call 1-800-MEALEYS.
  3. 3. In this Issue Assignment Of Rights 5th Circuit Panel Vacates Summary Judgment, Remands To Decide Intervenor’s Status.......................................... page 4 Trade Secrets Wyoming Supreme Court Defines Trade Secrets, Remands Fracking Fluid Disclosure Case.............................................. page 5 Order To Produce Seismic Data Affirmed; Water Well Suit Fact Discovery Ends May 23...............................................................page 7 Verdict Texas Jury Awards $2.9 Million To Family Alleging Harm From Natural Gas Fracturing........................................................... page 9 Legacy Damages Louisiana Appeals Panel Rules Plaintiffs Lack Standing To Seek Restoration Damages....................................................... page 10 Legacy Oil Pollution Claims Dismissed Without Prejudice In Louisiana Federal Court............................................... page 12 Appeal Oklahoma Class Plaintiffs Appeal Dismissal Of Claims For Waste Hauling Pollution.............................. page 15 Texas Supreme Court Remands Attorney Fee Award Dispute Arising From Royalty Suit ................................................. page 18 Duty To Defend Natural Gas Operator Held Liable To Indemnify Driller For Contamination Litigation...................................................... page 19 Lease Dispute Pennsylvania Federal Judge Rules Gas Well Activity Did Not Extend Term Of Lease....................................................... page 21 Pennsylvania Federal Judge Denies Summary Judgment In Natural Gas Lease Dispute........................................ page 22 April Trial Stayed Pending Dispositive Motion Ruling In Pennsylvania Federal Court............................................... page 24 Royalties March 2015 Royalty Trial Set In Arkansas; Some Claims Dismissed In January Order.......................................... page 25 Wrongful Death Gas Well Operator Objects To Order Denying Dismissal In Texas Federal Court ........................................................... page 26 Personal Injury Gas Well Operators Seek Order To Support Claims Before Summary Judgment Discovery..................................... page 28 Waste Disposal Discovery Dispute Reported By Oilfield Well Operators In Arkansas Injection Suit .............................................................. page 30 Ordinance Challenge New Mexico Property Owners Amend Complaint In Suit Challenging Fracking Ban................................................ page 31 Pipeline Gas Pipeline Operator Seeks Declaratory Judgment, Removal Of Bull From Easement...................................................... page 33 Property Damage Pennsylvania Plaintiffs Sue Well, Pipeline Operators For Loss Of Property Value............page 33 Natural Gas Pipeline Operator Appeals $78,000 Award In Pennsylvania Easement Suit .............................................. page 35 MEALEY’S Fracking Report Vol. 1, #1 May 2014 Cite as Mealey’s Fracking Report, Vol. 1, Iss. 1 (5/14) at p.___, sec.___. 3
  4. 4. News 5th Circuit Panel Vacates Summary Judgment, Remands To Decide Intervenor’s Status NEW ORLEANS — A unanimous Fifth Circuit U.S. Court of Appeals panel ruled May 7 that an Eastern District of Texas judge lacked jurisdiction over an assignment of rights dispute among natural gas well operating companies because a nondiverse intervenor destroyed subject-matter jurisdiction; the panel vacated a summary judgment order and remanded the lawsuit with instructions to determine if the intervenor is an indispensable party (Chesapeake Louisiana v. Buffco Production Inc., et al., No. 13-40458, 5th Cir.). (Opinion in Section D. Document #94-140513- 013Z.) Chesapeake Louisiana filed state law claims against Free- man Capital, Buffco Production Inc., Twin Resources, Wayne Freeman and Freeman Resources to recover for alleged overpayment of an assignment of deep rights in the Geisler Unit property in Harrison County, Texas (No. 10-359, E.D. Texas). Chesapeake Louisiana claimed federal jurisdiction because the defendants are citizens of Texas and it is a citizen of Oklahoma. 2008 Agreement The alleged overpayment involved a transaction arising from a July 2008 agreement between Chesapeake Loui- siana and Buffco. Chesapeake Louisiana agreed to pay approximately $232 million to acquire Buffco’s working interestsinthedeeprightsintheGeisler,Bowen,Hemby and Yow units for three years. The letter contains a non-operator clause through which Chesapeake Louisi- anaagreestomakethesameoffertonon-operatingwork- ing interests in the same properties. Freeman, Freeman Capital and Harleton Oil & Gas Inc. are the owners of the non-operating working interests. Based on faulty information from a third party, Chesa- peake Louisiana believed Buffco and Freeman each owned 50 percent interests in the Geisler unit deep rights, for which it paid each of them $6.8 million. The parties agree the proper allocation of the working interests in the Geisler unit is Buffco, 25 percent; Free- man, 22 percent, Freeman Capital, 3 percent; and Harleton Oil 50 percent. Therefore, by its payment to Buffco and Freeman, Chesapeake Louisiana ac- quired only 47 percent of the working interests in the Geisler Unit. Buffco, Freeman and Freeman Capital alleged in coun- terclaimsthatChesapeakeLouisianawasrequiredtopur- chase their interests in the Bowen, Hemby and Yow production units. Harleton Oil intervened and alleged claims against Chesapeake Louisiana, Freeman and Buffco. Harleton Oil sought 50 percent of the $13.6 million paid to Buffco and Freeman. In exchange, Harleton Oil would transfer its interest in the Geisler Unit to Che- sapeake Louisiana. Harleton alleged fraud claims against Buffco for misrepresenting its Geisler Unit interests to Chesapeake Louisiana. Chesapeake Louisiana and Buffco settled their dispute. Subsequently, Judge Rodney Gilstrap granted sum- mary judgment in favor of Chesapeake Louisiana and Harleton Oil with respect to the Geisler Unit and in favor of Chesapeake Louisiana with respect to the Bowen, Hemby and Yow units. Summary Judgment Following the entry of summary judgment, Freeman and Freeman Capital filed a joint motion to dismiss for lack of subject matter jurisdiction on the grounds that Harleton Oil’s intervention destroyed diversity and its status as an indispensable party. Judge Gilstrap concluded that Harleton Oil is a defendant-intervenor and denied the motion. In addi- tion, he ruled that an analysis of whether supplemental jurisdiction attached was unnecessary. Vol. 1, #1 May 2014 MEALEY’S Fracking Report 4
  5. 5. Freeman, Freeman Capital, Buffco and Harleton Oil appealed. Judges Patrick E. Higginbotham, W. Eugene Davis and Catharina Haynes heard the appeal and filed a per curiam opinion overturning the judgment in part. ‘‘As a court of limited jurisdiction, we must first satisfy ourselves, independent of the district court’s determi- nation, that subject-matter jurisdiction exists over the parties’ claims related to the Geisler Unit,’’ according to the panel. ‘‘As the parties correctly acknowledge, diversity jurisdic- tion existed over the suit prior to Harleton’s interven- tion; however, we must consider whether Harleton’s intervention destroyed diversity such that the district court lacked jurisdiction over this matter.’’ First, the panel considered whether Harleton Oil is properly recognized as a defendant-intervenor or a plaintiff-intervenor. ‘‘Here, the principal purpose of the suit and the primary and controlling matter in dis- pute suggest that Harleton is a plaintiff,’’ according to the panel. ‘Plaintiff-Intervenor’ ‘‘Harleton’s proper alignment as a plaintiff-intervenor is further illustrated by the fact that the summary judgment order awarded relief to both Harleton and Chesapeake, and both Harleton and Chesapeake are essentially aligned on appeal in seeking affirmance of the order. Further, Harleton affirmatively seeks to be aligned with Chesapeake in certain circumstances, such as when it argues that its unjust enrichment claim is timely because its claim can relate back to the unjust enrichment claim filed by Chesapeake. Finally, while Harleton brought a claim against Chesapeake, Buffco, and Freeman, no party has brought a claim against Harleton, and Harleton has no potential for liability. Such a lack of potential for liability against a party suggests that the party should be aligned as a plaintiff,’’ according to the panel. ‘‘Having determined that Harleton should have been aligned as a plaintiff-intervenor, we are bound to con- clude that the district court lacked diversity jurisdiction over the Geisler Unit claims. ‘‘Therefore, because there was no subject-matter juris- diction over the parties’ Geisler Unit claims following Harleton’s intervention, we must vacate the grant of summary judgment with respect to the Geisler Unit claims,’’ according to the panel. The panel remanded the claims to permit the District Court to consider if Harleton is an indispensable party and if the Geisler Unit-related claims should be dismissed. With respect to Freeman and Freeman Capital’s coun- terclaims for interests in the Bowen, Hemby and Yow units, the appellants aver that the counterclaims must be dismissed because subject matter jurisdiction is lacking over the Geisler Unit claims, according to the panel. Contrary to Freeman and Freeman Capital, an independent basis for jurisdiction exists, according to the panel. ‘We Affirm’ ‘‘Harleton did not destroy diversity with respect to these claims because its claims were limited to the Geisler Unit,’’ according to the panel. ‘‘Further, the amount in controversy with respect to these claims exceeded $75,000. Therefore, because Freeman and Freeman Capital’s only challenge on appeal rests on their juris- dictional argument, we affirm the district court’s deci- sion concerning the Bowen, Hemby, and Yow Units.’’ Jesse R. Pierce and Brian Kevin Tully of Pierce & O’Neill in Houston represent Chesapeake Louisiana. Ben Taylor of Fulbright & Jaworski in Dallas and Eric M. Albritton of Albritton Law in Longview, Texas, represent Freeman and Freeman Capital. Gene Francis Creely II of Creely Law Firm in Houston represents Buffco. Gregory Dunne Smith of Ramey & Flock in Tyler, Texas, represents Harleton Oil. I Wyoming Supreme Court Defines Trade Secrets, Remands Fracking Fluid Disclosure Case CHEYENNE, Wyo. — The Wyoming Supreme Court issued a unanimous opinion March 12 vacating a lower ruling that the components of hydraulic fracturing fluid are exempt from disclosure as trade secrets and instructing the lower court to apply the federal defini- tion of trade secrets to review a Wyoming Oil & Gas Conservation Commission order denying requests for disclosure of the chemicals in the fluid; the mandate MEALEY’S Fracking Report Vol. 1, #1 May 2014 5
