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B.A. Kelly Land Co. LLC v. Aethon Energy Operating LLC

United States District Court, W.D. Louisiana, Shreveport Division

October 7, 2019

B.A. KELLY LAND CO., LLC
v.
AETHON ENERGY OPERATING LLC

          KAREN L. HAYES JUDGE

          RULING

          TERRY A.TOUGHTY UNITED STATES DISTRICT JUDGE.

         Pending before the Court is a Motion for Partial Summary Judgment [Doc. No. 16] filed by Plaintiff B.A. Kelly Land Co., LLC (“B.A. Kelley”). Defendant Aethon Energy Operating LLC (“Aethon”) filed a memorandum in opposition to the motion [Doc. No. 24]. B.A. Kelly filed a reply [Doc. No. 27].

         For the following reasons, B.A. Kelly's motion is DENIED.

         I. RELEVANT FACTS

         This is a suit by an unleased mineral owner, B.A. Kelly, against the operator of certain unit and alternate unit wells, Aethon, for forfeiture under the Well Costs Reporting Statute, Louisiana Revised Statutes 30:103.1 and 103.2, based on Aethon's alleged failure to timely provide initial and quarterly reporting regarding the wells.

         B.A. Kelley is the owner of a tract of land in Section 11 of Township 16 North, Range 11 West (“Section 11”), Bossier Parish, Louisiana (the “Tract”). The Tract is included within two compulsory drilling and production units, one for the Lower Cotton Valley Zone, Reservoir A, for the Elm Grove Field, Bossier Parish, Louisiana (the “LCV Unit”), and one for the Haynesville Zone, Reservoir A, for the Elm Grove Field, Bossier Parish Louisiana (the “HA Unit”). Before Aethon became the operator of record of the subject units, 15 unit and alternate wells had been drilled in the LCV Unit, and one unit well had been drilled in the HA Unit (collectively, the “Wells”).

         The minerals underlying the Tract were subject to a mineral servitude owned by Dorothy K. Richardson (“Richardson”). Richardson had leased the minerals underlying the Tract, but, upon her death on November 11, 2013, the servitude expired, which resulted in the termination of the mineral lease she had executed by operation of law. The minerals reverted to the surface owner, B.A. Kelly, which had not leased the minerals.

         Aethon became the operator of record for the LCV Unit on July 1, 2016, and for the HA Unit on October 1, 2016. When Aethon became the unit operator, all the LCV unit wells and the single HA well had reached payout, meaning that the costs for initially drilling these wells had been recovered by the production revenues for each. This placed Aethon and the unleased owner, B.A. Kelly, in a relationship that entitled B.A. Kelly to its pro rata share of the well's monthly revenues, after the deduction by Aethon of B.A. Kelly's share of the ongoing operating costs for the well.

         On December 15, 2017, B.A. Kelly sent a letter to Aethon, stating that it was an unleased owner within the subject units and requesting certain categories of information regarding the Wells, including information preceding the periods of Aethon's operatorship. On April 17, 2018, B.A. Kelly sent a second letter to Aethon, purporting to call to Aethon's attention Aethon's alleged failure to provide the information requested in B.A. Kelly's December 15, 2017 letter. Neither letter made a reference to the Well Costs Reporting Statute or to its penalties.

         On or about April 24, 2018, Kyle Hickey (“Hickey”), a Senior Landman for Aethon, contacted B.A. Kelly's representative, Alan L. Brittain (“Brittain”), by telephone to discuss exactly what information B.A. Kelly was seeking from Aethon. During that conversation, Brittain indicated that he had received certain reports from Anadarko, a prior operator of one or more of the Wells, and requested that Aethon send him reports in a similar format. Hickey asserts that he was under the impression that Brittan was seeking some type of summary report, as opposed to a more detailed and itemized statement of the Wells' revenue and expenses.

