National Association of Division Order Analysts April / May / June 2018
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NADOA N a t i o n a l A s s o c i a t i o n o f D i v i s i o n O r d e r A n a l y s t s G R O W T H T H R O U G H E D U C T I O N
Volume MMXVIII • No 2
www.NADOA.org
Contents Feature
NADOA 2018 Officers President Cheryl Hampton 1st Vice President Jason Lucas 2nd Vice Presiden t Luanne Johnson, CDOA Treasurer Stephanie Moore, CDOA Corresponding Secretary
Articles
Updates Texas
In This Rule Against Perpetuities Exemption..........................................9 Lightning Oil v. Anadarko E&P...............................................11 California – Climate Change Lawsuit........................................15 West Virginia – Cotenancy Modernization Act...........................16 Legislative Watch – Wyoming........................................................16 North Dakota Rule Changes Approved..........................................17 Federal – OSHA Limits Silica in Oil & Gas Operations..............18 Institute Preview............................................................................19 Unclaimed Property California....................................................................................40 Indiana........................................................................................41 President’s Corner. ................................................................1 2019 Nominations.................................................................3 2018 Member Recognition Nominations................................4 Certification..........................................................................6 Cobwebs for Nashville. ..........................................................6 Webinar Update....................................................................7 Decimal Points......................................................................8 DO Smiles.............................................................................9 Condolences.........................................................................33 Counterpart Connection......................................................34 New Members......................................................................39 2018 NADOA Board/Committee Chairs..............................42 Calendar of Events. .............................................................44 Issue
Donna King, CDOA Recording Secretary Jennifer Lujano
The NADOA News Magazine is a quarterly publication of the National Association of Division
Order Analysts PO Box 44009 Denver CO 80201
Subscription: By membership to NADOA, at $75.00 per year. News Magazine Editor Rona L. Erickson, CDOA Kaiser-Francis Oil Company Ronae@KFOC.net 918.491.4319 Associate Editor April Luedecke, CDOA April.Luedecke@anadarko.com
Graphic Design Paul Beach
On the Cover: Parthenon replica Photo courtesy of Nashville Convention and Visitors Bureau
All rights reserved. No part of this publication may be reproduced/copied without written permission. Editorial disclaimer: The contents of this newsletter are intended for member use only and any other use without permission from the NADOA Board of Directors is strictly prohibited.Articles published herein represent the view of the authors; publication neither implies approval of the opinions expressed nor accuracy of the facts stated and NADOA accepts no liability for misprints.
President’s
Corner
Cheryl Hampton 2018 NADOA President
Greetings NADOA Members! It’s hard to believe this year is flying by and this is our 2nd Quarter Newsmagazine. Are you excited about the celebration for our 45th Annual Institute in Nashville? I hope everyone is planning on attending. Your Institute Committee is working hard to make this the BEST Institute ever. What a great way to celebrate 45 years of NADOA! Not only will you be getting a great educational opportunity in Nashville, there are some awesome places to visit and plenty to see and do. Consider coming in early or staying the weekend after to take in all that Nashville has to offer. As you probably know, I’ve been in the “business” for a long time now and it’s always fun to think back on all the changes that have taken place in the past 45 years. I know there are many of you who remember writing every calculation out on columnar paper, in pencil, and then using an adding machine to add up the numbers. How many times did you have to re-add it because you transposed a number?? And what about letters to owners? You had to use a couple sheets of carbon paper in between paper – sometimes different colors for filing purposes – and sit at a typewriter and type it out! Ahh, the many colors of White Out. Computers and copiers have made our daily work simpler but the truth of the matter is you still need a well educated Division Order Analyst to do the work. NADOA serves as a way to continue your education and keep you on top of your game. No matter how many times I may listen to someone speak on a particular topic, I learn something new. Never miss an opportunity to learn something new. Registration is open and if you register before June 30, members get the early bird price of $575! That’s a great price for THREE days of education! We are again having Wednesday Workshops covering Calculations for all levels of experience as well as a session on Pivot Tables and several sessions on Unclaimed Property. Room rates this year are $159 for city view and $209 for garden view. Right now, I’m finding flights from Houston for $300 and under round trip. Keep checking the airlines and be on the lookout for information from the Transportation committee. NADOA will again have a Golf Tournament on Wednesday for members and guests who wish to play. We are hosting a “Grab and Go See Nashville” Wednesday afternoon reception from 1:00 to 4:00 pm. We visit some great cities and we want everyone to have a chance to get out and see the sights. Thursday night we’ll be heading to the Ole Red Restaurant and Bar for dinner and fun. Lisa Buffaloe and Kacie Bevers are heading up this event so you know it will be a great time!
I’m looking forward to seeing all of you in Nashville in September for a Grand Ole Opportunity!!!
