Class Action Suit May Affect 50,000 Haynesville Shale Landowners
On April 10, 2010 a class action suit was filed affecting Haynesville Shale property owners in all of the Haynesville Fields of north Louisiana. The suit is filed against the Commissioner of Conservation and operators in the Haynesville Fields. The basis of the suit is that the Commissioner of Conservation is authorized by statute to establish a production unit that can be drained by one well. Members within one of the proposed classes are being denied their pro-rata share of production and the other class members are being denied their market value of their leasehold interest ownership. This may affect some 50,000 property owners in northwest Louisiana!
We have met with some of the attorneys and are pleased with the representation. The attorneys are class action attorneys Fayard & Honeycutt of Denham Springs; Simon, Peragine, Smith & Redfearn, LLP of New Orleans; Law Offices of Rudolph Estess, Jr. of Baton Rouge (in that office as special counsel is Jack C. Caldwell), Charles Tutt of Shreveport, Cave Law Firm of Baton Rouge, and Ryan Gatti an attorney from Bossier City. Through our own independent research we have learned that Mr. Caldwell was a contributing author to the Louisiana Mineral Code and also served as Secretary of the Department of Natural Resources.
If successful this would create a tremendous economic boom to this area by creation of many more jobs, not to mention a substantial increase to severance taxes to the state of Louisiana. We have received per request a filed copy of the pleadings filed in East Baton Rouge Parish. The suit explains the law and the resulting violation. Should you desire a copy of the suit please email your request to us at: www.fairdrilling.com. You may also wish to contact your attorney or local attorney for the group, Mr Gatti.
Andrew
Views: 6084
Replies to This Discussion
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Permalink Reply by Kat Bloomfield on
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good question. I don't see any legal reason that current royalties due could be held in escrow. Why? Title is clear. The lawsuit doesn't challenge title to the funds or the underlying property/minerals. But, don't put anything pass a lawyered up E&P Company. From what I've read in briefs, there are some, particularly one, that will argue ANYTHING.
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Permalink Reply by The_Baron on
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Caliente,
Do you believe that the units already formed are not in danger of being disolved? If the units were disolved (as the suit claims that they are formed in contridiction to the law) then wouldn't title be in question?
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Permalink Reply by Mac Davis on -
I think there's a good chance that if the property owners didn't object at the hearings when the unit was formed, they may have very limited ability to appeal now.
Sometimes, you can't appeal at all if you didn't appear at an earlier hearing. Even if you did appear, you may not be allowed to bring up a new issue on appeal. Appeals may be limited to issues considered at the first proceeding, or to procedural matters such as failure to notify, denying counsel, etc. -
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Hmmm. Dissolution of the unit does not change ownership of the minerals. But, it does change equitable distribution. I would expect that any dissolution order would have to take account of the equities and redistribute accordingly.
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Permalink Reply by Mac Davis on
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By drain does it NECESSARILY mean COMPLETELY drain?
You're twisting the words. The operative words are "economically and efficiently drain," not "drain."
The unit definitions are, by law, based on one well per unit.
80 acre units with one well will produce eight times as much gas per acre as a 640 acre unit with one well. An 80 unit is eight times more efficient.
It costs the same amount of money to drill a single well on a 640 acre unit as it does on a 80 acre unit, so there is no economic advantage.
There is no way you can claim a 640 acre single well unit can efficiently drain the unit.
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Permalink Reply by Andrew Walker on
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Drain does not mean COMPLETELY drain. No petroleum reservoir is completely drained. The amount of hydrocarbons drained or “recovered” depends on several factors including the formation’s porosity, permeability, and reservoir energy. Each reservoir has a unique “recovery factor.” For example the Haynesville Shale may hold 200 bcfe of natural gas per section (“gas in place”) but its anticipated recovery factor is only around 25%.
Our lawmakers realized that calculating the area drained by a single well would be an imprecise measurement so they decided we should err on the side of conservation. Thus they set a unit size as the MAXIMUM area that can be efficiently and economically drained by a single well. The goal is to prevent “waste.” The drilling of more wells than is necessary to drain a reservoir is a waste of everything from machinery, pipe, and fuel to drill the well to labor to unnecessary or excessive surface loss.
As far as the economic part of the equation, operators are looking for the well to “payout” in relatively short time frame. These Haynesville wells qualify. Years down the road when a well’s operating costs exceed their profits they will be plugged and abandoned.
I wish I had an answer for your questions about “royalties in escrow” and suspension of “running time on leases,” but I am not sure. I imagine the judge will have a lot to say about these. It looks to me like those tracts inside the drainage area of Haynesville well will be awarded 8X their present royalty and many outside the drainage area would be able to renegotiate their leases. This would be a plus for those who got “ripped off” in the early stages of Haynesville leasing.
You are right that “the devil is in the details.” I don’t have all the answers but the bottom line is that the law should always be enforced. I disagree with your opinion that the drilling is fair and legal. Have you read the “details” section at our website (fairdrilling.com) to see the stories of some of the victims? The state’s most respected oil & gas attorneys in history consider the drilling illegal, not to mention Supreme Court justices. Why do you disagree with them when the law is clear?
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Permalink Reply by Linda Whatley on
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I agree with Ray.
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Permalink Reply by Dion Warr, CPL on
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Caliente:
And considering that is has been largely left to the states to regulate in these matters, the respective states' Supreme Courts will ultimately have the final say IM"IANAL"HO, except possibly in instances where federal lands are substantially involved.
I just had a thought somewhat tangent to the discussion: considering the general imperviousness of the shale (without frac help), if the plaintiffs prevail, does this result in the landscape of the HS looking more like today, or like Caddo Pine Island? Just a thought.
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interesting note re: federal vs. state court. A suit can be in federal court even if it's not involving BLM lands---just need diversity of state citizenship between the plaintiff side and defendant side. So, if a texas citizen owned a 640 acre unit and were to file suit against the operator, who say may be an OK citizen, federal court could be a proper venue even though not one federal question is involved. It's jurisdiction based on diversity of citizenship -- premised on the antique notion that non-residents of state A could not get a fair shake in a state A court.
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Permalink Reply by Dion Warr, CPL on
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Caliente:
I understand the portion about diversity (I just dealt with a property not too long ago with owners in multiple states filing suit against a multinational corp.), but I am not sure that the fed. court will look past the state statutes and precedent regulating development (particularly LA, which is unlike any other state by and large).
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Permalink Reply by Mac Davis on
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forced pooling survives constitutional challenge...
Caliente, you have an interesting and important point that I missed at first.
The discussion here has been mostly that 640 acre sections are illegal because they don't conform to the law. Your point would suggest that even if LA law did permit 640 acre sections, it wouldn't be legal because it doesn't pass constitutional muster.
And I agree, there's little chance for this lawsuit to succeed. Even if the lawsuit "succeeds," the most likely outcome is that the lawyers clean up, and the "defendants" get absolved of their legal liabilities for a small fraction of the true financial value, and the landowners get a sham payment and lose their right to sue in the future.
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All litigation is a crapshoot, particularly 'roun these parts. And, yes, my point is that even if legal statutorily, there still lurks constiutional doubts.
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