Grigsby v. Department of Energy

561 F. Supp. 50, 77 Oil & Gas Rep. 294, 1982 U.S. Dist. LEXIS 10064
CourtDistrict Court, W.D. Louisiana
DecidedJune 30, 1982
DocketCiv. A. No. 77-0258
StatusPublished
Cited by2 cases

This text of 561 F. Supp. 50 (Grigsby v. Department of Energy) is published on Counsel Stack Legal Research, covering District Court, W.D. Louisiana primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Grigsby v. Department of Energy, 561 F. Supp. 50, 77 Oil & Gas Rep. 294, 1982 U.S. Dist. LEXIS 10064 (W.D. La. 1982).

Opinion

OPINION

STAGG, District Judge.

This long-standing controversy is on remand from the Temporary Emergency Court of Appeals (“TECA”). The issue to be decided is narrow and is well-defined in the TECA opinion.1 After hearing arguments and reviewing the record, this court concludes that that issue must be resolved adversely to the plaintiff.

BACKGROUND FACTS

This case involves compliance with federal oil pricing regulations. Mr. Grigsby, the plaintiff, is an independent oil and gas operator. He was the operator of the Lucky Strike Well No. 1, which served as the unit well for the Heywood Sand, Reservoir A, Sand Unit B, located in the North Jennings Field. The Louisiana Commissioner of Conservation had created the unit and designated the unit well on February 20,1969, by Order No. 464-F-l. The unit area resulted from the pooling of five separate leaseholds.

Initially there was a period of substantial production from the Lucky Strike Well. Later, however, the well began to produce excessive salt water. Grigsby then sought permission from the Louisiana Commissioner of Conservation to drill a “substitute unit well”. On July 26,1974, by virtue of Order No. 464-F-2, Grigsby was given permission to drill a well on a different lease in the unit. The “substitute unit well” was named the Robert Leger Well No. 1. The well was spudded on August 4, 1974, and production began on October 14, 1974. During the same month that production began on the Leger Well, plaintiff terminated crude oil production from the Lucky Strike Well. Beginning on October 14, 1974, Grigsby charged upper tier prices for the crude oil from the Leger Well, based on his understanding that the oil could be considered “new oil” under Federal Energy Administration (“FEA”) Regulations.

Seventeen months after production began from the Leger Well, plaintiff notified the Commissioner of Conservation of his intent to request an order recognizing two separate reservoirs in the North Jennings Field.2 In June of 1976 the Commissioner issued two orders acknowledging the existence of two reservoirs in the North Jennings Field. The reservoirs were designated Heywood Sand, Reservoir A, and the Upper Heywood “A” Sand, Reservoir A. The Leger Well No. 1 became the unit well for the Upper [52]*52Heywood “A” Sand, Reservoir A, Sand Unit B.

On November 29, 1976, the FEA issued a remedial order to Grigsby citing violations of Cost of Living Council Regulations and FEA Price Regulations. The FEA had determined that Grigsby had overcharged customers by billing them at “new oil” prices instead of “old oil” prices since the date production began on the Leger Well. Grigsby was ordered to reduce prices on production from the Leger Well immediately and to refund past overcharges. On December 11, 1976, Grigsby appealed the immediate order to the FEA’s Office of Exceptions and Appeals. That remedial order was essentially upheld. Grigsby then appealed the FEA action to the United States District Court. Summary judgment was granted in favor of the FEA, upholding its orders. The court also entered partial summary judgment in favor of the FEA on its counterclaim for civil penalties, and Grigsby was ordered to comply with the remedial order.

An appeal by Grigsby to TECA followed. The facts stated above are those found by TECA on rehearing.3 TECA recognized that, as of June 24, 1976, production from the Leger Well was considered to be from a separate property and, thus, could be properly classified as “new oil”. The question, however, was the status of the Leger Well production from its inception on October 14, 1974, until June 24, 1976. TECA declined to give the 1976 order retroactive application because of “[t]he need for certainty and finality in the enforcement of price control regulations.” Grigsby v. Department of Energy, 585 F.2d 1069, 1085 (Em. App.1978). Because neither the record nor the briefs clearly established the status of the well during the questionable time period, TECA remanded the case to this court for consideration of the official status of the well during that twenty-month interval.

The parties disagree completely as to what issues are now before this court. Plaintiff contends that the findings and rationale of the remedial orders are subject to review because they were based on erroneous findings of fact. On rehearing, TECA recognized that this court’s original entry of summary judgment was rendered upon clearly erroneous findings. The error occurred when the District Court found that the Division of the Heywood Sand into two reservoirs did not create two new properties and, therefore, the Leger Well produced from the same “property" as the Lucky Strike Well. TECA corrected the error when it recognized that the 1976 order did create two separate properties. As stated previously, however, TECA declined to give the 1976 order retroactive application. It is evident, therefore, that the original erroneous finding does not affect the question of status of the Leger Well from 1974 until 1976.

The Department of Energy (“DOE”) contends that this court must confine its decision to the sole issue of the status of the Leger Well during the period in question. The language used by TECA supports the position taken by DOE. In its conclusion, TECA stated that “[u]pon remand, the sole issue before the District Court will be whether the production from the Robert Leger Well No. 1 from October 14, 1974 until June 24, 1976, should be deemed production from the Heywood Sand, Reservoir A, Sand Unit B.” Id. at 1086 (emphasis added). That language leaves very little room for discussion as to what role this court should now play.

In addition to setting out exactly what issue is to be decided by this court, TECA also suggested guidelines for this court to use in reaching the decision as to the status of the Leger Well. First, it is important to note that the burden is on Grigsby to prove that the Leger Well production was not treated as production from the Heywood Sand, Reservoir A during the period in question. Second, TECA pointed out that this court should direct attention to the fact that the Leger Well was officially designated as the “substitute unit well” for the Heywood Reservoir A, Sand Unit B. Fur[53]*53thermore, TECA stated that an important area of inquiry would be the method used by Grigsby in apportioning the shares of production from the Leger Well. The opinion states that “[i]f the production from the Robert Leger Well No. 1 were apportioned among the lessees who shared an interest in the Heywood RA SU B, in accordance with the [Order No. 464-F-l] pooling order, then the production should have been classified as‘old oil’.” Id.

The answers given to the questions raised by TECA lead this court to conclude that production from the Leger Well during the period of October 14,1974 until June 24, 1976, was treated as production from the Heywood Sand, Reservoir A. It is undisputed that the proceeds of production from the Leger Well were apportioned in the same proportions before and after October 1974 among the same interest owners. In other words, those persons who received royalty payments from the Lucky Strike Well continued to receive payments after that well went to salt water and the Leger Well, as the “substitute unit well”, began to produce crude oil. The interest owners received payments in the same proportions as those established under the pooling order for the Lucky Strike Well.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Department of Energy v. Hunt
798 F.2d 1421 (Temporary Emergency Court of Appeals, 1986)

Cite This Page — Counsel Stack

Bluebook (online)
561 F. Supp. 50, 77 Oil & Gas Rep. 294, 1982 U.S. Dist. LEXIS 10064, Counsel Stack Legal Research, https://law.counselstack.com/opinion/grigsby-v-department-of-energy-lawd-1982.