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Officer Candidate Nominations
• 2nd Vice President (3 year commitment)
By Sandi Rupprecht, Board Advisor
Now is the time to send in your candidate nominations for the NADOA Board of Directors in 2019. Many of you know me, Sandi Rupprecht, this year’s Board Advisor. I am also the chairman of the official Nominations Committee, a group of six NADOA members charged to actively recruit those interested in serving. Every NADOA member is eligible to nominate outstanding individuals with the heart of a volunteer and the best interests of the organization in mind. If you know a great candidate, please email their name and the board position for which they would be well suited to srupprecht@enerplus.com. The committee will contact any nominee to discuss in more detail the duties required and willingness to serve, if elected. We are accepting nominations for:
• Treasurer (1 year term)
• Corresponding Secretary (1 year term, membership duties)
• Recording Secretary (1 Year Term)
Note: Association Directors are elected or selected independently by the corresponding local association.
Our best resource is our members and their familiarity with those that best represent our discipline. Thank you for taking the time to help the organization by volunteering yourself or identifying those that are well suited to serve.
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It’s never too early to think about the accomplishments of our members and the companies that support them, but it can be too late. So, start thinking now about that special person and/or company who should be nominated to receive one of NADOA’s Special Recognition awards. NADOA will recognize the following at the 2018 Institute in Nashville, TN: 2018 Member Recognition Awards
Russell Schetroma Memorial Speaker’s Award: Presented to the individual who has contributed to NADOA’s growth and development by speaking, educating and sharing knowledge on numerous occasions to the NADOA membership, the Division Order profession and/or the industry during the past year. contributed the most to NADOA’s growth and development, the Division Order profession, and/ or the industry during the past year. Nomination form follows and may also be found on the homepage of the website www.NADOA. org . Please forward nominations to Stan Pinney at sbpinney@sbcglobal.net . Corporate Award: Presented to the group/company that has
Interaction Award: Presented to the NADOA member or affiliated organization who has demonstrated leadership in the promotion of the profession to the industry and the community. Education Award: Presented to the NADOA member who has achieved a level of unusual distinction in NADOA’s education activities, as demonstrated by their contribution of time and service to the betterment of Division Order professionals. Lifetime Achievement Award: Presented to the NADOA member who has exemplified the Division Order profession through demonstrated leadership contributions to the industry and the profession during their career.
Deadline for nominations is May 31, 2018.
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2018 Nomination Form for NADOA Membership Recognition Awards
I would like to nominate ___________________________________________ for the award(s) marked below:
_____ Interaction Award: Presented to the NADOA member or affiliated organization who has demonstrated leadership in the promotion of the profession to the industry and the community. _____ Education Award: Presented to the NADOA member who has achieved a level of unusual distinction in NADOA’s education activities, as demonstrated by their contribution of time and service to the betterment of Division Order professionals. _____ Lifetime Achievement Award: Presented to the NADOA member who has exemplified the Division Order profession through demonstrated leadership contributions to the industry and the profession during his/her career. _____ Russell Schetroma Memorial Speaker’s Award: Presented to an individual who has contributed to NADOA’s growth and development by speaking, educating and sharing knowledge on numerous occasions to the NADOA Membership, the Division Order profession and/or the industry during the past year. _____ Corporate Award: Presented to the group/company that has contributed the most to NADOA’s growth and development, the Division Order profession, and/or the industry during the past year. Please detail the nominee’s involvement in NADOA, the services they have performed and/or contributions they have made (You may attach a separate sheet if necessary). ________________________ ________________________________________________________________________________________ ________________________________________________________________________________________ ________________________________________________________________________________________ ________________________________________________________________________________________ ________________________________________________________________________________________ ________________________________________________________________________________________ ________________________________________________________________________________________
Nominator: ____________________________________________________ (Please Print)
____________________________________________________ (Signature) ____________________________________________________ (Daytime Phone)
Send nominations to: Member Recognition Awards Committee, c/o Stan Pinney (sbpinney@sbcglobal.net) Nominations will be accepted through May 31, 2018
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CANDIDATES FOR CERTIFICATION Publication of the following “Certified Division Order Analyst” applicant(s) fulfills the requirement as stated in the Voluntary Certification Policy, III C.2 which states: “…applicant’s name will be published in the NADOA Newsletter or other official publication of NADOA.” This allows the NADOA membership an opportunity to present objections to the certification of the applicant. Any objection to the certification of the applicant must be in writing and signed by a NADOA member or non-member who qualifies his knowledge and objection of the applicant. All such letters will be considered confidential and must be received by the NADOA Certification Committee at the following address within thirty (30) days following the last day of the month in which the Newsletter or other official publication of NADOA was published:
NADOA Certification Committee P O Box 44009 Denver CO 80201
If the objection warrants denial of the certification or temporary withholding of certification, the applicant will be notified by Certified Mail.
CANDIDATES FOR RECERTIFICATION
Sherri DeWalt – Houston, TX Ernie Leuenberger – The Woodlands, TX
Congratulations to the following new CDOAs!!
Kelsi Lynn Flores – Fort Worth, TX Diane Dolan Walters – The Woodlands, TX
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Webinar Update By: Yoli Bazan, CDOA
Looking for additional ways to earn your CDOA credits? NADOA Webinars can now present up to 500 members at once! Participate with a coworker or individually and turn in those CDOA points. Please contact Yoli Bazan at nadoawebinars@gmail. com if you have any topics or speakers you’re interested in hearing.
