Cason v. Chesapeake Operating, Inc.

92 So. 3d 436, 178 Oil & Gas Rep. 965, 2012 WL 1192404, 2012 La. App. LEXIS 499
CourtLouisiana Court of Appeal
DecidedApril 11, 2012
DocketNo. 47,084-CA
StatusPublished
Cited by13 cases

This text of 92 So. 3d 436 (Cason v. Chesapeake Operating, Inc.) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Cason v. Chesapeake Operating, Inc., 92 So. 3d 436, 178 Oil & Gas Rep. 965, 2012 WL 1192404, 2012 La. App. LEXIS 499 (La. Ct. App. 2012).

Opinion

MOORE, J.

|! Edgar and Flora Cason appeal a judgment that overruled their exceptions and granted a preliminary injunction in favor of Empress Louisiana Properties, prohibiting the Casons from interfering with the construction of a gas pipeline from a well [438]*438drilled on land leased from the Casons. For the reasons expressed, we affirm.

Factual and Procedural Background

The Casons own, among other properties, a 68-acre tract (“the lease tract”) between the Red River and Loggy Bayou in the northwest part of Sec. 24, T14N, R11W, Red River Parish. On May 31, 2005, they granted an oil, gas and mineral lease covering 7,200 acres (including the lease tract) in favor of Pride Oil & Gas. With extensions that were exercised, the primary term of the Pride lease was five years, ending on May 31, 2010. This lease contained a clause (¶ 6) continuing the lease as long as the lessee is “engaged in operations for drilling”; another (¶ 9) permitting ingress and egress to the lease tract on “adjacent or adjoining lands” to build necessary roads and pipelines; and another (¶ 10) allowing either party to assign its rights in whole or in part.

Pride Oil assigned its interest to EnCa-na in early 2007; EnCana partially assigned its interest to SWEPI LP; EnCana and SWEPI partially assigned their interest to Empress in 2009. As a result, the lease is now owned by EnCana and SWEPI, subject to a sublease in favor of Empress. In 2009, EnCana obtained a unitization order placing the lease tract in a unit designated as HA RD SUO.

12According to the Casons, none of the assignees or sublessees took any actions that would continue the lease beyond its primary term-no drilling operations or drilling permit from the Office of Conservation. However, on May 28, 2010, employees of Chesapeake, Empress’s parent company, and of Fluid Disposal, a contractor, entered the lease tract without prior approval from “One Call,” an entity that tracks underground pipes and cable and must approve any excavations; on May 29 and 30, contractors entered the lease tract to cut trees and stack the lumber; and on June 1, after getting approval from One Call, Chesapeake’s men entered and began building a road and well pad.

Feeling that the Pride lease had expired, the Casons leased the same tract to Goodrich Petroleum on June 7, with the proviso that Goodrich could never assign any interest to Chesapeake; on June 11, Goodrich obtained a drilling permit from Conservation. However, Empress’s contractors continued daily work on the site, which was designated -as the “Cason 24 well.” In July, Goodrich executed a change of operator form naming Chesapeake as the operator of Cason 24. The well was spudded on July 22.

The Casons filed this suit on August 17, 2010, against Chesapeake, Empress, En-Cana, Fluid Disposal and SWEPI. They alleged that the minor work performed on the lease tract on May 29-31 did not constitute “operations for drilling” sufficient to continue the lease beyond its primary term. They demanded a declaration that the Pride lease terminated on May 31, 2010; damages for trespass after that date; an injunction to cease all operations; and other damages.

IsEmpress answered that it fulfilled all obligations under the Pride lease, specifically that it caused the Cason 24 well to be drilled. Empress also reconvened for an injunction to prevent the Casons from interfering with its lease. Empress alleged that as of July 2011, it had spent $8.5 million on Cason 24, yet the Casons were refusing to allow Empress’s contractors to lay a gas pipeline north from the well to a connector line in Section 13, due north of Section 24, on an adjacent tract owned by the Casons but not part of the lease tract.

The Casons responded with exceptions of no right of action, nonjoinder and unau[439]*439thorized use of summary proceedings, and two exceptions of no cause of action.1

Synopsis of Trial Evidence

At the start of trial on August 1, 2011, the district court heard arguments and rejected most of the Casons’ exceptions. Over the next two days, Empress called four Chesapeake managers.

• James Forney, a senior landman, testified that Mr. Cason had objected to extending operations and asked him to delay spudding for 90 days, presumably so the lease would expire. For-ney admitted that Chesapeake did not obtain a drilling permit within the primary term, but insisted that in that time frame they did surveys that were vital to the drilling. Also, after Cason 24 was completed but before the pipeline was laid, Chesapeake sent the Ca-sons a shut-in royalty of $5,764, but they refused to cash the check.
• Andy Widmer, a Chesapeake corporate representative, testified that the company hired Fenstermaker, a surveying | ¿company, on April 26, 2010; surveyors were on the ground May 4-7, tying off the section corners, and May 26-28, staking the pad. Widmer considered these operations for drilling. He also referred to Exhibit D-16, an invoice from Fenstermaker, to show that surveyors and technicians were “on the ground” on those days; the Casons objected to this document for lack of foundation.
• Carlos Evans, manager of gas sales, testified that he started researching production issues on May 10, and decided that the only feasible option for moving gas from Cason 24 was to run a pipeline north to KinderHawk’s gathering station in Section 13, due north of Section 24. Chesapeake signed a gathering agreement with KinderHawk to build this line, but the Casons refused to grant KinderHawk a right-of-way. A copy of the gathering agreement, heavily redacted to preserve the parties’ confidences, was admitted as Exhibit D-22, over the Casons’ objection. Evans estimated that Chesapeake was losing about $1,000,000 a month because it could not move this gas.
• Robert R. Stall, now a senior analyst for Chesapeake Midstream, testified that he worked for KinderHawk when D-22 was executed; he agreed that the line north to KinderHawk’s station in Section 13 was the most direct route to move Cason 24’s gas, but the Ca-sons refused to grant them a right-of-way.

Empress’s most expansive evidence came from an expert, Philip N. Aspro-dites, an attorney who was Louisiana Commissioner of Conservation for four years in the first Mike Foster administration, chairman of the Interstate Oil & Gas Commission, currently serves on the Mineral Law Institute at LSU, and has an active oil and gas legal practice. He carefully reviewed everything that Empress did prior to May 31, 2010 — putting surveyors on the ground, staking the well and cutting trees to lay a road — and concluded that these operations equaled “commenced operations.” He felt it did not matter that Empress did not obtain a drilling permit before May 31. On cross-examination, he [440]*440admitted it was not “standard practice” to do so much and then not get a drilling permit until 45 days after the end |sof the primary term, but he stressed that the lease tract posed special difficulties requiring extensive preparatory work.

The Casons’ only witness was Mr. Ca-son, who testified that the work he observed on May 28-31 was “slow-pace” and “counterproductive,” accomplishing in four days what he could have done in one. He insisted that he only objected to these operations, but did not interfere,

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Cite This Page — Counsel Stack

Bluebook (online)
92 So. 3d 436, 178 Oil & Gas Rep. 965, 2012 WL 1192404, 2012 La. App. LEXIS 499, Counsel Stack Legal Research, https://law.counselstack.com/opinion/cason-v-chesapeake-operating-inc-lactapp-2012.