Wednesday, May 12, 2010

HBP Lawsuit in DeSoto

A civil trial is underway in DeSoto Parish, LA to compel Questar E&P to drill the deep portion of a landowner's lease, which is currently held by production from shallower production activity, or forfeit its rights to the minerals.  Questar is in no hurry to drill the land, which is prospective for the Haynesville Shale, because the company is focused on drilling only its newer leases that will expire between 2011 and 2013. 

The linked article above provides more details, but it also leaves some out.  I'm not sure if the 22 year old lease lacked a vertical "Pugh clause" or other modern lease features or if there are other extenuating circumstances, but if the plaintiff is successful in his efforts, it might lead to another mini-land rush as landowners find ways out of old leases. 

One big unknown is how long the case will be stuck in the appeals process because whomever loses surely will appeal.  If it takes years to go through the appeals courts to the Louisiana Supreme Court, it might be after the time when many of the more recent leases expire.  At that point, operators might be more focused on drilling their HBP acreage, making the case moot, at least for this landowner. 

The bigger issue, however, is the precedent the case will set in the application of Louisiana mineral law.  Questar is going to fight it nearly to the death, and every other operator in the state is rooting them on. 


Anonymous said...

Very interesting. What is your source on the lawsuit? It may not take all that long to proceed through the appellate courts, if the trial is underway. Usually, there is not a lot of disputes about the facts, so no big transcript. The parties will probably rely on competing experts. This should be primarily a dispute over the law, not the facts. Keep us advised. Thanks.

Robert Hutchinson said...

My only source at the time of writing was the media report. I will be interested to see how quickly it works through the appeals system. I'll definitely keep an eye on it, as it might have far-reaching ramifications. Even if this case doesn't test the law as expected, I'm sure somebody else will file on the same grounds with a different set of facts.