RAINBOW GUN CLUB, INC., ET AL.
DENBURY RESOURCES, INC., ET AL.
FROM THE THIRTY-EIGHTH JUDICIAL DISTRICT COURT PARISH OF
CAMERON, NO. 10-19147 HONORABLE PENELOPE QUINN RICHARD,
Michael Veron Alonzo P. Wilson J. Rock Palermo III Julia Love
Taylor Turner D. Brumby Veron, Bice, Palermo & Wilson,
L.L.C. COUNSEL FOR PLAINTIFFS/APPELLEES: Rainbow Gun Club,
Inc., et. al.
W. Alexander Jones Law Firm COUNSEL FOR PLAINTIFFS/APPELLEES:
Rainbow Gun Club, Inc., et. al.
Saal, Jr. 504 Second Street COUNSEL FOR PLAINTIFFS/APPELLEES:
Rainbow Gun Club, Inc., et. al.
L. Cabes Andrew J. Halverson Milling Benson Woodard, LLP
COUNSEL FOR DEFENDANT/APPELLANT: SKH Energy Partners, LP.
composed of Shannon J. Gremillion, Phyllis M. Keaty, and D.
Kent Savoie, Judges.
KENT SAVOIE JUDGE.
SKH Energy Partnership, LP (SKH), appeals the trial
court's judgment holding it liable for its virile share
of damages resulting from a subsequent mineral lease
assignee's breach of its duty to operate the property as
a reasonably prudent operator. In addition, the Plaintiffs
appeal the trial court's award of legal interest from the
date of judicial demand. For the following reasons, we amend
the judgment with respect to the judical interest awarded by
the trial court, but otherwise affirm.
AND PROCEDURAL BACKGROUND
Plaintiffs in this matter are lessors of various mineral
leases as well as the owners of royalties of those leases.
Between 1998 and 2001, various Plaintiffs granted multiple
mineral leases directly to SKH, whose interest in those
leases were ultimately assigned to Denbury Resources, Inc.,
Denbury Onshore, LLC, and Specter Exploration, Inc.
(collectivey, the Denbury Defendants). The leases involved
various tracts of land in Cameron Parish, Louisiana. In 2003,
Denbury Resources, as the operator, spudded the Rainbow Gun
Club Well No. 1 on land covered by the mineral leases at
issue, and the well was completed in July 2003. The well
produced dry gas until December 2006, and it was then plugged
and abandoned in July 2008.
February 19, 2013, Plaintiffs filed suit against the Denbury
Defendants and SKH, as well as Cinco Energy Land Services
(Cinco) and Petro E, LLC (Petro E), wherein they allege that
as the well was being drilled, drill pipe was stuck in the
original hole, and that the stuck pipe could not be, and was
not, adequately sealed. Plaintiffs allege that, as a result,
there was an "extraneous water invasion" that
irreparably damaged the underground gas reservoir and access
to the gas reservoir was lost. Plaintiffs further assert in
their petition that due to Defendants' negligence and
breach of their obligations under the mineral leases, they
are entitled to lost royalty income they would otherwise have
received had the well and reservoir not been damaged.
April 15, 2015, Cinco filed a motion for summary judgment
seeking dismissal of Plaintiffs' claims against it,
arguing that it did not own a working interest in the well at
issue and never owned any interest in the applicable
lease(s). Plaintiffs did not oppose Cinco's motion, and
their claims against Cinco were dismissed.
September 25, 2015, Petro E filed a motion for summary
judgment seeking dismissal on the grounds that it had no
involvement in the drilling of the well at issue. Plaintiffs
did not oppose Petro E's motion for summary judgment, and
their claims against it were also dismissed.
to trial, Plaintiffs settled with the Denbury Defendants so
that at the time of trial on July 11, 2016, SKH was the only
remaining Defendant. Plaintiffs and SKH jointly submitted
written stipulations in connection with the trial, including
stipulations that the operator, Denbury Resources, stuck the
drill pipe, that "sticking drill pipe is known by all
prudent operators to be an undesireable event that should be
avoided at all costs, " and that "imprudent and
unreasonable actions of the operator, Denbury Resources, . .
. caused the loss of recoverable reserves[.]" They
further stipulated that prior to the drilling of the well,
SKH had assigned 100% of its interest in the applicable
mineral leases, so that SKH did not own any of the leases
during the drilling and production operations of the well.
parties also stipulated that, in accordance with the mineral
leases at issue, Plaintiffs collectively owned a 0.13123906
royalty interest. During trial, Plaintiffs called an expert
witness, William Griffen, who testified that 12.06 billion
cubic feet of gas that could have otherwise been ...