Replies to This Discussion

Permalink Reply by Dion Warr, CPL on July 20, 2012 at 10:38

Update to this suit of interest to GHS Members:

A hearing was held concerning this case on July 16, 2012 (C-589,350; Robert H. Gatti, Sr., et al vs. Louisiana State Conservation, et al) in the 19th JDC (Baton Rouge). 

 

"This case came before the Court for hearing on exceptions of no cause of action, no right of action, peremption or, in the alternative, prescription, lack of subject matter jurisdiction, premuturity, improper cumulation, and vagueness and ambiguity filed on behalf of defendants...

For oral reasons assigned, the Court maintained the exceptions of no cause of action, peremption or, in the alternative, prescription, lack of subject matter jurisdiction, and prematurity, dismissing plaintiffs' suit, without prejudice, at plaintiffs' costs.  The Court pretermitted ruling on any remaining exceptions.  Judgment will be signed accordingly. (B. Kearny; 7/16/12)"

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Permalink Reply by Skip Peel - Mineral Consultant on January 17, 2014 at 12:23

The First Circuit Court of Appeals has reversed dismissal of this suit and remanded it to the district court for trial.  I'm sure we will be seeing more specifics soon and the trial is still likely a year away but it is definitely a very interesting turn of events.  The Gatti suit challenged the Commissioner's authority to approve drilling and production units that were larger than a single well could drain.  Although the specifics of the suit deal with original Haynesville units of 640 acres, a single section, it could have wide spread implications for operators across the state in other plays where large units have been approved. 

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Permalink Reply by dbob on January 17, 2014 at 13:44

Wow

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Permalink Reply by Skip Peel - Mineral Consultant on January 17, 2014 at 17:06

Yeah.

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Permalink Reply by tc on January 17, 2014 at 17:10

Am I correct that the First Circuit Court of Appeals finds that the judge was wrong to dismiss the case and not that the Commissioner didn't have the authority to create large units?  So the district court can have a trail and find that the Commissioner does have the authority to create large units and the First Circuit Court of Appeals could be completely satisfied with that outcome.

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Permalink Reply by dbob on January 17, 2014 at 17:22

TC, essentially correct as I understand it.  the Wow on my part is that it is getting a trial.  If the commission does not have the authority to authorize units larger than a single well can drain, there will be questions regarding a very large number of existing units, and hell in new development.

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Permalink Reply by Nixon Dow on January 18, 2014 at 21:25

Yes TC is basically correct. All this decision means is that the trial court can listen to the merit of the case and make a decision from there. Even if the plaintiffs are successful your looking at 4-6 years at the earliest before it actually does anything. I have done some research in to heart of the arguments presents by both sides. As I see the plaintiffs have a legitimate "technical" legal argument for their claim. This technical arguments is that the commission can only authorize units that can drained by one well, so after the first wells were drilled back in beginning the operators should have submitted their data to the DNR and if it is determined that each well only drains 80 acres (or 330' on each side of the lateral) the units from then on out should only been 80 acres. 

While that is a legitimate argument there are a number of issues that . 1) From what I have read and heard there is more than enough information that would convince me that each lateral can “drain” from outside it’s 330’ radius of its lateral. 2) The commissioner not only has the right to unitized what is suppose to be effectively drained by one well but also take into consideration what might be “economical” in the development of such units. 

Lastly even if the plaintiffs can overcome both of the above discussed issues a patchwork of single well units would cause more problems than anyone could possibly imagine. Not only would it be a logistic nightmare for operators (drive up cost) it would not be beneficial to the mineral and royalty owners. 

Like most people have commented on this lawsuit is for one thing only, a settlement for money. While the current unitization system for the haynesville shale is in no way perfect, the steps to fixing is not making the units smaller. All this is needed is just some reform in the regulation and enforcement of duties for each unit operator (I’ll save this argument for another time).

If the plaintiffs do somehow win you can rest assure that it will make a major impact on the development of the Haynesville Shale, just not a positive one.

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Permalink Reply by Skip Peel - Mineral Consultant on January 19, 2014 at 2:48

Nixon, I will look forward to future discussions regarding the reform of regulation and enforcement of operators in regard to unit formation and operations.  However I have long been interested in information regarding the area stimulated by the typical Haynesville Shale frac cylinder.  I don't wish to turn the discussion too far or too long off topic but would very much like to hear what you have read and heard regarding drainage beyond 330'.  It might need to be a separate discussion thread.

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Permalink Reply by Nixon Dow on January 19, 2014 at 23:42

For one I have heard many accounts of formation communication (kicks/or sudden pressure increases) picked up by wells in the drilling process that time up with frac stages from another well over .5 mile away.

This leads me to believe that while a well might only be able to draw hydrocarbons within a 330' radius around the well bore, it does not mean that it is not depleting the formation pressure beyond that area. 

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Permalink Reply by Skip Peel - Mineral Consultant on January 20, 2014 at 4:10

I've heard a few similar accounts but have been unable to confirm them.  I was hoping you were aware of something more definitive.  Considering that the Haynesville Shale interval is ~500' thick at its thickest and that fracing out of the formation is a cost with no benefit not to mention a possible problem depending what is fraced into outside of the zone I would think that operators would place importance on avoiding it.  There is no accounting for naturally occurring fracture systems which could be the source of the communication you mention but that would be a little different than the frac cylinder reaching out that far.  Thanks, I'll keep looking.

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Permalink Reply by Skip Peel - Mineral Consultant on January 17, 2014 at 17:28

As I mentioned previously, the details will be available shortly.  I got an end of the day heads up as the ruling was handed down sometime yesterday.  The member who created this discussion may update the status.  If not the particulars will be more widely known the first of the week.  Yes, tc, I think your supposition is correct.  This appellate ruling will allow the plaintiffs a full hearing in the district court.  It is not a ruling on whether the Commissioner can or can not approve units larger than a single well is capable of draining.  The district court will make that ruling which will be appealed regardless of which party prevails.  Long road yet to travel.

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Permalink Reply by 1kw6x71km1v37 on January 18, 2014 at 5:52

Why would the Commissioner of Con. (no pun intended) declare a unit larger than can be drained by the unit well?

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