  6. 6. issuedMarch28(Powder River Basin Resource Council, et al. v. Wyoming Oil & Gas Conservation Commis- sion, et al., No. 13-120, Wyo. Sup.). (Opinion in Section E. Document #94-140513- 033Z. Mandate available. Document #94-140513- 034R.) Powder River Basin Resource Council, Wyoming Out- door Council, Earthworks and Center for Effective Government fka OMB Watch appealed the denial of disclosure of public records documenting the identity of chemicals used in hydraulic fracturing operations in Wyoming from the Wyoming Oil & Gas Conserva- tion Commission (WOGCC) pursuant to the Wyom- ing Public Records Act (WPRA; Wyoming Statute Subsection 16-4-204) and the Wyoming hydraulic fracturing disclosure rule. 7th Judicial District After WOGCC denied the request for information, the environmental groups filed a petition for review under the Wyoming Administrative Procedure Act (APA; Wyo. Statute Annotated section 16-3-114[c]) March 23, 2012, in the Wyoming Seventh Judicial District Court, Natrona Co. The groups argue the supervisor arbitrarily refused to disclose information, and the deci- sions was an abuse of discretion and contrary to the law. Halliburton Energy Services intervened, and the parties stipulated to a record including 65 requests for trade secret status approved by the WOGCC supervisor and posted on the commission website. The stipulated record also included correspondence with respect to the amendments by the commission to rules for exemp- ting certain information about hydraulic fracturing pro- ducts from disclosure as trade secrets. The environmental groups and Halliburton filed cross- motions for summary judgment based on the stipulated record. Judge Catherine E. Wilking conducted a hear- ing on the motions and granted summary judgment March 21, 2013, rejecting the claims of the environ- mental groups. The environmental groups appealed. The Wyoming Supreme Court heard oral arguments Nov. 20 and issued the opinion March 12. ‘‘Proceedings to challenge denial of access to documents claimed to be public must follow procedures established by the WPRA, and those are not subject to review under the Administrative Procedures Act [Sheaffer v. University of Wyoming, 2006 Wy 99, N˜ 4, 139 P.3d 468, 470 (Wyo. 2006)],’’ Justice Michael K. Davis wrote for the court. ‘Reverse And Remand’ ‘‘We will therefore reverse and remand to the district court. That court will have to decide whether to permit Appellants to amend their pleadings and file appro- priate documents to seek an order to show cause, or whether to dismiss the case instead. In the latter event, Appellants may file new action with the appropriate request for an order to show cause as contemplated by the WPRA. The district court is vested with broad discretion to determine whether to allow amendment of pleadings, and we will not interfere with that dis- cretion. Voss v. Goodman, 2009 WY 40, N˜ 14, 203 P.3d 415, 420 (Wyo. 2009). Regardless of which choice the district court makes, on presentation of an adequate application for an order to show cause, the district court should conduct appropriate proceedings and determine whether the information Appellants seek constitutes trade secrets or not, with the burden of showing that they do upon the custodian (here the Supervisor) and any intervenors.’’ ‘‘We understand the difficulty attendant upon holding these proceedings — they must be conducted in such a manner that the information sought to be protected is not disclosed until the court can determine whether it is in fact subject to disclosure,’’ according to the court. ‘‘This may require the use of in camera hearings, sealed files, or even closed hearings, tools that courts custo- marily use in cases involving trade secrets.’’ The court then turned to the standard to be applied on remand to trade secret cases under the WPRA. ‘‘This is a general question of law which can be answered without regard to the limited record we have, and it is in the interest of judicial economy to do so,’’ accord- ing to the court. E M A I L T H E E D I T O R email editor bill lowe at bill.lowe@lexisnexis.com Vol. 1, #1 May 2014 MEALEY’S Fracking Report 6
  7. 7. ‘‘In order to maintain an open and accountable govern- ment, the Wyoming legislature enacted WPRA in 1969. The Act provides a public right of access to records of the state, its agencies, and local government entities. Wyo. Stat. Ann. § 16-4-202(a) (LexisNexis 2013),’’ according to the court. ‘Disclosure Generally’ ‘‘The WPRA, like the FOIA [federal Freedom of In- formation Act], requires that disclosure generally pre- vail over secrecy.’’ ‘‘Striking a delicate balance between the public’s right of access to government records and the protection of proprietary information, the WPRA contains several exemptions from disclosure, which are set forth in § § 16-4-203(b) & (d),’’ according to the court. The exemption pertinent to the current case addressing trade secrets, privileged information and confidential commercial, financial, geological or geological data is found in 16-4-203(d)(v), according to the court. This exemption has never been subject to interpretation. ‘‘Having carefully contemplated the purpose of the WPRA, studied relevant case law, and considered com- peting arguments, we adopt the definition of trade secrets articulated by federal courts under the FOIA. A trade secret in the public records context is ‘a secret, commercially viable plan, formula, process or device that is used for the making, preparing, compounding, or processing of trade commodities and that can be said to be the end product of either innovation or sub- stantial effort [Anderson v. Department of Health & Human Services, 907 F.2d 936, 943-44 (10th Cir.)],’ ’’ according to the court. ‘‘This ‘definition requires that there be a direct relationship between the trade secret and the productive process.’ Id.’’ ‘‘We are left with the question of whether individual ingredients of hydraulic fracturing formulae can consti- tute trade secrets under the definition we adopt. We cannot resolve that issue in this appeal, unfortunately.’’ ‘Independently Resolve’ ‘‘The district court must independently resolve this dis- pute based on the credibility of the witnesses and per- suasiveness of the evidence presented by each party,’’ according to the court. Justices Marilyn S. Kite, William U. Hill, Barton Voigt and E. James Burke joined in the opinion. ShannonRoseAndersonofPowderRiverBasinResource Council in Sheridan, Wyo., and Timothy J. Preso, Laura D. Beaton and Katherine Kirklin O’Brien of Earth- justice in Bozeman, Mont., represent the appellants. Eric A. Easton and Peter K. Michael of the Wyoming Attorney General’s Office in Casper, Wyo., represents WOGCC. Steven L. Leifer of Baker Botts in Wash- ington, D.C., and John A. Masterson and Alaina M. Stedillie of Lewis Roca Rothgerber in Casper represent Halliburton. I Order To Produce Seismic Data Affirmed; Water Well Suit Fact Discovery Ends May 23 SCRANTON, Pa. — Phase 1 fact discovery in a law- suit in the U.S. District Court for the Middle District of Pennsylvania alleging contamination of residential water wells with hydraulic fracturing chemicals closes May 23; a motion by the natural gas extraction com- pany defendants for reconsideration of an October 2013 order to produce seismic data and open hole logs was denied in January (Susan Berish, et al. v. Southwestern Energy Production Co., et al., No. 10- 1981, M.D. Pa.). (Order extending discovery deadline available. Docu- ment #94-140513-026R. Order denying motion to reconsider available. Document #94-140513-027R.) Suzanne Berish is the lead plaintiff among a group of more than two dozen residents of Lenox Township, Susquehanna County. The lawsuit was filed in the Sus- quehanna County Court of Common Pleas (Suzanne Berish, et al. v. Southwestern Energy Production Co., et al., No. 10-1882, Pa. Comm. Pls., Susquehanna Co.). The plaintiffs include adults and children who live within a quarter mile of the so-called Price Well No. 1. Removal Southwestern Energy Production filed notice of removal Sept. 23, 2010, to the Middle District of Pennsylvania. A motion filed by the plaintiffs for leave to join de- fendants Halliburton Energy Services Inc., BJ Services MEALEY’S Fracking Report Vol. 1, #1 May 2014 7
  8. 8. Co., Shlumberger Limited and Union Drilling Inc. was granted May 3, 2012, by Judge A. Richard Caputo. The plaintiffs allege in the third amended complaint filed May 17, 2012, that Halliburton Energy Services, Union Drilling, Schlumberger Limited and BJ Services provided services, equipment and support to South- western Energy Production, the owner and operator of Price Well No. 1. The plaintiffs allege that they have been exposed to hazardous chemicals, including barium, manganese and strontium, by the hydraulic fracturing of the defen- dants. As a result of the fracking, their real properties have been damaged, and the value of their real proper- ties has been diminished, according to the plaintiffs. Plaintiff Connor Seamon avers that as a result of drink- ing contaminated water, he has become physically ill and manifests neurological symptoms of exposure to toxicants, including heavy metals. The plaintiffs allege negligence, private nuisance, strict liability and trespass causes of action. The plaintiffs seek an injunction ordering the defen- dants to stop releasing contaminants, which they allege is a violation of the Pennsylvania Hazardous Sites Cleanup Act (35 Pa. Statutes subsection 6020.1.1). They also seek compensatory and punitive damages in addition to creation of a medical monitoring fund. The plaintiffs voluntarily dismissed Schlumberger Limited in November 2012. Seismic Data Judge Caputo entered an order Aug. 27, 2013, instruct- ing Southwestern Energy Production and Schlumberger Technology Corp., a nonparty contractor, to file briefs regarding the discovery of seismic data and open hole logs. The defendants opposed the release on the grounds that the data are trade secrets. Judge Caputoissuedan order Oct.11 granting the plain- tiffs access to seismic data and open hole logs. The order was stayed Oct. 28 pending disposition of the motion to reconsider filed Oct 24. Judge Caputo denied the motion Jan. 16. ‘‘There are six elements used to determine whether information must be kept secret so it confers a competitive advantage to the owner of the information [Pestco Inc. Associated Products Inc., 800 A2d. 700, 706 (Pa. Super. 2005)],’’ according to Judge Caputo. ‘‘The burden is on SEPCO [Southwestern Energy Production Co.] to demonstrate that the open hole logs and the seismic data are trade secrets.’’ First, the information claimed by Southwestern Energy Production to be a trade secret is known by Schlum- berger and an unknown number of employees, accord- ing to Judge Caputo. ‘‘Moreover, there is no evidence of any protection SEPCO required of Schlumberger to require its employees of the information learned both while working at Schlumberger and after leaving Schlumberger’s employ.’’ Second, some 25 to 50 Southwestern Energy Produc- tion employees are aware of the information, according to Judge Caputo. ‘‘There is no evidence of any require- ments on SEPCO’s employees regarding the prohibi- tion of dissemination of this information while in the employ of SEPCO or thereafter.’’ Third, Southwestern Energy Production shared the information with Schumberger, a contractor, according to Judge Caputo. The distribution of the information is unknown, and there is no evidence of restrictions on the distribution of the evidence. Value Of Information Fourth, there is a lack of evidence of the value of the information about the information, according to Judge Caputo.Fifth,itisundisputedthatSouthwesternEnergy Production spent considerable money to develop the data, which mitigates in favor of classifying the infor- mation as a trade secret. Finally, the sixth issue concerns the value of the data about Price No. 1 Well to other potential well sites. The authority cited by the defendants for trade-secret classi- fication under this test, the Texas Supreme Court opi- nion in In re Bass (113 S.W.3d 735 [Texas 2003]), is distinguishable, according to Judge Caputo. ‘‘In Bass, the non-participating royalty interest owners of land sued the mineral estate owner claiming that implied duty to develop the land was breached. The mineral estate owner contracted with Exxon to run a geological survey of seismic activity on the entire land. The mineral estate owner never opted to develop the Vol. 1, #1 May 2014 MEALEY’S Fracking Report 8
