Last Friday (June 2, 1017), Louisiana’s Second Circuit Court of Appeals affirmed the lower court’s award of more than $23 million, plus attorney fees, to Gloria’s Ranch, LLC, for damages incurred by the defendants’ refusal to release their oil and gas lease after it expired according to its terms in Gloria’s Ranch, L.L.C. v. Tauren Exploration, Inc.
The lease in question provided for a primary term of three years, continuing thereafter “as long . . . as oil, gas, sulphur or other minerals . . . produced from said land hereunder or from land pooled therewith.” After the primary term, Tauren failed to provide Gloria’s Ranch satisfactory monthly revenue statements evidencing continued production under the lease. Gloria’s Ranch filed a lawsuit against Tauren and the other defendants, including its lender, Wells Fargo Energy Capital, Inc., for refusing to release the oil and gas lease so a new lease could be negotiated with a different operator.
The appellate court affirmed the trial court’s finding that the lease had expired for lack of continuous production in paying quantities from the unit wells for at least 12 months prior to the suit being filed. Damages were found to be properly calculated in accordance with testimony by petroleum experts, who determined that Gloria’s Ranch could have been leased for $18,000 an acre. For this failure to release the lease, the appellate court also upheld that the operator and Wells Fargo Energy Capital, Inc. were additionally liable to reimburse Gloria’s Ranch nearly $1 million in attorney fees.
Although this is a Louisiana case decision, it does illustrate the importance for landowners to negotiate a lease that provides clear explanation of events that trigger termination. This decision further suggests the potential liabilities not only to operators, but also their lenders, that can arise if releases are not timely executed when termination has occurred.
For more information about this or any related issue, please contact Indiana and Illinois mineral law attorney Kent A. “KAB” Brasseale II at (812) 423-3183 or kbrasseale@KDDK.com; or contact any member of the KDDK Mineral, Oil and Gas Law Practice Team.
About the Author
With a degree in Chemical Engineering and more than 20 years’ experience practicing law, KAB Brasseale, is equipped with the skills and knowledge to efficiently and effectively represent clients in environmental, mineral, intellectual property, construction, business and real estate matters. KAB takes the time to understand his clients’ needs and objectives. KAB’s experience, combined with his active service in civic and professional organizations and as a real estate licensing instructor, have yielded the skills to achieve efficient “win-win” results.
(Jordan Heck, a law clerk for KDDK, contributed to this article.)