In case you missed NADOA’s webinar in the 1st quarter of 2018, you missed out on a great educational opportunity. Special thanks to Mark Robinette for going above and beyond by providing links to the written material and answering additional questions from the webinar attendees. Fortunately for all, NADOA has the ability to record these presentations so you still have the opportunity to listen to Mark Robinette’s presentation at your leisure. Tuesday, February 27, 2018 P resenter : Mark Robinette with Law Offices of Mark Robinette T opic : Haunting the Title from the Beyond: When is a Probate Required in Arkansas?” 1st Quarter 2018
Upcoming Webinars:
Wednesday, May 30, 2018 11:30 am to 12:30 pm T itle : Common Title Issues Encountered in New Mexico P resenter : D. Bradley Gibb, Senior Attorney at Kiefaber & Oliva LLP
R egistration URL: https://attendee.gotowebinar.com/ register/3791476022481064962
Wednesday, August 29, 2018 11:30 am to 12:30 pm P resenter : TBD T opic : TBD Wednesday, Nov. 28, 2018 11:30 am to 12:30 pm P resenter : Pamela J. Wentz, Georgeson LLC
R ecorded L ink : https://attendee.gotowebinar.com/ register/8790015310341814787
L ink to written materials : http://robinettefirm.com/wp-content/uploads/2018/02/ RobinetteNADOAArkProbateFnl.pdf L ink to M ark ’ s QA response : http://robinettefirm.com/follow-up-to-nadoa-webinar- from-february-27-2018/
T opic : TBD
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NADOA
Decimal Points
April Luedecke, CDOA Associate Editor
Rona Erickson, CDOA Editor
2018 NADOA Article Deadlines
Regional Reporters
If you have a suggestion for someone to act as a Regional Reporter to help NADOA keep abreast of current legislation and legal issues for your region, please submit the name or the name of the firm. Special Institute Edition.....................June 1 Third Quarter..............................August 17 Fourth Quarter........................ November 9
ABADOA
Steptoe & Johnson PLLC dan.swiger@steptoe-johnson.com Donna King, CDOA donna.king@forwardlandllc.com Sharon Siemer, CDOA sharon.siemer@anadarko.com
CAPDOA
DADOA
DALWORTH Lewis Box, CDOA
lbox@finleyresources.com
HADOA
Dale Bender, CDOA dalebender1433@yahoo.com
MAADOA
Angie Coady, CDOA
acoady@vessoil.com
PBADOA
Shawn Thompson shawn.thompson@pxd.com Rebecca Helt, CDOA rebecca.helt@wpxenergy.com
SADOA
Arkansas Jackie Clotfelter, CDOA jclotfelter@hannaoilandgas.com North Dakota Kimberly A. Backman kbackman@crowleyfleck.com New Mexico Zachary P. Oliva zoliva@kolawllp.com Louisiana
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DO Smiles :) Division Order Analysts may sometimes feel
“I handed the baton to Division Orders back in October. They’re the only ones with the records and expertise to elucidate the interest calculations (and among the few with the patience and gluttony for punishment required for the dissection of 500 page title opinions). I won’t presume to speak for them, but it’s possible they might be actively revising and updating their records for the area.”
underappreciated by other departments. Lecia Hite with Laredo Petroleum shared the following excerpt from an email sent by their Lead Joint Interest Accountant to a Landman who wanted an explanation of how an interest is calculated in a horizontal allocation well:
Legal
Updates
These materials reflect only the personal views of the author and are not individualized legal advice. It is understood that each case is fact-specific, and that the appropriate solution in any case will vary. Therefore, these materials may or may not be relevant to any particular situation. Thus, the author and their law firm cannot be bound either philosophically or as representatives of their various present and future clients to the comments expressed in these materials. The presentation of these materials does not establish any form of attorney-client relationship with the author or their law firm. While every attempt was made to insure that these materials are accurate, errors or omissions may be contained therein, for which any liability is disclaimed. Texas Supreme Court Exempts Oil and Gas Conveyances from the Rule Against Perpetuities
The rule against perpetuities (“RAP”) and its archaic and frequently confusing interpretation of when an interest is “vested” has plagued generations of law students and property lawyers. RAP requires that “no interest is valid unless it must vest, if at all, within twenty- one years after the death of some life or lives in being at the time of conveyance.” BP Am. Pro. Co. v. Laddex, Ltd., 513 S.W.3d 476, 479 (Tex. 2017). Traditionally, RAP imposed the draconian consequence of voiding any
interest if any possible contingency of the grant violated RAP. Over time, courts have continued to relax the penalty imposed by RAP. Rosson v. Bennett, 294 S.W. 660, 662 (Tex. 1927) (holding that an oil and gas lease, which grants a lessee the right to explore and develop for a certain period of time and for so long thereafter as oil and gas is produced, creates a fee simple determinable estate that does not violate RAP).