  9. 9. land. In seeking to support their claim of breach of implied duty to develop the land, the royalty interest owners sought the seismic data because it would ‘reveal whether development would be profitable.’ In re Bass, 113 S.W.3d at 738.’’ The seismic data at issue in Bass was not confined to a single well, according to Judge Caputo. ‘‘In Bass, it is apparent that it relates to the entire 22,000 acres.’’ For these reasons, the motion to reconsider is denied, according to Judge Caputo. The parties stipulated Feb. 28 to an extension of the case management deadlines. Judge Caputo endorsed the stipulation March 3. Fact discovery, including fact depositions, will be completed by May 23, accord- ing to Judge Caputo. ‘‘All other deadlines in the Second Amended Case Management Order dated September 30, 2013 shall be extended accordingly.’’ Counsel Patrick Walsh of Kelly, Polishan, Walsh & Solfanelli of Old Forge, Pa., represents Price. Michael Gleeson, M.D., of the Law Office of Michael Gleeson in Arch- bald, Pa., Peter J. Cambs and William J. Dubanevich of Parker Waichman in Port Washington, N.Y., and Christopher P. Caputo of Caputo & Mariotti in Moo- sic, Pa., represent the plaintiffs. Joel Robin Burcat and Matthew M. Haar of Saul Ewing in Harrisburg, Pa., and John H. Barr, Michael C. Connelly and Robert D. Ayers of Bracewell & Giu- liani in Houston represent BJ Services. David R. Fine and George A. Bibikos of K&L Gates in Harrisburg represent Southwestern Energy Production and Halli- burton Energy Services. Patricia Fecile-Moreland of Marks, O’Neill, O’Brien & Courtney in Philadelphia and David P. Helwig of Marks, O’Neill, O’Brien & Courtney in Pittsburgh represent Union Drilling. I Texas Jury Awards $2.9 Million To Family Alleging Harm From Natural Gas Fracturing Case name: Lisa Parr, et al. v. Aruba Petroleum Inc. Case number: 11-1650 Court: County Court at Law No. 5 of Dallas County, Texas Judge: Mark Greenberg Verdict / Settlement (breakdown): $2.9 million ($275,000 diminution of real property value, $750,000 each for past physical pain and suffering to Bob and Lisa Parr, $500,000 past physical pain and suffering to Emma Duval, $100,000 each for future physical pain and suffering to Bob and Lisa Parr, $50,000 for past physical pain and suffering to Emma Duval, $100,000 each to Bob and Lisa Parr for past mental anguish, $100,000 for past mental anguish to Emma Duval) Plaintiff(s): Lisa Parr, minor daughter Emma Duval, Robert Parr Defendant(s): Aruba Petroleum Inc. Date: April 22, 2014 Background: Lisa and Robert Parr own 40 acres over the Barnett Shale in Wise County, Texas. Hydraulic fracturing for natural gas extraction began in 2008 in the Barnett Shale. Twenty-two wells eventually were drilled within two miles of the Parrs’ residence; no wells or natural gas extraction activities occur on the Parrs’ tract. The Parrs attribute their personal injuries and property damage to benzene, toluene, ethylben- zene, xylene and other volatile organic compounds used to complete the wells by hydraulic fracturing. The Parrs named 11 defendants in the lawsuit filed in 2011. Aruba Petroleum Inc. and Encana Oil & Gas (USA) Inc. remained as defendants in the 11th amended petition filed Sept. 17, 2013. Halliburton Co. was granted a no-evidence summary judgment in 2013 on the grounds that its actions were not the proximate cause of the Parrs’ alleged injuries. Settle- ments were reached with the remaining defendants prior to trial. Aruba Petroleum was granted summary judgment on negligence, gross negligence and trespass causes of action. The trial proceeded on the claim of private nuisance against Aruba Petroleum. The jury was instructed to determine if Aruba Petroleum intention- ally created a private nuisance and if the company’s conduct was abnormal and out of place; five of the six the jurors answered the first question in the affirma- tive and the second question in the negative. The jury declined to award punitive damages. MEALEY’S Fracking Report Vol. 1, #1 May 2014 9
  10. 10. Claim: Personal injury, property damage Injury: Chronic nose bleeding, irregular heartbeat, muscle spasms, open sores, emotional distress, harm to livestock, damage to the environment, loss of property value Defense: The Parrs cannot prove Aruba Petroleum caused their injuries because of the number of wells drilled near their property by other oil and gas com- panies. Aruba Petroleum complied with applicable federal and state laws and air quality and drilling safety guidelines established by the Texas Railroad Commis- sion and the Texas Commission on Environmental Quality. Other: Plaintiff attorneys: Brad J. Glide, Glide Law Firm, Houston; David Matthews, Mathews & Associates, Dallas; Richard A. Capshaw, Capshaw & Associates, Dallas Defense attorneys: Ben Barron, Ben K. Barron PC, Dallas; Michael J. Mazzone, Haynes & Boone, Houston Key related documents: 11th amended complaint available. Document #15-140506-058C. Verdict in Section B. Document #15-140506-057V. I Louisiana Appeals Panel Rules Plaintiffs Lack Standing To Seek Restoration Damages LAKE CHARLES, La. — A unanimous Third Circuit Louisiana Court of Appeal panel on May 7 affirmed summary judgment against surface estate owners seek- ing damages from oil and natural gas operators for allegedly failing to restore the surface estate; the panel applied the subsequent purchaser doctrine and con- cluded that the plaintiffs lack standing to seek dam- ages for alleged injuries before they purchased the subject land (Carlos Boone, et uxor v. ConocoPhillips Co., et al., No. 13-1106, La. App., 3rd Cir.; 2014 La. App. LEXIS 1204). (Opinion in Section A. Document #94-140513- 012Z.) Carlos and Lori Boone appealed a motion for sum- mary judgment and exception of prescription decided against them in the Louisiana 15th Judicial District Court of Vermillion Parish (No. 92292). Judge John Damian Trahan granted the motion filed by EnerQuest Oil & Gas, a former lessee of the property. Rights Reserved The Boones purchased 18.66 acres of land encumbered by mineral reservations and oil and natural gas leases for $120,000 in August 2005 from Primeaux Properties Inc. Primeaux Properties purchased the tract in 2003 from Aaron Lagneaux and Eric Lagneaux, who inher- ited the property. Oil and natural gas operations on the property date back to 1972. The Lagneauxs reserved the minerals and mineral rights of the property in the 2003 sale. EnerQuest acquired the wells and operating rights on the tract in 2000 from Phillips Petroleum Co. Ener- Quest sold its operating rights and interest in the prop- erty to Petro ‘‘E’’ in 2004. The sale and assignment to Petro ‘‘E’’ included EnerQuest’s use of the surface of the subject property and the obligation to clean and restore the surface. The Boones asserted contamination and property damage in the lawsuit filed in May 2010. The Boones alleged claims against six oil and natural gas operators. They allege claims against ConocoPhillips Co. as suc- cessor to Phillips Petroleum, EnerQuest and Petro ‘‘E’’ and three other operators. Our Copyright Policy Subscribers are encouraged to copy sections of this report for use in court submissions. You also are welcome to copy a single article to send to a client or colleague, and to copy and route our table of contents. However, it is a violation of our copyright to copy substantial portions of this report for any other reasons without permission. Illegal copying can seriously undermine subscription-based publications like ours; moreover, the Copyright Act of 1976 provides for damages for illegal copying. If you wish to copy and distribute sections of the report, simply contact MealeyInfo@LexisNexis.com. Vol. 1, #1 May 2014 MEALEY’S Fracking Report 10
  11. 11. In support of their claims, the Boones alleged the dis- covery of abandoned debris and equipment on the land and asserted a failure to properly clean and restore the property. The Boones identified three of five wells on the property in a first amended petition filed in July 2012 that they allege were operated by EnerQuest before its sale to Petro ‘‘E.’’ EnerQuest moved for summary judgment on the grounds that the Boones as a matter of law are pre- cluded from asserting a tort or contract claim for prop- erty damage before its 2005 acquisition of the property without a specific assignment of that right from Phillips Petroleum. Leave To Amend The Boones offered assignments of rights from Pri- meaux and the Lagneauxs in response to the summary judgment motion. Judge Trahan granted the Boones leave to file a supplemental and amending petition asserting their right as assignees to the rights of the previous owners, claims for fraud and conspiracy and solidary liability of all defendants. Judge Trahan then granted EnerQuest summary judg- mentandexceptionofprescription.TheBoonesappealed. ‘‘We begin with a review of the subsequent purchaser rule or doctrine [Eagle Pipe and Supply Inc. v. Amerado Hess Corp., 79 So.3d 246, 256-57 (La. 10/25/11)],’’ Judge Ulysses Gene Thibodeaux wrote for the panel. ‘‘Relevant to our inquiries here, a real right is not defined by the Civil Code but has long been held to be a proprietary interest and a species of ownership, which ‘defines the relation of man to things and may, therefore, be declared against the world.’ Eagle Pipe and Supply, Inc., 79 So.3d at 259,’’ according to the panel. ‘‘A real thing and a real obligation both attach to a thing. Id. at 261; La. Civ. Code art. 1764, Revision Comments—1984, (b).’’ ‘‘As illustrated by Eagle Pipe and Supply, Inc. through its analysis of Clark v. J.L. Warner Co. et al., La. Ann. 408 (1851) and subsequent jurisprudence, the former owner retains the right to recover damages caused by the former owner’s lessee during the former owner’s ownership of the property,’’ according to the panel. The August 2005 sale and conveyance of the property from Primeaux to the Boones does not assign the seller’s personal right to sue the lessee for damage done to the land before the date of the sale, according to the panel. ‘Subsequent Purchaser’ ‘‘Lagneaux reserved the rights to himself in 2003, and in 2005 Primeaux, who never obtained them from Lagneaux, referenced the mineral and lease reservations in its sale to the Boones and pointed the Boones to the recorded prior act of sale from Lagneaux. Accordingly, the Boones knew that the land was encumbered by reserved mineral rights and leases. Under the subse- quent purchaser doctrine, they do not have a right of action to sue for damages occurring prior to their ac- quisition of the property.’’ In an attempt to sue EnerQuest, the Boones obtained assignments from Lagneaux and Primeaux in September 2012, according to the panel. ‘‘We find that the assign- ments also fail to provide the plaintiffs with a right of action for pre-acquisition damages against EnerQuest.’’ Lagneaux had no right of action in tort against Pri- meaux to assign in 2012 as a matter of law, according to the panel. Louisiana Civil Code Article 3493, which governs damage to immovable property, has a one-year statute of limitations. The statute of limitations expired in March 2004, according to the panel. Primeaux could not assign contractual rights to the Boones in September 2012 because it did not acquire contractual rights from Lagneaux in 2003, according to the panel. ‘‘Accordingly, the Boones did not obtain any tort or contract rights from the previous owners via the assignments to sue for damages prior to the act of sale in 2005.’’ Alternatively, the Boones aver that they have a right of recovery as third-party beneficiaries of the surface lease granted in 2002 by Lagneaux to EnerQuest, according to the panel. In Andrepont v. Acadia Drilling Co. (231 So.2d 347 [1969]), the Louisiana Supreme Court iden- tified three criteria for determining if contracting parties provided a benefit for a third party. The Boones have not met their burden of proving they are third-party beneficiaries under the contracts, according to the panel. ‘Withheld Its Lease’ Finally, the Boones aver that the 2002 surface lease had a 10-year term and was effective until 2012, which MEALEY’S Fracking Report Vol. 1, #1 May 2014 11
  12. 12. included their ownership of the surface, according to the panel. ‘‘We disagree. As previously discussed, Lagneaux withheld its leases and contractual rights from assign- ment to the Boones, and in any event the surface lease did not provide fordamages. It only provided for restora- tion which was not due until six months after the lease expired.’’ ‘‘Based upon the foregoing, we affirm the trial court’s judgment granting the motion for summary judgment and exception of prescription in favor of EnerQuest Oil & Gas, LLC. Costs of this appeal are assessed to the plaintiffs, Carlos and Lori Boone.’’ Judges Sylvia R. Cooks and John E. Conery joined in the opinion. Warren A. Perrin of Perrin, Landrey, deLaunary, Dar- tez & Ouellet in Lafayette, La., and Michael Gregory Stag of Smith Stag in New Orleans represent the plain- tiffs. Morgan J. Wells Jr. of Larzelere Picou Wells Simp- son Lonero in Metairie, La., represents EnerQuest. Rebecca H. Dietz of King, Krebs & Jurgens in New Orleans represents ConocoPhillips. I Legacy Oil Pollution Claims Dismissed Without Prejudice In Louisiana Federal Court NEW ORLEANS — Defense motions to dismiss were granted in part on April 22 with leave to amend in a well field legacy contamination lawsuit pursued by landowners in the U.S. District Court for the Eastern District of Louisiana (Catherine P. Alford, et al. v. Chevron USA Inc., et al., No. 13-5457 [consolidated], E.D. La.; 2014 U.S. Dist. LEXIS 55724; See 4/15/14, Page 27). (Order available. Document #15-140506-037R. Third amendedcomplaint available. Document #15-140506- 038C. Brief in support of motion to reconsider available. Document #15-140506-039B. Response to motion to reconsider available. Document #15- 140506-041B.) Plaintiffs led by Catherine Alford filed suit in the 25th Judicial District Court in Plaquemines Parish, La., (No. 60-4883) to recover damages for contamination of their property in the so-called Potash Field by oil and gas operators Chevron USA Inc., Goodyear Petroleum Co., Hilcorp Energy I, Laurent Oil & Gas, Malloy Energy Co., Noble Energy Inc., Shell Oil Co., Exxon Mobil Corp., Gulf Oil Corp., Anadarko E&P Onshore, BP America Production Co., Chevron USA Holdings Inc., Four Star Oil and Gas, French Gulf Coast Partners and Pan American Petroleum Corp. Removing Defendant The lawsuit was removed in August 2013 by Chev- ron USA. This so-called legacy litigation, as described in Marin v. Exxon Mobil Corp. (48 So.3d 234, 238 [La. 2010]), arises from operations conducted decades ago that left an unwanted legacy in the form of actual or alleged contamination, according to Judge Sarah S. Vance. Facilities constructed by the defendants during extrac- tion operations allegedly released hazardous substances onto the plaintiffs’ property, according to Judge Vance. Exxon Mobil moved to dismiss or for a more definite statement in September 2013, which Judge Vance granted in part on April 1 with leave to amend (2014 U.S. Dist. LEXIS 44621). Judge Vance denied the motion for a more definite statement. Pursuant to the April 1 order, the plaintiffs filed a third amended sup- plemental complaint on April 21. Exxon Mobil on April 11 moved for reconsideration with respect to the classification of servitude and implied obligations of mineral servitude holders. Exxon Mobil challenges the application of the obliga- tions as successor to Humble Oil & Refining. ‘‘The Court’s Order and Reasons states that the February 17, 1960 Servitude Agreement attached to Plaintiffs’ petition grants a mineral servitude to Hum- ble Oil on Plaintiffs’ property. Exxon respectfully sub- mits that this legal conclusion is manifestly erroneous, as the Servitude Agreement does not convey any rights to Exxon with respect to exploring for, producing, or reducing minerals to possession or ownership.’’ The agreement grants only rights with respect to con- struction and maintenance of pipelines and equipment for treating, transporting and storing oil, gas, sulfur, saltwater brine and other minerals on the subject land, according to Exxon Mobil. ‘‘Absolutely no rights Vol. 1, #1 May 2014 MEALEY’S Fracking Report 12
  13. 13. to explore for, produce, or reduce to possession and ownership any minerals are transferred through the document. Thus, by its very terms, the 1960 Servitude Agreement cannot be classified as a Mineral Servitude.’’ Reconsider Because the agreement does not convey mineral servi- tude or mineral rights, the plaintiffs cannot state a cause of action under Louisiana Mineral Code articles 11 and 22, according to Exxon Mobil. ‘‘As such, Exxon respectfully requests this Court reconsider its finding that Exxon is a mineral servitude owner, and therefore, its conclusion that ‘the complaint plausibly alleges that Exxon breached the duties it owes to plaintiffs as a mineral servitude holder to ‘keep[] the property subject to the [servitude] in good order’ and to ‘exercise [its[ rights with reasonable regard’ for those of plaintiffs.’’’ The plaintiffs cite Louisiana Civil Code 639 in an April 28 response to the motion to reconsider. ‘‘Civil Code Article 639 declares that a limited personal servitude is a real right that confers ‘in favor of a person a specified use of an estate less than full enjoyment,’’’ according to the plaintiffs. ‘‘Because limited personal servitudes such as a mineral lease ‘constitute an intermediary category between usu- fruct and predial servitudes,’ they are ‘regulated by application of the rules governing usufruct and predial servitudes to the extent that their application is com- patible with the rules governing a right of use of servi- tude.’ [La. Civil Code article 645],’’ according to the plaintiffs. ‘‘Both the rules governing usufruct and the rules governing predial servitudes require restoration of the thing subject to the usufruct or predial servitude.’’ ‘‘Exxon clearly has the obligation of ‘preserving the substance’ of the plaintiffs’ property under both the 1950 Lease and the 1960 Servitude [Eagle Pipe and Supply Inc. v. Amerada Hess Corp., 79 So.3d 246, 258-259],’’ according to the plaintiffs. The plaintiffs also aver that they have the right to enforce mineral lessee obligations arising from the end of mineral lease. ‘‘Exxon ignores the fact that a miner lease is ‘a hybrid institution’ [Mineral Code Article 16] that may be classified as a limited personal servi- tude,’’ according to the plaintiffs. Eagle Pipe ‘‘When the mineral lease terminates, the lessee’s obliga- tion to the surface owner does not disappear, as the lessee is ‘always with the obligation of preserving the sub- stance.’ [Eagle Pipe, 79 So.3d at 258-259] (emphasis added),’’ according to the plaintiffs. ‘‘Exxon is responsible for its obligations both under the 1950 Lease and the 1960 Servitude,’’ according to the plaintiffs. The order issued April 22 grants in part with leave to amend motions filed in September 2013 by Chevron USA, Four Star Oil and Gulf Oil (collectively, Chev- ron); Anadarko E&P Onshore, BP America and Pan American Petroleum (collectively, BP); Hilcorp Energy I; and French Gulf Coast Partners to dismiss certain of the plaintiffs’ claims and for a more definite statement. Judge Vance denied the motions for a more definite statement. Judge Vance dismissed all the claims without prejudice, except the claims under Civil Code articles 2683(2), 2686 and 2692 and Mineral Code articles 11 and 122. Theplaintiffshave21daystofileanamendedcomplaint. Judge Vance dismissed claims for restoration damages under Civil Code article 2683(3) as premature because the plaintiffs do not allege that the 1950 lease has expired. The plaintiffs are correct that obligations imposed on lessees under Civil Code articles 2683, 2686, 2688 and 2692 and articles 11 and 122 of the Mineral Code continue (Marin, 48 So.3d at 256), according to Judge Vance. Civil Code article 2683(2) and Mineral Code articles 11 and 122 collectively require mineral lessees to use leased property as a so-called prudent administrator, according to Judge Vance. The plaintiffs allege in the article 2686 claim that the defendants used the leased property in a way that may cause damage to the prop- erty, according to Judge Vance. The Article 2692 claim alleges that the subject property was damaged by the improper storage of waste, which triggers a duty to repair the property, according to Judge Vance. Without Prejudice Judge Vance dismissed without prejudice claims for frau- dulent concealment, restoration, breach of express con- tract,violationoftheprudentoperatordoctrine,landloss, punitive damages, continuing trespass, civil fruits, conti- nuing nuisance, strict liability and unjust enrichment. MEALEY’S Fracking Report Vol. 1, #1 May 2014 13