         Hickey indicated to Brittain that he was not sure whether Aethon had a copy of the prior Anadarko reports, and Brittain volunteered to send Hickey a copy of such a report as an example. Hickey told Brittan that he would send him an email so Brittan could send a copy of the Anadarko report back to him. Hickey followed up the conversation with an email to Brittain, thanking Brittain and, again, asking for a copy of the Anadarko report, so that Aethon could style its report according to Brittan's request. No. response from Brittain was forthcoming.

         On September 21, 2018, B.A. Kelly filed this suit, seeking a forfeiture of Aethon's right to recoup B.A. Kelly's pro rata share of the Wells' operating costs out of production because of Aethon's alleged failure to timely provide B.A. Kelly with reports under La. Rev. Stat. 30:103.1 and 103.2.

         On August 2, 2019, B.A. Kelly filed the pending motion seeking partial summary judgment declaring that any rights Aethon may have had to charge costs to B.A. Kelly's well revenue have been forfeited by law. Aethon opposes the motion, and B.A. Kelly has filed a reply.

         The matter has been fully briefed, and the Court is prepared to rule.

         II.LAW AND ANALYSIS

         A. Standard of Review

         Summary judgment is appropriate when the evidence before a court shows “that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A fact is “material” if proof of its existence or nonexistence would affect the outcome of the lawsuit under applicable law in the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute about a material fact is “genuine” if the evidence is such that a reasonable fact finder could render a verdict for the nonmoving party. Id.

         “[A] party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of ‘the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (quoting Anderson, 477 U.S. at 247). “The moving party may meet its burden to demonstrate the absence of a genuine issue of material fact by pointing out that the record contains no support for the non-moving party's claim.” Stahl v. Novartis Pharm. Corp., 283 F.3d 254, 263 (5th Cir. 2002). Thereafter, if the non-movant is unable to identify anything in the record to support its claim, summary judgment is appropriate. Id. “The court need consider only the cited materials, but it may consider other materials in the record.” Fed.R.Civ.P. 56(c)(3).

         In evaluating a motion for summary judgment, courts “may not make credibility determinations or weigh the evidence” and “must resolve all ambiguities and draw all permissible inferences in favor of the non-moving party.” Total E & P USA Inc. v. Kerr- McGee Oil and Gas Corp., 719 F.3d 424, 434 (5th Cir. 2013) (citations omitted). While courts will “resolve factual controversies in favor of the nonmoving party, ” an actual controversy exists only “when both parties have submitted evidence of contradictory facts.” Little v. Liquid Air. Corp., 37 F.3d 1069, 1075 (5th Cir. 1994). To rebut a properly supported motion for summary judgment, the opposing party must show, with “significant probative evidence, ” that a genuine issue of material fact exists. Hamilton v. Segue Software, Inc., 232 F.3d 473, 477 (5th Cir. 2000) (emphasis added). “‘If the evidence is merely colorable, or is not significantly probative,' summary judgment is appropriate.” Cutting Underwater Tech. USA, Inc. v. Eni U.S. Operating Co., 671 F.3d 512, 517 (5th Cir. 2012) (quoting Anderson, 477 U.S. at 248).

         Relatedly, there can be no genuine dispute as to a material fact when a party fails “to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.” Celotex Corp., 477 U.S. at 322-23. This is true “since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial.” Id. at 323.

         B. The Well Costs Reporting Statute

         Louisiana Revised Statute 30:103.1 provides in pertinent part as follows:

A. Whenever there is included within a drilling unit, as authorized by the commissioner of conservation, lands producing oil and gas, or both, upon which the operator or producer has no valid oil, gas, or mineral lease, said operator or producer shall issue the following reports to the owners of said interests by a sworn, detailed, itemized statement:
(1) Within ninety calendar days from completion of the well, an initial report which shall contain the costs of drilling, completing and equipping the unit well.
(2) After establishment of production from the unit well, quarterly reports shall contain the following:
(a) The total amount of oil, gas, or other hydrocarbons produced from the lands during ...

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