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In ConocoPhillips Co. Koopmann, No. 16-0662, 2018 Tex. LEXIS 247 (Mar. 23, 2018), the Texas Supreme Court addressed the applicability of RAP to mineral interests. In Koopmann, in 1996, Lois Streiber conveyed 120 acres of land in Dewitt County to Lorene Koopmann, which deed included the following language: “RESERVATIONS FROM AND EXCEPTIONS TO CONVEYANCE AND WARRANTY: 1. There is EXCEPTED from this conveyance and RESERVED to the Grantor and her heirs and assigns for the term hereinafter set forth one-half (1/2) of the royalties from the production of oil, gas . . . and all other minerals . . . which reserved royalty interest is a non-participating interest and is reserved for the limited term of 15 years from the date of this Deed and as long thereafter as there is production in paying commercial quantities of oil, gas, or said other minerals from said land or lands pooled therewith. . . . It is expressly understood, however, that if any oil, gas, or mineral or mining lease covering said land . . . is maintained in force and effect by payment of shut-in or any other similar payments made to lessors or royalty holder in lieu of actual production. . . .” (emphasis added). Based on the above language, Streiber reserved a 15-year term non-participating royalty interest (“NPRI”). Subsequently, Lorene Koopman conveyed an undivided two-thirds of her mineral interest to her children (the “Koopmanns”). Next, Lorene Koopmann leased the land, which lease was eventually acquired by Burlington Oil & Gas Company, LP (“Burlington”). Burlington identified a well to be drilled, but actual production was not obtained until February 2012 – two months after the Streiber term expired on December 27, 2011. However, prior to December 27, 2011, Burlington tendered “shut-in royalty payments” to the Koopmanns and explained that the payments “were made ‘to ensure that all parties’ interest, if any, in the well is maintained.’” Id., 2018 Tex. LEXIS 247, at *4. The dispute centered on the Koopmanns’ assertion that the term NPRI interest expired. Burlington argued that “the ‘as long thereafter’ language Streiber used in her reservation created in the Koopmanns a springing executory interest, which is not certain to vest, if at all, within the period required by [RAP]: Id., 2018 Tex. LEXIS 247, at *2-3.
twenty-one years after the death of some life of lives in being at the time of the conveyance.” Id., 2018 Tex. LEXIS 247, at *10. The Texas Supreme Court explained: “Under the common law [RAP], with respect to the NPRI, the deed created in Streiber a fee simple sub- ject to executory limitation and in the Koopmanns an executory interest. The Koopmanns received a future interest created in someone other than the grantor that would become possessory by the divesting of Streiber’s prior freehold estate, i.e., an executory interest. Thus, at the time it was created, it was uncertain whether the Koopmanns’ future interest would vest within the period required by [RAP]. The Koop- manns’ argument that their future right to the NPRI ‘vested in interest’ immediately upon execution of the deed is simply not the law: springing executory in- terests do not vest, by definition, until the condition terminating the grantor’s possessory interest is met.” Koopmann, 2018 Tex. LEXIS 247, at *14-15. Here, the condition terminating the possessory interest, a lack of production in paying quantities, may not occur within twenty-one years after the death of some life or lives in being, and, thus, violated RAP. The Texas Supreme Court noted that if the conveyance had been a grant of the NPRI instead of a reservation, then the conveyance would not have violated RAP. Id., 2018 Tex. LEXIS 247, at *15- 16. The Texas Supreme Court, however, did not invalidate the conveyance because voiding the interest would not serve the purpose of RAP, which was to prevent landowners “from using remote contingencies to preclude alienability of land for generations.” Id., 2018 Tex. LEXIS 247, at *17. The Texas Supreme Court explained that limitation of the term NPRI, being production in paying quantities, was an event that was certain to occur at some point. Thus, the Texas Supreme Court saw “no persuasive reason to treat the Koopmanns’ future interest in the NPRI as uncertain and thus subject to invalidation by [RAP] simply because it was created through reservation rather than a grant, when the event upon which their interest will vest was certain to occur.” Id., 2018 Tex. LEXIS 247, at *25. After determining that RAP did invalidate the conveyance, the Texas Supreme Court analyzed the ownership of the NPRI interest at the conclusion of
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The Koopmann decision is significant because the Texas Supreme Court clearly stated its position that RAP should not be applied to invalidate conveyances of oil and gas interests when the holder of the interest can be ascertained and the condition is certain to terminate. Koopmann upholds the long-standing industry practice of inclusion of “as long thereafter as there is production in paying quantities” language in oil and gas conveyances.
the 15-year term. Burlington and Streiber both argued that the payment tendered in December 2011 to the Koopmanns “to extend the primary term of its lease on the tract is ‘similar’ to a shut-in royalty and thus meets the third savings-clause requirement.” Id., Tex. LEXIS 247, at *33. The Texas Supreme Court affirmed the decision of the court of appeals that the interpretation of “other similar payments” in the NPRI reservation constituted a factual issue to be determined by a jury.
Memorandum Opinion
About the Authors:
Eli Kiefaber is a partner with Kiefaber & Oliva LLP. Eli focuses his practice on oil and gas matters, including acquisition and divestiture of oil and gas assets, title opinions, joint operating agreements, federal leases, pooling and unitization issues.