  14. 14. Donald T. Carmouche, Diane Adele Owen, John Hogarth Carmouche, Ross Joseph Donnes, Victor Lynn Marcello and William Robert Coenen III of Tal- bot, Carmouche & Marcello in Baton Rouge, La., and William Peter Connick of Connick & Connick in Metairie, La., represent the plaintiffs. Michael Raudon Phillips, Brittany Buckley Salup, David Philip Curtis, Michelle Purchner Cumberland and Shannon A. Shelton of Kean Miller in New Orleans and Alan James Berteau, Charles Simon McCowan III and Louis Victor Gregoire Jr. of Kean Miller in Baton Rouge represent Chevron USA, Gulf Oil, Chevron USA Holdings and Four Star Oil and Gas. Loulan Joseph Pitre Jr., Demarcus J. Gordon, Jane Jackson and Terrence Kent Knister of Gordon, Arata, McCollam, Duplantis & Egan in New Orleans repre- sent Goodrich Petroleum and Malloy Energy. Craig Isenberg, Andrea Mahady Price, Michelle M. Ruther- ford, Richard Edward Sarver and Zachary I. Rosenberg of Barrasso, Usdin, Kupperman, Freeman & Sarver in New Orleans represent Hilcorp Energy I. Paul J. Hebert and David K. McCory of Ottinger Hebert in Lafayette, La., represent Laurent Oil & Gas. Joseph P. Farnsworth and Daria Burgess Diaz of Stone Pigman Walther Wittman in New Orleans represent Noble Energy. Patrick Wise Gray, Amy Allums Lee and Jack Brandon Stanley of Johnson Gray McNamara in Lafayette represent Shell Oil. Phillip E. Foco of Tay- lor, Porter, Brooks & Phillips in Baton Rouge and Anthony Joseph Lascaro and John Allain Viator of Bienvenu, Bonnecaze, Foco, Viator & Holinga in Baton Rouge represent Exxon Mobil. James E. Lapeze and Jonathan J. Fox of Liskow & Lewis in New Orleans represent Anadarko E&P. Versatile research materials for busy legal professionals on the go! LexisNexis® offers a growing selection of titles covering state jurisdictions and practice areas in the eBook format. You can: electronically ® content Thanks to the functionality of eBooks, your legal library is now portable and easy to access. For more information or to download a sample LexisNexis ebook, go to To purchase an eBook, or the LexisNexis® Store: LexisNexis eBooks are available in epub format for use on devices like the Apple® iPad® and mobi format for use on devices like the Amazon® Kindle™ . LexisNexis and the Knowledge Burst logo are registered trademarks of Reed Elsevier Properties Inc., used under license. Matthew Bender is a registered trademark of Matthew Bender Properties Inc. Other products or services may be trademarks or registered trademarks of their respective companies. © 2012 LexisNexis. All rights reserved. OFF01778-0 2012 ® Vol. 1, #1 May 2014 MEALEY’S Fracking Report 14
  15. 15. James P. Dore of Kean Miller, Amy DeGeneres Berret, Benn Vincent and Shelly J. Harrison in Baton Rouge represent BP America Production. Patrick S. Ottinger and Hebert of Ottinger Hebert in Lafayette represent French Gulf Coast Partners. Dore and Vincent repre- sent Pan American Petroleum. I Oklahoma Class Plaintiffs Appeal Dismissal Of Claims For Waste Hauling Pollution DENVER — Class action representatives of an Okla- homa action alleging fly ash and produced water con- tamination filed an appellant brief April 21 in the 10th Circuit U.S. Court of Appeals seeking reversal of an order denying remand under the local controversy exception to the Class Action Fairness Act of 2005 or, alternatively, vacating summary judgment for defen- dants for failing to state a claim (William Reece, et al. v. AES Corp., et al., No. 14-7010, 10th Cir.). (Appellant brief available. Document #94-140513- 030B.) Bill Reece is the lead plaintiff in a putative class action removed in November 2012 to the U.S. District Court for the Eastern District of Oklahoma (Bill Reece, et al. v. AES Corp., et al., No. 12-457, E.D. Okla.; 2013 U.S. Dist. LEXIS 2236) pursuant to the Class Action Fair- ness Act (CAFA; U.S. Code 28:1332[d]) by XTO Energy Inc. from the LeFlore County, Okla., County Court (No. 11-256). Amended Complaint The plaintiffs filed a first amended complaint on Aug. 20, 2013, alleging claims against AES Corp., AES Shady Point Inc., AES Shady Point, MMHF aka Mak- ing Money Having Fun, Thumbs Up Ranch, Daryl Jackson dba Daryl Jackson Trucking, Kevin J. Jackson, Kenneth Jackson, Chad Jackson, GCI Mining aka George Colliers Inc., Mountain Minerals, Brazil Creek Minerals Inc., Farrell-Cooper Mining Co., Ash Grove Resources, Marine Coal Sales Co., Hunter Ridge Coal Co., International Coal Group, Coal Creek Minerals, McCorkle Truck Line Inc., Star Bulk aka PX Transportation Inc., R&J Trucking Inc., SEECO Inc., XTO Energy Inc., Stephens Production Co., Chesapeake Operating Inc., Petrohawk Operating Co., Hanna Oil & Gas Co., Highland Oil & Gas, Cholla Petroleum Inc., BP America Production Co., Ross Production Co., Shields Operating Inc., Sedna Energy Inc., Hogback Exploration Inc., Bishop Truck- ing, Bear Productions Inc., Graco Fishing & Rental Tools Inc., TXD Transport, Mike Krebbs Construc- tion Inc., Big Mac Tank Trucks, Oklahoma Big Mac Tank Truck, B&B Gas Well Services Inc. and Bear Transports. The plaintiffs allege that chemicals in oil and natural gas well waste and in coal combustion waste and fly ash hauled to and deposited at a dump site one mile south of Bokoshe, Okla., in LeFlore County have contami- nated the environment where they live and work. The haul routes to the dump site are also contaminated with fugitive chemicals from the hazardous wastes, ac- cording to the plaintiffs. Defendants AES, AES Shady Point Inc. and AES Shady Point own a coal-fired electricity generation plant in LeFlore County, according to the plaintiffs. Defendants GCI Mining, Mountain Minerals, Brazil Creek Miner- als, Farrell-Cooper Mining, Ash Grove Resources, Mar- ine Coal, Hunter Ridge, International Coal and Coal Creek deliver coal and limestone to the AES Shady Point plant, according to the plaintiffs. Well Defendants Defendants SEECO, a wholly owned subsidiary of Southwestern Energy; XTO Energy; Stephens Produc- tion; Chesapeake Operating; Petrohawk Operating; Hanna Oil & Gas; Highland Oil & Gas; Cholla Pet- roleum; BP America Production; Ross Production; Shields Operating; Sedna Energy; Hogback Explora- tion own oil and natural gas wells in Arkansas and Oklahoma, according to the plaintiffs. Defendants Bishop Trucking, Bear Productions, Graco Fishing & Rental Tools, TXD Transport, Mike Krebbs Construction, Big Mac Tank Trucks, B&B Gas Well Services and Bear Transports hauled produced fluid wastes (PFW) from the oil and natural gas wells to the MMHF dump site, according to the plaintiffs. Making Money Having Fun operates the MMHF dis- posal site, according to the plaintiffs. Thumps Up Ranch owns the land where the disposal site is located. Daryl, Kevin, Kenneth and Chad Jackson own Thumbs Up Ranch, according to the plaintiffs. MEALEY’S Fracking Report Vol. 1, #1 May 2014 15
  16. 16. By disposing of the waste and fly ash at the dump, the AES defendants have caused the release of arsenic, bar- ium, chromium, copper, lead, manganese, mercury, nickel, vanadium and zinc from the dump site, accord- ing to the plaintiffs. The PFW from oil and gas wells includes saltwater, sand, acid, oil- and water-based drilling fluids, comple- tion flowback fluid, frack flowback fluid, workover flowback fluid, rainwater gathered at the well sites, dril- ling cuttings and pit water generated in the extraction of oil and natural gas, according to the plaintiffs. The plaintiffs allege that they are exposed to hydrochlo- ric acid, hydraulic fracturing sand, diesel fuel, surfac- tants, potassium chloride, benzene and isopropanol from the PFW. Class Area The plaintiffs allege that the class area is within three miles of the MMHF dump. Class claims alleged by the plaintiffs in the first amended complaint are abnormally dangerous activity strict liability, public and private nuisance, trespass, negligence, negligence per se, trespass, diminution of property values, personal injury, unjust enrichment and violations of Oklahoma law. The damages alleged by the plaintiffs are diminution of property value; loss of use of property; contamination of soil, surface and groundwater and the air; and perso- nal injuries such as respiratory conditions, skin and eye irritations, cancer and death. The plaintiffs in December 2012 moved to remand under the local controversy and home state exceptions to CAFA. Judge Heaton denied the motion in April 2013 after concluding that the plaintiffs had not met their burden of establishing class citizenship. The plaintiffs filed a renewed motion to remand in May 2013 with a proffer of class membership and addi- tional evidence of class citizenship. Judge Heaton denied the motion and declined to consider the proffer of citizenship evidence as untimely. The defendants in September 2013 moved to dismiss the first amend complaint for failure to state a claim pursuant to Federal Rule of Civil Procedure 12(b)(6). Judge Heaton granted the motion on Jan. 8, 2014, and entered final judgment on Jan. 28 for the defendants. The plaintiffs appealed. The plaintiffs assign errors with respect to the denial of remand under the local controversy exception to CAFA and to dismissal for failing to state a claim. ‘Local Controversy’ ‘‘The allegations set forth in the FAP [first amended petition] and the reasonable inferences and interpre- tation of those allegations demonstrate that this case is a local controversy,’’ according to the plaintiffs. ‘‘The district court’s failure to remand this case to state court as a local controversy pursuant to 29 U.S.C.A § 1332(d)(4)(A) was [in] error and undermines CAFA’s statutory purpose,’’ according to the plaintiffs. The plaintiffs aver that they met their burden of showing that at least one defendant is ‘‘significant’’ and a citizen of Oklahoma and that the principal inju- ries occurred in Oklahoma. With respect to the failure to state a claim error, the plaintiffs aver that they satisfied Federal Rule of Civil Procedure 8(a)(2). ‘‘The FAC [first amended com- plaint] alleges facts which if taken as true, for the pur- poses of Fed.R.Civ.P. 12(b)(6), provide the district court and Defendants with exactly the kind of notice and evidence of Appellants’ claims and demands for relief to which Defendants are entitled,’’ according to the plaintiffs. ‘‘Together with the prodigious body of probative evi- dence pled with specificity by Appellants, and the im- portant inferences which reasonably can and must be drawn in Appellants’ favor, the FAC satisfies in every respect the ‘short and plain statement’ requirement of Fed.R.Civ.P. (8(a), as well as the ‘plausible’ reference expressed in Bell Atl. Corp., [Bell Atlantic Corp. v. Twombly, 550U.S. 544(2007)] 550U.S. 544,’’accord- ing to the plaintiffs. ‘‘For the foregoing reasons, Appellants respectfully request that this Court reverse the district court’s order denying remand as to this action in its entirety. Alternatively, Appellants further request this Court vacate the district court’s order dismissing Appellants’ claims, both with prejudice and without on the basis Vol. 1, #1 May 2014 MEALEY’S Fracking Report 16
