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

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

December 4, 2019

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

          MAG. JUDGE KAREN L. HAYES

          RULING

          TERRY A. DOUGHTY UNITED STATES DISTRICT JUDGE

         Pending before the Court is a Motion for Reconsideration of Denial of B.A. Kelly's Motion for Partial Summary Judgment [Doc. No. 33] filed by Plaintiff B.A. Kelly Land Co., LLC (“B.A. Kelly”). Defendant Aethon Energy Operating LLC (“Aethon”) filed a memorandum in opposition to the motion [Doc. No. 36].

         Pending also is the Court's sua sponte Notice it may enter summary judgment in favor of Aethon. In the Court's Ruling denying B.A. Kelly's Motion for Partial Summary Judgment [Doc. Nos. 28, 29], the Court gave Notice that, given the Court's findings that the letters at issue in this matter do not meet the strict requirements of the Well Costs Reporting Statute, Louisiana Revised Statutes 30:103.1 and 103.2, the Court intended to sua sponte enter summary judgment in favor of Aethon, denying B.A. Kelly's forfeiture claims under § 103.2, and dismissing this suit with prejudice.[1" name="FN1" id= "FN1">1] The Court granted B.A. Kelly twenty-one (21) days to reply to this Notice. B.A. Kelly timely filed a reply [Doc. No. 34');">34].

         For the following reasons, B.A. Kelly's Motion for Reconsideration [Doc. No. 33] is DENIED, and the Court sua sponte enters summary judgment in favor of Aethon denying B.A. Kelly's forfeiture claims under § 103.2 and dismissing those claims with prejudice.

         I. BACKGROUND

         This is a suit by an unleased mineral owner, B.A. Kelly, against the operator of certain unit and alternate unit wells (“the 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.

         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. 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. 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 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.

         Instead, 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 a Motion for Partial Summary Judgment [Doc. No. 16] seeking judgment declaring that any rights Aethon may have had to charge costs to B.A. Kelly's well revenue have been forfeited by law.

         On October 8, 2019, the Court issued a Ruling and an Order denying B.A. Kelly's Motion for Partial Summary Judgment [Doc. Nos. 28, 29]. The Court noted that an operator's failure to comply with the reporting requirements imposes a harsh penalty: the operator forfeits his right to contribution for expenses from the unleased owner. Because this penalty is harsh, §§ 103.1 and 103.2 are strictly construed by courts. The Court additionally noted that the law demands that an owner who wishes to take advantage of the Well Costs Reporting Statute must comply to the letter. This is in keeping with the principle that penal statutes be strictly construed and require exact compliance.

         The Court found that the December 15, 2017 letter and the April 17, 2018 letter failed to comply with the strict requirements of Section 103.1. After considering the strict construction of the Well Costs Reporting Statute as well as the requirement of compliance to the letter of the law, the Court found that summary judgment on the issue of forfeiture in B.A. Kelly's favor was inappropriate.

         Additionally, given the Court's findings that the letters do not meet the strict requirements of the Well Costs Reporting Statute, the Court gave Notice that it intended to sua sponte enter summary judgment in favor of Aethon, denying B.A. Kelly's forfeiture claims under § 103.2. B.A. Kelly was ...


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