Zachary Oliva is a partner with Kiefaber & Oliva LLP. Zack
focuses his practice on energy and corporate law. He regularly assists clients in the drafting of oil and gas title opinions, purchase and sale agreements and contract interpretation. Additionally, he assists clients with the negotiation, drafting and review of business formations, contracts and service agreements. Zack earned his B.A. from The Ohio State University and his J.D. from Capital University Law School. He is licensed to practice in New Mexico, Ohio and Texas.
Eli is licensed to practice law in Texas, Oklahoma, Colorado and Ohio, is a regular speaker on issues relating to the development of unconventional shale plays and has given a variety of presentations regarding legal issues relating to oil and gas development. Eli earned his B.A from Kenyon College and his J.D., with honors, from Marquette University Law School.
Off-site Drilling: Lightning Oil Company v. Anadarko E&P Onshore, LLC By: Melissa A. Munson, Steptoe & Johnson PLLC Can an oil and gas operator drill
through the mineral estate underlying an adjacent tract of land without the adjacent lessee’s permission? In Lightning Oil Company v. Anadarko E&P Onshore, LLC, the court said yes. Lightning Oil Co. v. Anadarko E&P Onshore, LLC, 520 S.W.3d 39 (Tex. 2017).
Who was involved, and when and where did this take place:
In 2009, Anadarko E&P Onshore, LLC entered into an oil and gas lease with the Texas Parks and Wildlife Department covering the Chaparral
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Wildlife Management Area in LaSalle and Dimmit Counties. The terms of the lease required Anadarko to locate drill sites off of the Chaparral Area whenever “prudent and feasible.” Id. at 43. Anadarko tried first to secure a surface agreement from the Texas Parks and Wildlife Department and was unsuccessful. The tract adjacent to the Chaparral Area had split surface and mineral ownership; the surface was owned by Briscoe Ranch, Inc., while the minerals were
Leased to Lightning Oil
Leased to Anadarko
Chaparral Wildlife Management Area
Briscoe Ranch
How did prior courts view this issue:
owned by the Hurd family. In 2009, the Hurds leased the minerals to Lightning Oil Co. Anadarko entered into an agreement with Briscoe Ranch, the surface owner of the adjacent tract, to locate a drill site on the Ranch tract close to the property line between the Ranch and the Chaparral Area. Anadarko’s plan was to drill vertical wellbores through the mineral estate underlying the Ranch and then “kick-off ” horizontally to access its leased minerals under the Chaparral Area. Lightning was not a party to the agreement between Anadarko and Briscoe Ranch, and when Anadarko staked out its first well site, Lightning objected not only to the proposed site but to Anadarko drilling from any location on the Ranch. Anadarko entered into a surface use and subsurface easement agreement with Briscoe Ranch specifically authorizing Anadarko to locate wells on the surface of the Ranch, drill through the subsurface and use those wells to produce minerals from the Chaparral Area. Lightning filed suit alleging Anadarko committed subsurface trespass on Lightning’s leased mineral estate and tortious interference with its mineral lease. Lightning sought a temporary restraining order and an injunction to prevent Anadarko from drilling on the Ranch. Both parties filed motions for summary judgment. Lightning claimed that Anadarko’s drilling activities could cause harm due to the potential for damage to Lightning’s minerals, the need to drill additional offset wells to prevent drainage, and interference with Lightning’s drilling plans. Why did the parties go to court:
Prior to this case, Texas courts had held generally that a mineral lessee could be entitled to injunctive relief if it could show well surface locations interfered with its rights under the mineral lease. Humble Oil & Ref. Co. v. L & G Oil Co., 259 S.W.2d 933, 938 (Tex. Civ. App. – Austin 1953, writ ref ’d n.r.e.). The general rule was refined a few years later when a court held that to prove such interference, the mineral lessee must show that he needed the surface location being used at that time and place. Atlantic Ref. Co. v. Bright & Schiff, 321 S.W.2d 167, 169 (Tex. Civ. App. – San Antonio, 1959, writ ref ’d n.r.e.). In both of these cases the adjacent tract’s surface owner agreed to the use of the surface location and conduct of the subsurface operations by the oil and gas operator. In one Texas case departing from precedent, in which the surface owner of an adjacent tract approved the use of the surface, the surface lessee of such tract objected to the surface usage and the mineral lessee opposed the subsurface conduct, the court determined there would necessarily be damage to the oil, gas and mineral formation, as well as damage to the surface lessee. Chevron Oil Co. v. Howell, 407 S.W.2d 525, 528 (Tex. Civ. App. – Dallas 1966, writ ref ’d n.r.e.).