  17. 17. that Appellants have met the pleading standards set forth under Fed.R.C.P. 8(a).’’ Counsel Clark O. Brewster, Montgomery L. Lair and J. Randall Miller of Brewster & De Angelis in Tulsa, Okla., repre- sent the plaintiffs. David W. Wulfers, Todd Maxwell Henshaw, Kara E. Moore and Shannon Davis of James, Potts & Wulfers Inc. of Tulsa and Mary B. Scott and William McAlister of Abowitz, Timberlake, Dahnke & Gisinger in Okla- homa City represent Bear Productions and Bear Transports. Jeff Belote of Jeff Belote Law in McAlester, Okla., represents Integrity Energy. Linda C. Martin and N. Lance Bryan of Doerner, Saunders, Daniel & Anderson in Tulsa and Dru Warren of Dru Warren Law in Poteau represent MMHF, Thumbs Up Ranch and the Jacksons. Matthew S. Panach, Bradley A. Gungoll and Jordan K. Russell of Gungoll, Jackson, Collins, Box & Devoll in Enid, Okla., represent Quick Transport. James M. Reed, Michael E. Smith and Sharon T. Tho- mas of Hall, Estill, Hardwick, Gable, Golden & Nelson in Tulsa represent AES Corp., AES Shady Point, Mon- tana Minerals and Coal Creek Mineral. Brian R. McLaughlin of McLaughlin & Sanders in Stigler, Okla., represents Bishop Trucking and B&B Gas Well Services. Matthew T. Warren Gotcher and Mat- thew Thomas Sheets of Gotcher & Beaver in McAles- ter, Okla., represent Mike Krebbs Construction. Floyd James III of Law Offices of Green, Johnson & Mumina in Oklahoma City represents GCI Mining. Mark K. Stonecipher and Lance E. Effel of Fellers, Snider, Blankenship, Bailey & Tippens in Oklahoma City represent TXD Transport. Harold E. Heath of Harold Heath Law Offices in Holdenville, Okla., repre- sents C&C Tank Service. Robert M. Honea of Hardin, Jesson & Terry in Fort Smith, Ark., represents XTO Energy, Cholla Petroleum and Hogback Exploration. Defense Counsel C. Michael Daily of Daily & Woods in Fort Smith represents Hanna Oil & Gas and Shields Operating. Pine Drewyor of Kendall Drewyor Law Firm in Rogers, Ark., and Sherry P. Bartley of Mitchell Williams Law in Little Rock represent Farrell-Cooper Mining and Brazil Creek Minerals. Charles D. Neal, Gary C. Crapster and Rachel D. Parrilli of Steidley & Neal in Tulsa, Jeff A. Woods, Justin W. Ross and Courtney Ross Samford of Wyatt, Tarrant & Combs in Louisville, Ky., and George P. Sibley III, Robert M. Rolfe, D. Alan Rudlin and Joshua P. Hanbury of Hunton & Williams in Richmond, Va., represent Marine Coal Sales, Interna- tional Coal Group and Hunter Ridge Coal. Steven E. Holden and Ryan C. Harper of Holden & Carr in Tulsa and Jason T. Seay of Tulsa represent Eastern Tank Service. L. Mark Walker and C. Miles Tolbert of Crowe & Dunlevy in Oklahoma City repre- sent A&A Tank Truck. Timothy J. Bomhoff and Jodi W. Disman of McAfee & Taft in Oklahoma City in represent Chesapeake Operating, Petrohawk Operating, SEECO and Ross Explorations. William S. Leach and Jessica L. Dickerson of McAfee & Taft in Oklahoma City represent Ross Explorations. Michael J. McDaniel, Robert P. Coffey Jr., Philard L. Rounds Jr. and David C. Senger of Brennan, Smith & Cherbini in Muskogee represent C&C Tank Truck Services. Philip O. Watts of Oklahoma City, Allison J. Maynard of Wilson, Elser, Moskowitz, Edelman & Dicker in Dallas and Sean M. Higgins of Wilson Elser in Houston represent Ash Grove Resources. Daniel K. Zorn and Stephen R. Palmer of Collins, Zorn & Wagner in Oklahoma City represent Big Mack Tank Trucks. Shannon H. Ratliff and Lisa A. Paulson of Ratliff Law Firm in Austin, Texas, and Andrew D. Sims, Russel R. Barton and Michael V. Fitzpatrick of Harris, Finley & Bogle in Fort Worth, Texas, represent XTO Energy. Additional Defense Counsel R. Stratton Taylor, Clint Russell and Sean Burrage of Taylor, Burrage, Foster, Mallett, Downs, Ramsey & Russell in Claremore, Okla., represent Stephens Pro- duction. Neal Tomlins of Tomlins Law in Tulsa rep- resents Sinclair Trucking. Jared D. Giddens and J. Dillon Curran of Conners & Winters in Oklahoma City represent Graco Fishing & Rental Tools. William D. Perrine, Reagan L. Madison and James N. Crews of Pittman, MacIsaac & Roy in Calgary, Alberta, Canada, represent PX Transportation. Thomas M. Ladner of Ladner, Little & Eldredge in Tulsa and Stephen M. Ryan of DLA Piper in Houston MEALEY’S Fracking Report Vol. 1, #1 May 2014 17
  18. 18. represent Highland Oil & Gas. Truman B. Ruckler Jr. of Tulsa in represents Sedna Energy. Rick D. Wescott of Wescott Law Office in Tulsa represents Hogback Exploration. Ian P. Faria of Coats Rose in Houston represents Big Mac Tank. I Texas Supreme Court Remands Attorney Fee Award Dispute Arising From Royalty Suit AUSTIN, Texas — The Supreme Court of Texas issued a per curiam opinion on April 25 remanding an attorney fee dispute with instructions for the trial court to develop a record sufficient to calculate attorney fees with the lodestar method; the disputed attorney fees are from a lawsuit to enforce an assignment of working interests in oil and natural gas producing wells (Larry T. Long, et al. v. Robert M. Griffin, et al., No. 11- 1021, Texas Sup.). (Opinion available. Document #15-140506-061Z.) Robert M. Griffin, Robert M. Griffin Jr., Marvin and Marie Ogilvie and Charles Conrad sued Larry T. Long, L. Allan Long and B. Virginia Long in their capacities as the trustees of the Lawrence Allan Long Trust, the Charles Edward Long Trust, the Larry Thomas Long Trust and the John Stephen Long Trust in the 124th District Court in Gregg County (No. 97-1009) in con- nection with oil and natural gas ventures. Working Interest The plaintiffs allege that the trusts failed to assign the working interest due them under assignment agree- ments in which the plaintiffs agreed to pay a portion of drilling and operating costs in exchange for partial working interests in producing wells. The plaintiffs filed an affidavit in 2001 supporting a request for attorney fees of $100,000 for 644.5 hours worked by two attorneys on their behalf. The plaintiffs averred that 30 percent of the time was spent on the assignment claim but argued that the assignment issue was ‘‘inextricably intertwined’’ with other claims against the trusts on which the attorneys spent 95 percent of the time. Following a 2003 bench trial, Judge Nathan E. White ruled for the plaintiffs and awarded them $35,000 in fees. On appeal, the 12th District Court of Appeals affirmed the judgment with modifications (144 S.W.3d 99). The Texas Supreme Court reversed the appeals court (222 S.W. 3d 412 [Texas 2006]) after concluding that the assignment agreements did not comply with the statute of fraud and could not be enforced on future wells and that the plaintiffs are not entitled to prevail on a separate claim involving a litigation agreement with the trusts. The case was remanded to the trial court to determine the attorney fee award. On remand, the trial court awarded the plaintiffs $30,000 in fees and post-judgment interest accruing from the date of final judgment in 2009. The court of appeal affirmed the trial court judgment with respect to the attorney fee award in May 2011 but modified the judgment to accrue interest from the 2003 judg- ment of the trial court (No. 09-260, Texas App., 12th Dist.; 2011 Tex. App. LEXIS 10143). Lodestar Calculation In the instant appeal, the trusts aver that the evidence does not support the amount of the attorney fee and that post-judgment interest should accrue from the 2009 final judgment. ‘‘Because the Griffins offered no evidence of the time expended on particular tasks, as we have required when a claimant elects to prove at- torney’s fees via the lodestar method, we agree with the Long Trusts that the Griffins did not provide the trial court with legally sufficient evidence to calculate a rea- sonable fee,’’ according to the court. ‘‘We explained in El Apple I, Ltd. v. Olivas that general- ities about the tasks performed provide insufficient information for the fact finder to meaningfully review whether the tasks and hours were reasonable and neces- sary under the lodestar method. 370 S.W.3d 757, 763 (Tex. 2012),’’ according to the court. ‘‘Sufficient evi- dence includes, at a minimum, evidence ‘of services performed, who performed them and at what hourly rate, when they were performed, and how much time the work required.’ Id. at 764.’’ ‘‘Likewise, in City of Laredo v. Montano, we reversed and remanded to redetermine attorney’s fees when the attorney testified to the time expended and the hourly rate but failed to provide evidence of the time devoted tospecifictasks. 414S.W.3d731, 736-37(Tex.2013).’’ ‘‘Here, as in El Apple and Montano, the affidavit sup- porting the request for attorney’s fees only offers gen- eralities,’’ according to the court. Vol. 1, #1 May 2014 MEALEY’S Fracking Report 18
  19. 19. ‘‘We note that here, as in El Apple, contemporaneous evidence may not exist. But the attorneys may recon- struct their work to provide the trial court with suffi- cient information to allow the court to perform a meaningful review of the fee application. El Apple, 370 S.W.3d at 764.’’ Alternatively, the plaintiffs argue that the 35 percent contingency fee agreement is sufficient to establish that the claim for attorney fees is reasonable and customary, according to the court. The argument is without merit, according to the court. Contingency Fee ‘‘Even if supporting evidence is not required for the contingency fee method of proof (as it is for the lodestar method), the contingency fee method cannot support the trial court’s fee award because the final judgment awarded no monetary relief except for attorney’s fees. Because the contingency method cannot support the trial court’s fee award, and no legally sufficient evidence supports the award under the lodestar method, we remand to redetermine attorney’s fees.’’ The court did not reach the assignment of error related to the accrual of interest. ‘‘We are confident that, on remand, the lower courts will apply the principles we clarified in Long v. Castle Texas Production Limited Part- nership, __ S.W.3d __ (Tex. 2014) [2014 Tex. LEXIS 252], to properly assess the date from which postjudg- ment accrues,’’ according to the court. F. Franklin Honea of Law Offices of F. Frank Honea in Dallas, Ronny Lee Adkison of The Adkison Law Firm in Henderson, Texas, and Mike A. Hatchell and Thomas F. Loose of Locke Lord in Dallas represent the trusts. Rex A. Nichols Sr. of Nichols & Nichols in Longview, Texas, and Andrew George Khoury of Longview represent the plaintiffs. I Natural Gas Operator Held Liable To Indemnify Driller For Contamination Litigation COLUMBUS, Ohio — A natural gas operating com- pany sued by a drilling company with which it con- tracted to spud wells in West Virginia is liable under the drilling contract to reimburse settlement and litigation costs for a related well-water contamination lawsuit naming both companies as defendants, the presiding U.S. District Court for the Southern District of Ohio judge ruled April 16 (Warren Drilling Inc. v. Equitable Production Co., No. 12-425, S.D. Ohio; 2014 U.S. Dist. LEXIS 52064). (Order available. Document #15-140506-006R.) Warren Drilling Co. Inc. sued Equitable Production Co. and Ace American Insurance Co. in April 2012 in the Nobel County, Ohio, Court of Common Pleas (No. 12-85) for breach of contract and indemnification for contamination of the land surface or water pursuant to a March 2006 drilling contract with respect to Jack- son County, W.Va., natural gas wells. Equitable Pro- duction removed the action in May 2012 to the Southern District of Ohio and filed cross-claims against Warren Drilling. Underlying Lawsuit Warren Drilling performed drilling operations on three natural gas wells from November 2007 to February 2008 in Jackson County on property owned by Dennis and Tamera Hagy. The Hagys sued Equitable Pro- duction and Warren Drilling, BJ Services Corp. USA and Halliburton Energy Services, which were hired by Equitable Production to conduct natural gas well drilling operations, in the U.S. District Court for the Southern District of West Virginia for contaminating a water well on which they depend for domestic water (Dennis Hagy et al. v. Equitable Production Co., et al., No. 10-1372, S.D. W.Va.; 2012 U.S. Dist. LEXIS 91773; See 7/17/12, Page 6). They allege that Equita- ble Production owned and operated the natural gas wells. The claims against Halliburton and Warren Drilling were resolved by settlement. The claims against Halli- burton were dismissed May 17, 2012. The claims against Warren Drilling were dismissed April 24, 2012, in accord with a $40,000 settlement. Equitable Production was granted summary judgment May 17, 2012. A unanimous Fourth Circuit U.S. Court of Appeals panel affirmed summary judgment Oct. 8 for Equitable Production (Dennis Hagy, et al. v. Equitable Pro- duction Co., et al., No. 12-1926, 4th Cir.; 2013 U.S. App. LEXIS 20478; See 10/15/13, Page 24). MEALEY’S Fracking Report Vol. 1, #1 May 2014 19
