Valence, therefore, became operator as to its proposed operations and was required to “actually commence work” by March 17, 2000. Once operations began, Valence was required to “complete [operations] with due diligence.” Anadarko, however, filed suit, arguing that Valence failed to commence operations before March 17, 2000. Valence conducted the following activities before the deadline expired: prepared an authorization for expenditures, received topographic map of locations, surveyed and staked locations and took pictures of well sites, obtained preliminary list of title instruments, held meetings to discuss locations and how to build on those locations, prepared detailed cost and facility estimates for the four wells, prepared preliminary run sheets, and obtained permits for the wells from the Texas Railroad Commission. After the deadline had passed, Valence built access roads, signed drilling contracts and began drilling.
The court held that Valence’s pre-deadline activities were not sufficient as a matter of law to establish actual commencement of work on the proposed operation within the meaning of the JOA. The issue was, therefore, properly submitted to the jury.
The Energy Law Blog
Posted at 3:31 PM on April 6, 2010 by Robert Theriot
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