What did the courts decide here:
The trial court granted Anadarko’s motion for partial summary judgment. The court of appeals affirmed, noting that “the surface estate owner controls the earth
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beneath the surface estate” and that “absent the grant of a right to control the subterranean structures in which the oil and gas molecules are held, the mineral estate owner does not control ‘the mass that undergirds the surface.’” Lightning Oil Co. v. Anadarko E & P Onshore LLC, 480 S.W.3d 628, 635 (Tex. App. – San Antonio 2015, aff ’d sub nom. Lightning Oil Co. Anadarko E &P Onshore, LLC, 520 S.W.3d 39 (Tex. 2017)). The Supreme Court determined that Lightning’s claims turned on “whether a lessee’s rights in the mineral estate includes the right to preclude a surface owner or an adjacent lessee’s activities that are not intended to capture the lessee’s minerals, but rather are intended only to traverse, or bore through, the formations in which the lessee’s minerals are located.” Lightning Oil Co., 520 S.W.3d at 46. The primary issue under consideration was whether Anadarko’s proposed drilling activities constituted a trespass. The court broke the claim into two inquiries: the first being whether Anadarko’s drilling would interfere with Lightning’s use of the surface and subsurface and the second being whether Anadarko’s drilling would interfere with Lightning’s enjoyment of the minerals. The court considered the three primary principles relied on by the court of appeals regarding ownership and control of the subsurface: (1) the surface overlying a leased mineral estate is the surface owner’s property, including the geological structures beneath the surface, (2) the surface owner, and not the mineral owner, owns all non-mineral molecules of land, and (3) the mineral estate owner is only entitled to a fair chance to recover the oil and gas in place. The court of appeals concluded that Lightning could not exclude Anadarko because Lightning “does not own or exclusively control the earth surrounding any hydrocarbon molecules”, and because Lightning did not have the right to exclude Anadarko, Anadarko could not be trespassing on Lightning’s property. Lightning Oil Co., 480 S.W.3d at 635. The court agreed that the surface owner controls the mass that undergirds the surface, but advised that such ownership did not necessarily mean the surface owner could make or permit physical intrusions where the minerals are located and remove those minerals. The court explained that when the mineral estate is severed from the fee simple, five rights, often referred to as the “bundle of sticks,” are conveyed to the transferee, including the
right to develop, lease, receive bonus payments, receive delay rentals and receive royalties. As an oil and gas lessee, Lighting was granted to the right to develop under a lease, which right includes the right to explore, obtain, produce and possess the minerals subject to the lease, but not the right to possess the place where the minerals are located. Thus, the court determined that “an unauthorized interference with the place where the minerals are located constitutes a trespass as to the mineral estate only if the interference infringes on the mineral lessee’s ability to exercise its rights.” Lightning Oil Co., 520 S.W.3d at 49. Considering whether Anadarko’s proposed operations infringed Lightning’s ability to develop, the court held, first, that Lightning had not offered proof that the Railroad Commission drilling regulations concerning the location and number of wells were insufficient to preserve Lightning’s rights and second, that Lightning’s leased mineral estate remained the dominate estate subject to the accommodation doctrine, meaning Anadarko had no rights to use the surface greater than what Briscoe Ranch as the surface owner had. Considering whether Anadarko’s proposed operations interfered with the minerals themselves, the court agreed with Lightning that Anadarko’s drilling activities would necessarily extract minerals embedded in the ground to which Lightning would otherwise be entitled, but that the quantum of minerals which would be removed would be small. The court weighed the relevant interests of society and the oil and gas industry against the interest of an individual operator and concluded that if Anadarko’s proposed activities were a non-actionable interference with Lightning’s rights, the policy of the state of Texas to encourage recovery of minerals and minimize waste would outweigh the minimal loss of minerals Lightning might suffer.
About the Author:
Melissa Munson practices in the areas of business and energy and natural resources law. Her practice focuses on energy transactions, including those involving oil and gas exploration and production and upstream and midstream asset
acquisitions and dispositions. Melissa.munson@steptoe-johnson.com
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Legal
Watch
Climate Change Case Proceeds San Francisco and Oakland, CA filed lawsuits against five of the world’s largest fossil fuel companies seeking damages to cover the costs of mitigating the effects of climate change. US District Judge William Alsup, the judge presiding over the consolidated cases, had requested a “tutorial” on climate science from both sides. The Bay Area cities enlisted three top climate scientists. One person from among the five defendants (BP, Chevron Corp., ConocoPhillips, ExxonMobil, and Royal Dutch Shell) chose to present: the lawyer from Chevron.
globally as the effects of climate change increase.
Lawsuits have been an effective tactic in the U.S. for getting the federal government to address environmental issues for years. For example, in a landmark 2007 case the US Supreme Court sided with the Commonwealth of Massachusetts in holding that the US Environmental Protection Agency is required to regulate CO2 under the Clean Air Act. The courtroom discovery process can be a way to introduce new information into public record, as occurred in the lawsuits against tobacco companies. Some experts are concerned that the climate change lawsuits will further deepen divisions but others see the courtroom as a more neutral forum for communication. Trial participants are “bound by procedural rules, by evidentiary rules, and there’s a neutral arbiter sitting in the front of the room, or on the side if it’s a trial by jury,” says Michael Burger, executive director of the Sabin Center for Climate Change Law at Columbia University in New York. In such a formal setting, off-the-cuff theories, distractions, and distortions are less likely to gain traction. “Courts do hold the parties to higher standards of how they use science and evidence than [a legislature] certainly is held to,” agrees Ann Carlson, an environmental law professor at the University of California, Los Angeles, School of Law. “If the science is relevant to the legal claims … the judge will take it into account.” Many believe the recent cases are evidence of a new sense of urgency to deal with the problem of climate change. In the U.S., the cost of natural disasters in 2017 was the most expensive year on record.
