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United States Court of Appeals for the Tenth circuit

Marlin Oil Corp. v. Lurie, No. 10-6210 (10th Cir. Mar. 28, 2011), http://www.ca10.uscourts.gov/opinions/10/10-6210.pdf (unpublished)

Marlin erroneously overpaid and over-billed working interest owner Lurie for two years resulting in net overpayment of $135,625.35. The Court ruled that Marlin is entitled to restitution of the net overpayment and can withhold future payments to Lurie until it has been repaid in full.

What this means to you: A joint interest billing error is not always final.

Oklahoma Supreme Court

Plano Petroleum, LLC v. GHK Exploration, L.P., 2011 OK 18 (OSCN.net)

The court stated that the court’s first priority in a conveyance dispute is to ascertain the true intent of the parties, particularly that of the grantor, as evidenced from the four corners of the instrument itself and viewed in light of the circumstances attending its execution. To the extent that the court determines the instrument is ambiguous as to the parties’ intent, it will allow presentation and use of outside evidence to ascertain the intent of the parties.
What this means to you: One cannot be too conscientious or specific when drafting an assignment or conveyance.

Oklahoma Court of Civil Appeals

MacDonald Oil & Gas, LLC v. Sledd, 2011 OK CIV APP 36 (decided Dec. 28, 2010, mandate issued Mar. 16, 2011) (OSCN.net)

The court found that the deeds were susceptible to at least two interpretations. Thus, the trial court should have allowed and considered evidence outside of the four corners of the deeds in its effort to discern the intent of the parties, particularly the grantors.

What this means to you: One cannot be too conscientious or specific when drafting an assignment or conveyance.

Oklahoma Legislature

The Oklahoma Legislature convened Monday, February 7, 2011 and must adjourn by 5:00 p.m. Friday, May 27, 2011. The Bills set out below have been introduced, acted upon, and remain viable.

Senate Bill 242 (Rep. Jackson and Sen. Branan) would create the 2011 Shale Reservoir Development Act. The Act would authorize the Corporation Commission to create drilling and spacing units of up to four governmental sections for horizontal wells drilled into shale reservoirs.

Practical Effect: Operators could hold up to four times more acreage than they currently do by obtaining production from one well.

Senate Bill 243 (Rep. Trebilcock and Sen. Branan) would amend Section 318.5 of the Oklahoma Surface Damages Act to remove the requirement that a jury trial under the Act be conducted and judgment entered in the same manner as a railroad condemnation action.

Practical Effect: If the award of the jury exceeds the award of the appraisers by at least ten percent, then the operator is responsible for the landowner’s attorney and expert fees. A jury composed of residents of the same county as the landowner is likely to be sympathetic to the landowner’s cause. Thus, an award exceeding the appraisers’ award by at least ten percent is not uncommon. There has arisen in Oklahoma a practice by some attorneys of taking advantage of the law as it is currently written. This proposed amendment would temper such attorneys’ enthusiasm for picking fights with oil and gas operators.

House Bill 1564 (Rep. Jordan and Sen. Schultz) would amend 60 O.S. § 820.1 by entitling it the Airspace Severance Restriction Act. The referenced statute prohibits permanent severance of the airspace from the surface estate for the purpose of developing and operating commercial wind or solar energy conversion systems.

Practical Effect: This legislation was pushed hard by the Oklahoma Farm Bureau so that farmers do not lose control of what occurs above the surface of their land as many have done with what occurs below the surface of their land.

House Bill 1821 (Rep. Trebilcock and Sen. Marlatt) would create the Oil and Gas Exploration Rights Act of 2011. The Act would provide that oil and gas exploration rights would not be diminished or interfered with in any respect by a wind or solar energy agreement except with the prior written consent of the owner of exploration rights, which consent may be granted or withheld for any reason or for no reason. Further, the Act provides that any consent given shall apply only to the exploration rights of the owner giving the consent, and to the successors and assigns of the owner if so provided in the instrument of consent.

Practical Effect: This legislation would restrict critically the activities of wind energy conversion companies in Oklahoma.

Oklahoma Corporation Commission

Pursuant to Permanent Rulemaking Cause RM No. 201000007, the Corporation Commission has submitted for gubernatorial and legislative review, consideration, and permanent adoption new rules and amended rules affecting oil and gas conservation. A select few of the new or amended rules are as follows:

165:10-3-4: The Commission added 165:10-3-4(e) “Notice of hydraulic fracturing operations.” It provides that the operator shall give at least 24 hours notice by telephone, facsimile, or e-mail to the Commission regarding the time when hydraulic fracturing will commence. Separate stages of a multi-stage frac shall not constitute separate hydraulic fracturing operations for notification purposes.

165:10-3-1: 165:10-3-1(f)(4) was amended to provide that if an oil and gas operator changes its proposed method of disposing of drilling fluids, then it shall notify the appropriate Corporation Commission authority by telephone, facsimile, or e-mail within 24 hours after the change.

165:10-21-45: 165:10-21-45(e) was amended to provide that gross production taxes levied on wells spud between July 1, 2011 and July 1, 2015 and drilled to a depth greater than 15,000 feet shall be reduced to 4% for the 48 months following first sale.

165:10-21-67: The procedure for applying for an exemption from the levy of gross production tax on production from a horizontal well was amended to provide that in lieu of the traditional OCC Form 1534, an OCC Form 1002A Completion Report for a horizontally drilled well accepted by the Commission would constitute approval by the Commission of an application for qualification for the gross production tax exemption.