Rivers v. Sun Oil Co.

503 So. 2d 1036, 96 Oil & Gas Rep. 104, 1987 La. App. LEXIS 8775
CourtLouisiana Court of Appeal
DecidedFebruary 25, 1987
DocketNo. 18406-CA
StatusPublished
Cited by3 cases

This text of 503 So. 2d 1036 (Rivers v. Sun Oil Co.) 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
Rivers v. Sun Oil Co., 503 So. 2d 1036, 96 Oil & Gas Rep. 104, 1987 La. App. LEXIS 8775 (La. Ct. App. 1987).

Opinion

SEXTON, Judge.

The defendant, Sun Oil Company, the operator of a forced drilling unit, appeals the judgment of the trial court awarding each of the plaintiffs $45,993.07 as a result of the defendant’s failure to comply with the disclosure requirements of LSA-R.S. 30:103.1 and LSA-R.S. 30:103.2. The defendant’s appeal also seeks to recover sums it asserts were overpaid the plaintiffs. The plaintiffs answer seeking additional statutory damages under LSA-R.S. 30:104. We affirm.

The dispute involves the interpretation of LSA-R.S. 30:103, 30:103.1 and 30:103.2 which read as follows:

§ 103. Operators to report to owners amount of oil or gas produced
Operators taking or producing oil or gas from lands who do not market through a pipe line company, shall report [1038]*1038monthly to each owner of an oil or gas interest in the lands. These monthly reports shall show the amount of oil or gas produced from the lands during the previous calendar month, the amount disposed of, and the amount which has not been disposed of. Reports shall be sent by registered mail to each owner of a royalty, oil or gas interest, who has furnished his name and address to the operator.
§ 103.1 Operators and producers to report to owners of unleased oil and gas interests
Whenever there is included within a drilling unit, as authorized by the commissioner of conservation, lands producing oil or gas, or both, upon which the operator or producer has no valid oil, gas or mineral lease, said operator or producer shall report to the owners of said interests, by a sworn, detailed, itemized statement, the costs of the drilling operations of said unit within ninety calendar days from the completion of the well. Reports shall be sent by registered mail to each owner of an unleased oil or gas interest who has requested such report and furnished his name and address to the operator or producer.
§ 103.2 Failure to report; penalty
Whenever the operator or producer permits (1) ninety calendar days to elapse from completion of the well and (2) fifteen additional calendar days to elapse from date of receipt of written notice by registered mail from the owner or owners of unleased oil and gas interests calling attention to failure to comply with the provisions of R.S. 30:103.1, such operator or producer shall forfeit his right to demand contribution from the owner or owners of the unleased oil and gas interests for the costs of the drilling operations of the well.

The present suit was filed on January 10, 1984. Plaintiffs’ extensive prayer primarily sought judgment based on LSA-R.S. 30:103, et seq. for costs of production allegedly due plaintiffs as a result of the defendant’s failure to comply with the aforesaid statute. The plaintiffs also sought damages for tax and marketing losses caused by the failure of disclosure and for attorney’s fees. The defendant reconvened alleging overpayment of royalties to the plaintiffs. They asserted that accounting errors erroneously determined the payout date prematurely, and thus plaintiffs had been overpaid sums as royalties which should have been assessed against them as drilling costs.

This case was submitted upon a stipulation of facts and genuineness of documents.1 Upon review thereof, the trial court found the following facts.

[1039]*1039On July 25, 1977, Sun Oil proposed a farmout of the unleased mineral interest of the plaintiffs. Plaintiffs responded to the proposal requesting additional information and stating that at the time they were not prepared to make a decision. There was no indication that an agreement for a farmout was ever reached.

The operating agreement between Sun Oil, Sohio, Murphy and Munoco showed the interest of the parties to comprise 100% of the unit thus omitting the 40-acre interest of plaintiffs. The Bolinger No. 1 Well was completed in the unit on or about March 15, 1978. No notice of the commencement of drilling or the completion of the drilling operations was given to plaintiffs. A division order was prepared recognizing the plaintiffs’ interest but there is no evidence that a copy of this order was ever sent to the plaintiffs.

Plaintiffs, on September 28, 1978, made demand on the defendant for a report of the operator as required by LSA-R.S. 30:103.1 and 103.2, and also requested a copy of the operating agreement and accounting schedule. No response was forthcoming from the defendant until August 16, 1979, after repeated requests from the plaintiffs. The August 16th letter did not include an affidavit of the cost of drilling operations. It stated that the requested information had previously been furnished by an employee of the defendant on January 30, 1979. However, there was no evidence that that correspondence had been sent certified mail as required by statute, or was received by the plaintiffs.

The first compliance by the defendant to the request made by plaintiffs for statutory disclosure was on January 30, 1979.

On February 15,1980, plaintiffs, through their attorney, informed Sun Oil that they wished to become a party to the operating agreement and requested that defendant provide contracts and marketing information as to the quantity of production from the unit. In response to this letter, the defendant failed to make plaintiffs a party to the operating agreement or advise them as to the marketing arrangements. No statement was provided as to the quantity of unit production. Neither was it revealed [1040]*1040to plaintiffs that commencing in July, 1979, plans for a workover recompletion of the well had been proposed and that non-operator parties had been informed as to expenditures requested for approval in recomplet-ing the well.

The first indication that plaintiffs had that the recompletion work had commenced on the well was on March 28, 1980, when a letter was sent to plaintiffs enclosing a current pay-out status on the well which showed additional expenditures for recom-pletion work.

Subsequent to being informed that the well had achieved pay-out status, on August 26, 1983, plaintiffs sent a letter requesting information concerning accounting and payment on the well. No response was received from defendant. On October 25, 1983, plaintiffs sent a demand letter requesting a report of expenditures as required by LSA-R.S. 30:103.1 and 103.2 within fifteen days from the letter. No response was ever received.

The trial court, in reaching a decision, divided its evaluation into two periods of time, the first commencing from the date of plaintiffs’ mineral interest purchase through the date recompletion operations were started in July, 1979.

Period 2 began at the commencement of recompletion operations until the petition was filed in January of 1984. The court found that the defendant had violated the provisions of LSA-R.S. 30:103, 30:103.1 and 103.2 in both Periods 1 and 2. Therefore, the court concluded that the defendant must forfeit the right to demand contribution from the plaintiffs for the cost of the drilling operations of the well in both periods. The defendant was cast in judgment to each plaintiff in the amount of $45,-993.07.

The plaintiffs’ requests for loss of profits for sale of oil and gas from the well and tax detriments resulting therefrom were denied. The court found the evidence inconclusive and insufficient to support these damages.

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Bluebook (online)
503 So. 2d 1036, 96 Oil & Gas Rep. 104, 1987 La. App. LEXIS 8775, Counsel Stack Legal Research, https://law.counselstack.com/opinion/rivers-v-sun-oil-co-lactapp-1987.