On March 21, Chevron’s lawyer, Theodore Boutrous Jr., surprised the courtroom by stating “From Chevron’s perspective there’s no debate about climate science,” and declaring that humans are indeed playing a significant role in causing climate change. That’s a dramatic departure from the oil industry’s long-held public skepticism, even though recently revealed documents show that some companies not only knew about the risks but were considering their potential liability. Over the past several years, activists have increasingly brought climate grievances to court. In the 15 years prior to 2000, only six climate-related lawsuits were filed in the United States; since 2000, there have been more than 1,000. Not merely an American phenomena, as of March 2017, climate change cases had been filed in 24 countries and experts expect this trend to continue
Source: the Christian Science Monitor
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West Virginia Legislature Passes Cotenancy Modernization and Majority Protection Act Legislative Update
On March 5, 2018, the West Virginia Legislature completed legislative action on and passed House Bill 4268, known as the Cotenancy Modernization and Majority Protection Act. The bill will now be delivered to the Governor’s desk for his consideration and ultimate approval or veto. At its core, this bill will allow development of the oil and gas within a particular mineral tract owned by seven or more cotenants once the operator obtains the consent of at least three-fourths of the executive interest in that tract. As such, this bill, if signed into law by the Governor, will alter the common law of West Virginia announced in Law v. Heck Oil Co., 106 W. Va. 296 (1928), which held that an owner of an undivided 1/768 interest in the oil and gas in place could block development of the resource even though the owners of the other 767/768 undivided interest had consented to development and leased their interests to the operator. The passage of this legislation is the culmination of years of negotiations between farmers, land and mineral owners, royalty owners, surface owners, the oil and gas industry and West Virginia elected officials to make the state’s mineral development laws more competitive with other mineral producing states. The bill also creates a statutory defense against claims for waste and trespass, limits the liability of non-consenting cotenants, affords non-consenting cotenants an option to elect a production royalty or working interest, and
provides for administrative oversight by the West Virginia Oil and Gas Conservation Commission in specified circumstances.
Editor’s note: The bill was approved by the governor on March 9, and will take effect July 1, 2018.
About the Authors:
G. Kurt Dettinger MEMBER
Kurt Dettinger focuses his practice in the areas of energy law, energy and financing transactions, and government relations.
Email: kurt.dettinger@steptoe-johnson.com
L. Gil White GOVERNMENT RELATIONS COORDINATOR - WV
Gil White is a former 14-year elected member of the West Virginia State Legislature and a former political liaison to Governor Joe Manchin III.
Email: gil.white@steptoe-johnson.com
Legislative
Watch
Wyoming legislators debated a 50% severance tax cut for wells in their third and fourth years of production. The measure narrowly passed through the Senate; however, as of March 5, 2018 it was postponed indefinitely in the House. Wyoming
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North Dakota Rule Changes Update (See article in the 2018 first quarter magazine)
Also added to Chapter 43-02-06, was Section 43-02- 06-01.1 regarding the Ownership Interest Information Statement. This new section also becomes effective July 1, 2019 and requires that: Within one hundred twenty days after the end of the month of the first sale of production from a well or change in the spacing unit of a well, the operator or payor shall provide the mineral owner with a statement identifying the spacing unit for the well (and the effective date of the spacing unit change if applicable), the net mineral acres owned by the mineral owner, the gross mineral acres in the spacing unit, and the mineral owner’s decimal interest that will be applied to the well. For a complete copy of all of the rule amendments, please See North Dakota Industrial Commission Order No. 28537, in Case No. 26062 at https://www.dmr.nd.gov/oilgas/.”
The Administrative Rules Committee approved the new rules in March 2018 and the rules that were to take effect April 1, 2018 are now in effect. The rules regarding Royalty Statements and the Ownership Interest Information Statement will become effective July 1, 2019: “Of note are the amendments made to Chapter 43-02- 06 regarding Royalty Statements, which become effective July 1, 2019. In addition to the existing requirements, the amendments to chapter 43-02-06 require that the Royalty Information Statement also include: a. The weighted average price for all oil, gas and natural gas liquids. The price must be the net price received by the producer after all deductions. b. The amount and purpose of any deduction made, identified as transportation, processing, compression, or administrative costs. c. The amount and purpose of each adjustment or correction made.