  20. 20. Warren Drilling filed a claim in November 2010 against Ace American Insurance Co. for coverage and a defense in the Hagy litigation under a commercial general liabi- lity policy it obtained pursuant to the drilling contract with Equitable Production. Ace American Insurance denied coverage April 15, 2011. Warren Drilling noti- fied Equitable Production in May 2011 of the denial and asserted an obligation under the March 2006 dril- ling contract to indemnify for all costs of defending the Hagy litigation. Equitable Production did not in- demnify Warren Drilling. In addition to $40,000 for the settlement, Warren Dril- ling seeks to recover $155,000 it alleges it spent defend- ing the Hagy litigation. Warren Drilling settled with Ace American Insurance in April 2013. Warren Drilling and Equitable Production filed cross-motions for summary judgment in November and October 2013. 3 Issues In Dispute Pennsylvania law applies under a choice-of-law provi- sion in the March 2006 drilling contract, according to Judge James L. Graham. ‘‘Three distinct issues are in dispute here: (1) which party has a right to indemni- fication under the Drilling Contract; (2) whether that party must prove that the claim made against it by the Hagys was legally valid; and (3) whether its expenses in the Hagy litigation were reasonable,’’ according to Judge Graham. Warren Drilling and Equitable Production argue that the other party bears the duty to indemnify under the contract. Equitable Production cites Section 11.5 of the drilling contract; Warren Drilling cites Section 11.6 of the drilling contract. For Section 11.5 to apply, the contamination must originate on or above the surface or from a liquid or solid in the control of Warren Drilling, according to Judge Graham. ‘‘The record before the court demon- strates that neither requirement is satisfied.’’ ‘‘The court does find as a matter of law that § 11.6 applies here,’’ according to Judge Graham. ‘‘Under this section EQT [Equitable Production] must indem- nify Warren for claims of pollution or contamination to the extent that they are: (1) ‘not assumed by Cont- ractor [Warren] in Subparagraph 11.5,’ (2) not covered by Warren’s insurance, and (3) not caused by the neg- ligence or misconduct of Warren or its employees.’’ ‘‘None of these limitations come into play here.’’ ‘‘EQT argues that even if § 11.6 does apply, Warren is not entitled to indemnification because Warren has not demonstrated the validity of the Hagys’ underlying claim against Warren,’’ according to Judge Graham. ‘‘Warren contends that the Drilling Contract required EQT to defend and indemnify Warren against all claims, not just claims for which Warren was actually liable,’’ according to Judge Graham. ‘Plain Language’ ‘‘The court finds that the Drilling Contract contains plain language by which EQT’s duty to indemnify was triggered by the making of a claim for contami- nation against Warren.’’ ‘‘To hold otherwise would render § 11.6 meaningless,’’ according to Judge Graham. With respect to the reasonableness of the settlement amount and Warren Drilling’s litigation expenses, Warren Drilling has not met its burden, according to Judge Graham. ‘‘Though it has submitted evidence that it reached a $40,000 settlement with the Hagys, it has not provided any analysis as why that amount was reasonable, other than to vaguely assert that a trial would have been expensive. Further, Warren has merely alleged that it expended $155,000 in attorneys’ fees and costs in connection with the Hagy litigation, without submitting any evidence to substantiate that amount.’’ ‘‘Accordingly, the court will instruct the parties to submit additional evidence and briefing on the issues of the reasonableness of the settlement amount and the litigation expenses.’’ With respect to the reasonableness of Warren Dril- ling’s request for fees and costs under section 11.6 of the drilling contract for the instant litigation, Judge Graham noted that Equitable Production offered no argument in opposition. ‘‘Accordingly, the court will also instruct the parties to submit additional evidence and briefing on the issue of the reasonableness [of] those fees and costs,’’ according to Judge Graham. Colleen Elizabeth Cook, Daniel Patrick Corcoran and James Scott Huggins of Theisen, Brock, Frye, Erb & Vol. 1, #1 May 2014 MEALEY’S Fracking Report 20
  21. 21. Leeper in Marietta, Ohio, represent Warren Drilling. Lyle B. Brown and J. Kevin West of Steptoe & John- son in Columbus represent Equitable Production. Dar- ius N. Kandawalla and Sabrina Christine Haurin of Bailey Cavalieri in Columbus represent Ace American Insurance. I Pennsylvania Federal Judge Rules Gas Well Activity Did Not Extend Term Of Lease WILLIAMSPORT, Pa. — Lycoming County, Pa., property owners seeking a declaratory judgment against a natural gas extraction company in the U.S. District Court for the Middle District of Pennsylvania were granted summary judgment April 30; the judge con- cluded that the oil and natural gas lease expired under its own terms because the extraction activity occurred on an adjacent property in violation of the unambiguous lease (Thomas A. Neuhard, et uxor v. Range Resources- Appalachia, No. 11-1989, M.D. Pa.; 2014 U.S. Dist. LEXIS 59602). (Order in Section C. Document #15-140506-053R.) Range Resources-Appalachia and Thomas and Barbara Neuhard are litigating whether a five-year oil and nat- ural gas lease executed in June 2006 expired because a natural gas well was not developed on the surface of the Neuhards’ 47-acre property in Lycoming County during the term of the lease. Notice Of Removal TheNeuhardsfiledsuitinSeptember2011intheLycom- ing County Court of Common Pleas (No. 11-1738). Range Resources-Appalachia filed notice in October 2011 to remove the lawsuit to the Middle District of Pennsylvania. Summary judgment discovery commenced in February 2012 on cross-motions filed by the plaintiffs and Range Resources-Appalachia. ‘‘The Court held oral argument on the motions on March 26, 2014,’’ according to Judge Matthew W. Brann. ‘‘There are no material facts in dispute, and the issues before the Court involve interpretation of contract provisions as a matter of law.’’ The disputed oil and natural gas was executed June 21, 2006, according to Judge Brann. ‘‘The Lease provided Range the rights to procure oil and gas from forty-seven (47) acres owned by the Neuhards situate[d] in Lewis Township, Lycoming County, Pennsylvania. The Lease contains a primary term of five years calculated from June 21, 2006. Unless extended by the com- mencement of drilling operations or as otherwise pro- vided, the Lease would expire by its own terms on June 21, 2011.’’ Range Resources-Appalachia executed a designation of unit document June 13, 2011, creating the Null Eugene A Unit, which includes the Neuhards’ tract, according to Judge Brann. ‘‘The language of the Lease, Range’s activities, and the positions of the parties raise three legal issues,’’ accord- ing to Judge Brann. The issues are whether Range Resources-Appalachia began activities before the lease expired, whether the unit created for extraction exceeded the lease and whether drilling a well on the adjacent Null property satisfied the lease, according to Judge Brann. ‘Commencement’ ‘‘First, did Range’s activities prior to June 21, 2011, the expiration date of the Lease’s primary term, constitute the ‘commencement of a well’ as a matter of law?’’ ‘‘This Court recently decided this particular issue in Roe v. Chief Exploration & Development LLC [No. 11-816, M.D. Pa., Aug. 13, 2013; 2013 U.S. Dist. LEXIS 113914] finding that activity undertaken in good faith in preparation to drill satisfied a lease’s com- mencement clause,’’ according to Judge Brann. ‘‘Pennsylvania cases adopt this posture as well,’’ accord- ing to Judge Brann. Range Resources-Appalachia’s activities before June 21, 2011, included obtaining permits from government agencies, staking a location for a well site, negotiating well-drilling operation agreements with the plaintiffs and neighboring land owners, obtaining easements, removing timber and constructing an access road and pad site, according to Judge Brann. ‘‘These activities are sufficient to constitute the commencement as a matter of law. [Pemco Gas Inc. v Bernardi, 1977 Pa. Dist. & Cnty. Dec. LEXIS122, Dec. 30, 1977].’’ MEALEY’S Fracking Report Vol. 1, #1 May 2014 21
