Replies to This Discussion

Permalink Reply by jim weyland on January 25, 2014 at 12:41

are you inquiring as to joint operating agreements?  also known as, JOA's, they are contracts between/among a well's owners specifying all aspects (the who, what, when, where and why) of a well's drilling, completion and operation. all of those i dealt with were based upon the AAPL model JOA. imo, with those contracts there shouldn't be much "wiggle" room for any party to try to exploit.

there are many other types of energy/hydrocarbon related operating agreements. can you provide details regarding the agreement in question?

 

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Permalink Reply by Oklahomachic on January 25, 2014 at 13:46

Yes, JOA. What if the agreement is not being abided by? What happens then?

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Permalink Reply by jim weyland on January 25, 2014 at 14:21

 please understand that i'm not an attorney.

if you have a reasonable belief that a counterpart is not abiding by the terms and/or clear spirit of any contract such that you are being damaged, i believe that your consulting with competent, louisiana legal counsel is something you should strongly consider.

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Permalink Reply by John Brewster on January 28, 2014 at 9:17

Who is not honoring the terms of the JOA, the operator or a non-operator.  The response/consequences depends.  Generally, an operator can withhold revenue if he is the payor.  Most JOAs also give operator the right to require payments in advance and to impose a lien in the interest of delinquent non-operators.  If you are a non-operator and another non-operator is in breach of the JOA, that is the operators issue, not yours unless you are being required to pay all or a portion of the other parties JIB.  One would need to know the facts to offer a more comprehensive analysis - and also what year AAPL Model Form JOA is in use. 

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Permalink Reply by Oklahomachic on January 29, 2014 at 11:50

" and also what year AAPL Model Form JOA is in use." Can I ask you to go into details about this?  If said Company states that they are working under said agreement.  Why would it matter the year of the JOA? Just curios. 

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Permalink Reply by John Brewster on January 29, 2014 at 12:09

The AAPL (American Association of Petroleum Landmen) has produced several (at least six, I suspect) versions of their Model Form Joint Operating Agreement.  These are printed forms on which parties fill in the blanks and compose "Additional Provisions."  At the bottom of each page in small print, it states "AAPL Model Form 1985" or whatever year the version is.  This makes a huge difference with respect to the rights of the parties. The more recent vintage (newer) contain more provisions to protect the operator.  The older forms are more "bare bones."

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Permalink Reply by Oklahomachic on January 29, 2014 at 12:13

So they do not have to comply by the agreement if it is not newer version?

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Permalink Reply by Oklahomachic on January 29, 2014 at 12:27

If there were any additional provisions, I do not see any thing reflecting that in the operating agreement I have in hand.    

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Permalink Reply by John Brewster on January 29, 2014 at 12:46

In the older versions, like 1977, Additional Provisions was always Article XV.  I don't recall whether that changed in the 1985 version.  Almost every JOA I ever worked with had some additional provisions.  They also have a COPAS attached, usually as exhibit C. That is the Accounting Procedure.  That agreement provides how invoices are to be rendered and paid, etc.  COPAS stands for Council of Petroleum Accountants Societies.  The JOA is a well accepted contract that is enforcable.  However, different jurisdictions have adopted different interpretations.  In some states, for example, not Texas, an operator has a fiduciary duty to the non-operators.  As I indicated before, one of the biggest problems has been to give the operator the ability to collect from the non-operators.  That specific issue is addressed more fully in 1985 and newer versions.

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Permalink Reply by Oklahomachic on January 29, 2014 at 12:49

Oh, well that is the least of my worries, I pay my JIBs... :)

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Permalink Reply by Oklahomachic on January 29, 2014 at 12:59

I see what you are saying... Yes, Article XV (cleverly named) OTHER PROVISIONS does state obviously provisions.  Which still are not being followed/abides... so guess we shall see.... Thank you for your input!  

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Permalink Reply by John Brewster on January 29, 2014 at 15:00

It is still unclear who is not honoring the terms of the JOA.  Is your problem with the operator or another WIO.  I must presume it is the operator.  If he is overcharging you or conducting expensive operations without first seeking the approval of the WIO (if the JOA requires that), then you have rights.  Otherwise, I don't immediately know why you would have a complaint against another WIO in the well.  The only common problem with them would be non-payment of JIBs, but that does not seem to be the issue.  Most Operators are careful to do business in strict accordance with the operating agreement.  Where they get in trouble with me is when they breach the OGML, as I am a large mineral owner.  That, sadly, is a challenging matter to redress.  There are lots of wonderful O&G attorneys in OKC and Tulsa who could help you if the amount of your damages justifies their fees.

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