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Gilmer v. Principle Energy, L.L.C.

Court of Appeals of Louisiana, Second Circuit

September 26, 2018

GEORGE M. GILMER, JR. Plaintiff-Appellant
v.
PRINCIPLE ENERGY, L.L.C., F/K/A REGAL ENERGY, L.L.C., and CLASSIC PRODUCTION SERVICES, INC. Defendant-Appellee

          Appealed from the Forty-Second Judicial District Court for the Parish of DeSoto, Louisiana Trial Court No. 73530 Honorable Amy Burford McCartney, Judge

          THE PESNELL LAW FIRM By: Billy R. Pesnell J. Whitney Pesnell W. Alan Pesnell Counsel for Appellant

          COLVIN, SMITH & McKAY By: Cole B. Smith James H. Colvin Taunton Melville Counsel for Appellee, Principle Energy, L.L.C., f/k/a Regal Energy, L.L.C.

          KEAN MILLER, LLP By: William R. Huguet Ann Rene Hankins Counsel for Appellee, Classic Production Services, Inc.

          RANDAZZO, GIGLIO & BAILEY, LLC By: Matthew J. Randazzo, III Shawn Alexander Carter Counsel for Appellee, XTO Energy, Inc.

          Before PITMAN, GARRETT, and McCALLUM, JJ.

          PITMAN, JUDGE

         Plaintiff George M. Gilmer, Jr., appeals the judgment of the trial court which granted motions for summary judgment filed by Defendants, Principle Energy, L.L.C., f/k/a/ Regal Energy, L.L.C. ("Principle"), and Classic Production Services, Inc. ("Classic"), finding that the drilling of a shut-in well, which had been tested for production of minerals, interrupted prescription on a royalty interest. Plaintiff also appeals the trial court's denial of his cross-motion for summary judgment. For the following reasons, we affirm the judgment of the trial court.

         FACTS

         On April 1, 2008, Plaintiff signed a royalty conveyance of 50 percent of 1/5th of 8/8ths interest in six tracts of land in DeSoto Parish to Regal Energy, L.L.C. The conveyance stated that the deed "shall have a prescriptive period of three (3) years, rather than ten (10) years ordinarily provided under Louisiana law. A shut-in well shall perpetuate the term of this Deed." Regal Energy, L.L.C., subsequently changed its name to Principle Energy, L.L.C.

         On October 13, 2008, XTO Energy, Inc. ("XTO"), spudded the E. B. Brown, et al. No. 1 Well ("the Brown well") on Plaintiff's property, and the well was completed on January 23, 2009. The Brown well was tested by FESCO, Inc., on January 28-29, 2009, by an open-flow surface production test. The test showed that the well could produce 1, 156 thousand cubic feet ("MCF") per day. The well was never placed in production due to lack of a pipeline and was classified by the Louisiana Department of Conservation as a shut-in well waiting on pipeline. Another type of test, a DT-1 surface production test (deliverability test), was not performed on the Brown well. On June 30, 2009, the Louisiana Commissioner of Conservation issued Order No. 191-H-45, which created the HA RA SU58 unit and designated the Brown well as the unit well. The order stated that its effective date was "on and after May 12, 2009."

         In November 2010, the Louisiana Commissioner of Conservation issued Order No. 191-H-129, which authorized Chesapeake Operating, Inc. ("Chesapeake"), to drill and operate a well called the Davis 17-15-14H Well No. 001-Alt ("the Davis well") as an alternative unit well for the HA RA SU58 unit. The Davis well was spudded on October 13, 2010, and completed on April 30, 2011. Since then, the Davis well has produced in paying quantities. On July 8, 2011, Principle conveyed a portion of its interest to Classic.

         Since the royalty conveyance was signed on April 1, 2008, and was for a term of three years, and the Davis well was not completed until April 30, 2011, Plaintiff first attempted to convince Principle and Classic to release the royalty deed. When the companies refused, he filed a petition against them in DeSoto Parish entitled "Petition to Annul and Cancel Royalty Conveyances and Recover Royalty Payments and Ancillary Relief." He alleged the above facts, but also claimed that the Brown well was never completed, as shown by a Department of Conservation Inspection Report dated April 15, 2011, and that XTO never filed a "Well Completion Report" with the Conservation Department concerning the Brown well.

         Plaintiff also alleged that no DT-1 test was performed on the Brown well, in accordance with Statewide Order 29-B, and that the well has never produced any gas. He further alleged that when Chesapeake applied to the Louisiana Commissioner of Conservation, it created the HA RA SU58 unit for the Haynesville Shale Zone by order effective May 12, 2009. In that order, the Commissioner found that the unit could "be efficiently and ...


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