  22. 22. ‘‘Even though Range’s activities in beginning the well on the neighboring Null property satisfied the com- mencement clause as a matter of law, by the terms of the Lease those drilling activities must have been per- formed wither ‘on the Leased Properties or on a spacing unit containing a portion of the Leased Properties’ in order to extend the Lease. Lease § 8.1,’’ according to Judge Brann. ‘‘The concrete issue before the Court is whether Range’s designation of a unit of approximately three hundred ninety-five (395) acres exceeded its unitization author- ity under the Lease.’’ Unit Size ‘‘The Neuhards submit that, by the plain language of the lease, the acreage amounts articulated in Section 9.2 operate so as to limit the maximum extent of a unit’s size to the 350 acres surrounding each well, based on the allusion to section 9.2 in section 12.1,’’ according to Judge Brann. ‘‘The Court holds that Range’s unit designation violates its unitization authority under the plain and unambig- uous terms of the Lease, because the Lease is clear that a unit cannot be larger than 350 acres surrounding each well in the unit, and a unit cannot contain more than one well without the permission of the Lessor, which Range did not obtain.’’ ‘‘Although Range undoubtedly commenced a well prior to the expiration of the primary term, it did not do so on the Leased premises, but on a premises adjacent to the Leased Premises that was not unitized according to the Lease,’’ according to Judge Brann. ‘‘Under a plain read- ing of the Lease, Range’s activities on the Null Property adjacent to the Leased Premises did not constitute dril- ling activities ‘on the Leased Premises.’ Nor was there a sufficient modicum of activity in preparation for dril- ling on the Leased Premises during the primary period to extend the Lease — the operative activity was per- formed on the Null Property.’’ ‘‘In sum, Range commenced a well before the expira- tion of the Lease’s primary term,’’ according to Judge Brann. ‘‘That well, however, was neither ‘on the Leased Premises’ nor ‘on a unit containing a portion of the Leased Premises.’ Range exceeded its unitization authority under the plain and unambiguous language of the Lease and did not commence a well on the Neuhard’s property. Consequently, the Lease expired by its own terms on June 21, 2011.’’ Michael A. Dinges of Elion, Wayne, Grieco, Carlucci, Shipman & Irwin in Williamsport represents the plain- tiffs. Andrew D. Sims and Troy Okruhlik of Harris, Finley & Bogle in Fort Worth, Texas, and J. David Smith of McCormick Law Firm in Williamsport repre- sent Range Resources-Appalachia. I Pennsylvania Federal Judge Denies Summary Judgment In Natural Gas Lease Dispute PITTSBURGH — A magistrate judge’s recommen- dation in the U.S. District Court for the Western Dis- trict of Pennsylvania to deny summary judgment in a natural gas lease dispute was adopted April 16 by the presiding judge over the objection of the defendants, who are accused of allowing the disputed lease to expire (Rugh A. Mason, et uxor v. Range Resources- Appalachia, et al., No. 12-369, W.D. Pa.; 2-14 U.S. Dist. LEXIS 53195). (Order available. Document #15-140506-031R.) Rugh and Sherry Mason sued Range Resources-Appa- lachia and NiSource Energy Ventures in February 2012 in the Washington County, Pa., Court of Common Pleas (No. 12-1159) to stop the companies from ob- taining production rights for natural gas under their land. The defendants removed the declaratory judg- ment lawsuit March 26, 2012, to the Western District of Pennsylvania. Declaratory Judgment The plaintiffs seek a declaration that they rather than the defendants own all drilling and production rights to the natural gas associated with the land. The plaintiffs further allege that Range Resources-Appalachia inter- fered with Rugh Mason’s relationship with his em- ployer after he refused to amend and ratify a March 1961 lease or to enter into a new lease for gas produc- tion rights with the company. The Masons own 151 acres of a 165-acre tract in Washington County that is the subject of a March 22, 1961, lease executed by John Burig, Flora Burig Vol. 1, #1 May 2014 MEALEY’S Fracking Report 22
  23. 23. and Anna C. Burig with The Manufacturers Light and Heat Co. John and Anna Burig are deceased; it is pre- sumed Flora Burig is also deceased because John, her husband, was born in 1889. The Masons succeeded to ownership of the subject land though Sherry Mason, who has been the owner of the land since at least the execution of a lease in October 1984 but did not object to the lease for more than 25 years. Columbia Gas Transmission and NiSource Energy Ventures have succeeded to the Manufacturers Light’s rights under the lease. The primary term of the lease was 10 years. A provision of the lease extended the lease as long as the lessee operates any portion of the subject land in search of or by production of natural gas and oil or if the land is part of a production unit or a natural gas storage field. The lessee is granted in the lease sole authority to deter- mine if the operation satisfies the conditions and if the royalties paid are adequate compensation. There is no evidence that the Burigs ever considered the lease forfeited or terminated. Nor is there evidence that the Masons have demanded Columbia Gas Transmis- sion or its assignees drill a well on the subject property, according to Jeffrey Kramer, the Range Resources- Appalachia landman responsible for land and lease acquisitions in Washington County. Columbia Gas Transmission operates the Donegal Sto- rage Field created by Manufacturers Light and Heat Co., which includes the subject property. 2005 Sublease Columbia Gas Transmission entered into a sublease in December 2005 with Range Resources-Appalachia predecessor Great Lakes Energy Partners for gas devel- opment and production rights in the Donegal Storage Field except for the sandstone gas storage formation. The sublease includes any rights remaining under the 1961 lease. Columbia Gas Transmission assigned to NiSource Energy Ventures in December 2009 all of its rights and interests as sublessor under the 2005 sublease with Great Lakes Energy Partners. NiSource Energy Ventures sublet to Range Resources-Appalachia the production rights for all formations below the top of the Rhinestreet formation in the Donegal Storage Field pursuant to the gas storage leases, including the 1961 lease. The Masons allege since 1961, no entity has paid any consideration for oil and natural gas productions rights that may still exist under the 1961 lease. They also allege neither Great Lakes nor Range Resources- Appalachia has paid royalties or other consideration except for delay rental paid in 2007. Meanwhile, Range Resources-Appalachia has begun operations within the Donegal Storage Field and as of Jan. 7, 2014, placed approximately 53 natural gas wells into production. Magistrate Judge Robert C. Mitchell issued a report and recommendation Feb. 26 to deny the plaintiffs’ Dec. 23, 2013, motion for summary judgment in part. The plaintiffs argue the payment of delay rental cannot, as a matter of Pennsylvania law, extend the lease beyond its primary term, according to Magistrate Judge Mitchell. ‘‘Plaintiffs have presented no evidence of abandonment, and the equitable defenses of laches, waiver and estoppel raise fact issues for trial,’’ according to Magistrate Judge Mitchell. Joint Objection The defendants filed a joint objection March 12. Judge Joy Flowers Conti adopted the report and re- commendations on April 16. ‘‘In their objections, Defendants contend that the magistrate judge in the R&R [report and recommendations] erroneously con- cluded that there are genuine issues of material fact on the issue of severability of the gas production rights and storage rights by reason of: (i) the lease’s assign- ment clause; (ii) production rights under the lease being subleased to Range Resources, and the sublease being subsequently assigned to NEVCO [NiSource Energy Ventures]; and (iii) Range Resources’ consum- mation of a ‘top lease’ with Plaintiffs in 2007,’’ accord- ing to Judge Conti. Contrary to the defendants, ‘‘[t]he R&R did not reach any conclusion with respect to the issue of severability,’’ according to Judge Conti. ‘‘The R&R merely noted that, although Defendants had argued that dual pur- pose leases in general appear compatible with the notion of severability of storage and production rights, MEALEY’S Fracking Report Vol. 1, #1 May 2014 23
  24. 24. Defendants had not discussed the assignment clause in the lease, the history of the separate assignments of the production rights or the lease consummated with Plaintiffs in 2007.’’ ‘‘It is noted that, had Defendants’ wished to file a motion for summary judgment arguing that they were entitled to judgment as a matter of law on the question of who owns the product rights to the natural gas reserves on Plaintiffs’ land, they could have done so,’’ according to Judge Conti. ‘‘Because they chose not to file a motion, the magistrate judge in the R&R merely pointed out an issue that remains to be resolved at trial.’’ The plaintiffs of Claysville, Pa., are pro se. Laura A. Lange and Paul K. Stockman of McGuireWoods in Pittsburgh and James W. Pfeifer of Pepper Hamilton in Pittsburgh represent Nisource Energy Ventures. Donald T. Dulac Jr. and Kenneth J. Witzel of Barnes Dulac Watkins in Pittsburgh represent Range Resources-Appalachia. I April Trial Stayed Pending Dispositive Motion Ruling In Pennsylvania Federal Court WILLIAMSPORT, Pa. — Natural gas operators sued in the U.S. District Court for the Middle District of Pennsylvania filed a supplemental authority on April 28 in support of dismissing a strict liability claim as a matter of law; the trial anticipated to start April 21 was stayed in March pending a ruling on dispositive defense motions (Edward E. Kamuck v. Shell Energy Holdings, et al., No. 11-1425, M.D. Pa.). (Motion for stay available. Document #94-140513- 028M. Supplemental authority available. Document #94-140513-029B.) Edward Kamuck owns 93 acres that were once part of the Copp property in Tioga County, Pa. The entire tract was subject to an oil and gas lease, according to the record. The original Copp lease did not address the extraction of natural gas from Marcellus Shale forma- tions, however, according to the record. Lease Holders Shell Holdings GP, Shell Holdings LP and Shell Wes- tern Exploration & Production were lessees under the Copp lease and in 2010 sought to expand their mineral rights to include Marcellus Shale natural gas extraction, according to the record. Kamuck declined to amend the Copp lease, but the other owners agreed, according to the record. The ori- ginal 10-year lease on Kamuck’s property expired June 12, 2011, according to the record. After the defendants commenced natural gas extraction on the adjoining land, Kamuck sued. In the complaint filed in August 2011, Kamuck sued for breach of con- tract, a declaratory judgment against the companies for hydraulic fracturing and for damages in torts. The defendants moved to dismiss under Federal Rule of Civil procedure 12(b)(6) for failing to state a claim and to strike the claims under Rule 12(f). The motion was granted in part in April 2012, leaving only private nuisance, negligence and strict liability causes of action. The defendants on Jan. 17, 2014, moved to dismiss the remaining claims pursuant to Federal Rule of Civil Procedure 41(b) for failure to prosecute or, alterna- tively, for summary judgment. In support of this motion, the defendants filed a supplemental authority on April 28 from Ely v. Cabot Oil & Gas (No. 0902284, M.D. Pa.). ‘‘On April 23, 2014, Judge John E. Jones, III issued an Order adopting this Court’s Report and Recommendation in its entirety, granting summary judgment in favor of the defendants in that case on the issue of strict liability,’’ according to the defendants. ‘‘The issue of whether Defendants natural gas drilling operations are subject to strict liability was briefed by the parties in the instant case, and the Defendants relied specifically upon the analysis contained in this Court’s Report and Recommendation in the Ely mat- ter,’’ according to the defendants. Strict Liability Magistrate Judge Martin C. Carlson issued the report and recommendation on April 21, according to the defendants. Magistrate Judge Carlson ruled as a matter of law, natural gas drilling activities are not subject to strict liability, according to the defendants. Meanwhile, the defendants filed an unopposed motion on March 19 to stay the trial set to begin April 21. Vol. 1, #1 May 2014 MEALEY’S Fracking Report 24

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