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Silica Limits for Oil and Gas Operations
June 23, 2018 will bring new standards into play for the producers of our nation’s oil and gas resources, particularly the unconventional operations utilizing hydraulic fracturing. The long expected regulations on exposure to crystalline silica are scheduled to become effective on that date. These rules by the federal Occupational Health and Safety Administration (OSHA) require workers to be protected from exposure to respirable crystalline silica. These rules establish a new permissible exposure limit (PEL) of 50 micrograms of respirable crystalline silica per cubic meter of air averaged over an eight hour time period. The large amounts of sand and associated silica dust associated with hydraulic fracturing are targeted by these new standards. While many operators and service providers have already adopted measures to monitor and reduce silica exposure, the remaining operators and their service providers will be required to adopt these measures to stay ahead of eventual inspections and potential enforcement actions by OSHA. Respirable silica particles are typically 100 times smaller than the sand found on beaches and playgrounds. According to OSHA, there is strong scientific evidence that exposure to respirable silica can increase a person’s risk of developing lung cancer. The World Health Organization, the National Institute of Health and the American Cancer Society have all designated crystalline silica a known human carcinogen. Once fully implemented for all covered industrial activities, OSHA expects to prevent 600 deaths a year from silica-related diseases. While the exposure limitations become effective on June 23, 2018 for the oil and gas industry, the industry will have until June 23, 2021 to implement on-site
engineering controls to comply with the exposure limits. Until then, employees can continue to wear respirators if their exposure exceeds the limitations. Additionally, industry employers are required to offer medical examinations to employees exposed above the PEL for 30 or more days beginning on June 23, 2018 and medical examinations to employees exposed at or above the PEL for 30 or more days beginning on June 23, 2020. At this time it is uncertain what level of enforcement the oil and gas industry will see from OSHA, but it is best to be prepared to demonstrate a high level of compliance and understanding as these requirements move forward. If you have questions about how these new standards may affect your business, please contact the author of this alert or a member of our energy or environmental team.
About the Author:
Gary E. Slagel Government Affairs Specialist – PA
Gary Slagel is an engineering graduate from the University of Dayton and spent 35 years with CONSOL and CNX Gas in several capacities, including Director of Environmental
Regulatory Affairs and later Director of Government Affairs working on both coal and natural gas issues. Mr. Slagel uses his talents to address the increasingly complex issues associated with shale gas exploration and development. Email: gary.slagel@steptoe-johnson.com
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NADOA
Institute
NADOA.ORG
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NADOA’S 45th Anniversary: A Grand Ole Opportunity for You Program Chairs
Stephanie D. Moore, CDOA Yoli Bazan, CDOA, CPLTA
Are you ready to celebrate NADOA’s 45th Anniversary in Nashville??? Yoli and I have been working to satisfy some of the most popular requests from the recent Survey Monkey you all participated in and Wednesday classes are back!!! Three (3) days of class for the price of two (2)!!! Make plans to attend the 2018 NADOA Institute in Nashville, Tennessee in September. We look forward to seeing you there!
Wednesday’s Program will include Advanced Calculations and something a bit different on Unclaimed Property
CONFIRMED Program for 2018 with more to come:
• Basic Calculations, Non-Consents and Payouts presented by Donna Reeves • Advanced Calculations: ORRI and NPRI’s presented by April Luedecke, CDOA, • Advanced Calculations: The Challenges of Multi- Section Wells presented by Eli Murray, CDOA, CPLTA • Pivot Tables: Making the Life of a DOA Easier presented by Debra Heckman, CDOA, CPLTA • Current Trends in Unclaimed Property presented by William King with KPMG • What’s All the Fuss About in Delaware presented by Quin Moore with Keane • Calculating a Texas Owner’s Unclaimed Funds per Well Completion presented by Quin Moore with Keane • Escheat Open Mic Panel: Come with your questions! Panel Attendees: Pamela Wentz with Georgeson, William King with KPMG, Quin Moore with Keane and Lucretia Jones with Newfield Exploration • The Modern Day Land Rush: Pooling in Oklahoma presented by Christian Sizemore, Newfield Exploration • Best Practices for Communicating with Royalty Owners presented by Melody Baker and Pamela J. Daniels of Oildex • Organization in the Digital Age presented by Luanne Johnson, CDOA, CPLTA, Newfield Exploration • How to be a Proponent of Oil and Gas presented by Jason Lucas, Steptoe & Johnson, PLLC
• Senate Bill 168 of Oklahoma and How to Calculate presented by Joe Anderson, Cimarex • Conveyance Trends in the Courts, a State by State Comparison presented by Matthew Schlensker, Steptoe & Johnson, PLLC • Changes in the Energy Sector presented by Eric Mullins Managing Director and Co-CEO of Lime Rock Resources – Keynote Speaker • Energy Transactions: How They Affect Division Order Analysts presented by Kacie Bevers and Andrew Graham, Steptoe & Johnson, PLLC • In Depth Look at Oil and Gas Agreements: Comparisons and Trends presented by Kacie Bevers and Andrew Graham, Steptoe & Johnson, PLLC • Wellbore Assignments presented by Frank Hinton of Elias, Books, Brown & Nelson
The full 2018 Program will be included in the next issue of the NADOA Magazine (look for the email) and some of the titles of these classes are subject to change.
Please email any questions you may have to nadoaspeakercommittee@gmail.com.
If you have any questions regarding the CONFIRMED topics listed here, please send them our way and we’ll get them to the speakers. This will help pinpoint what attendees are looking for. Answers will be provided in Nashville.
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