Amoco Production Co. v. Thompson
| Decision Date | 17 September 1987 |
| Docket Number | Nos. CA,s. CA |
| Citation | 516 So.2d 376 |
| Parties | AMOCO PRODUCTION COMPANY v. Herbert W. THOMPSON, Commissioner of Conservation, et al. AMOCO PRODUCTION COMPANY v. Herbert W. THOMPSON, Commissioner of Conservation, et al. CHEVRON U.S.A., INC. v. Herbert W. THOMPSON, Commissioner of Conservation, et al. 86-0190, CA 86-1316, CA 86-1317. |
| Court | Court of Appeal of Louisiana — District of US |
J. Clayton Johnson, Taylor, Porter, Brooks & Phillips, Baton Rouge, for plaintiff-appellant Amoco Production Co.
Veil David Devillier, Eunice, for defendant-appellee Herbert W. Thompson, Com'r of Conservation and Asst. Secretary, Office of Conservation of the State of Louisiana.
Randall C. Songy, Onebane, Donohoe, Bernard, Torian, Diaz, McNamara & Abell, Lafayette, for intervenor-appellant Energy Production Co.
Frederick W. Ellis, Strain, Dennis, Palmer, Mayhall & Bates, Baton Rouge, for intervenor-appellee Ray John Forrest, Beverly Rachel Janis Forrest and Silver Mount Corp.
William S. Strain, Baton Rouge, for intervenor-appellee, Sabine Corp., Frederick J. Frey, Edwin J. Leonards, Crutcher-Tufts Corp., H & W Petro-Resources, Inc., WPM Exploration, Inc., Billy R. Powell, Sam L. Pfiester, Jackson Bldg. Components, Inc., Circle Seven Oil & Gas, Inc., Royal Energy, A.R. Dike, Charles D. Saunders, Circle Seven Investments, Herlihy Exploration, MO-MC & Associates, James E. Fowler, W.E. Gene Taylor, William L. Word Co., A.C. Atkins, G. Hunter Enis, James B. Hanks, Milton Womack, James S. Jenkins, G. Allen Penniman, C. Wallace Gladney, Austin S. Bridgeforth, III, Hugh Goodrich.
Melanie M. Lewis, New Orleans, for plaintiff-appellant Chevron USA, Inc.
Before GROVER L. COVINGTON, C.J., and LANIER and ALFORD, JJ.
This is an appeal from a trial court judgment which affirmed an amended administrative order issued by the Commissioner of Conservation of the Department of Natural Resources of the State of Louisiana (Commissioner) which provided for the marketing of, and accounting for, the gas production of compulsory drilling and production units in a natural gas field.
Effective October 20, 1980, and October 27, 1981, the Commissioner created nine compulsory drilling and production units for the gas reservoir denominated the 17,900' TUSC Zone, Reservoir A, in the Morganza Field (Field) located in Pointe Coupee Parish, Louisiana. Nine additional compulsory drilling and production units were thereafter established. Amoco Production Company (Amoco) was designated as the unit operator for all but one of these production units. Apparently, production has been obtained from thirteen of these units and Amoco is the unit operator for all of them.
Two mineral owners in the Field, Chevron U.S.A., Inc. (Chevron) and Energy Development Corporation (Energy), elected to take their share of the Field's gas production in kind, and Amoco delivered gas to them. Some of the mineral owners in the Field 1 did not elect to take their share of the Field's gas production in kind and did not enter into operating or balancing 2 agreements with Amoco and the other mineral owners for the future sale of the gas production. Amoco entered into a contract with Columbia Gas Transmission Corporation (Columbia) on May 18, 1981, wherein Columbia agreed to buy Amoco's portion of the gas produced from the Field. The price that Amoco was to receive for this gas was relatively high because the federal government deregulated gas in 1979 and a gas shortage thereafter developed.
Apparently, Amoco commenced delivering all gas production from the Field (less that taken in kind) to Columbia. Apparently, Columbia initially agreed to buy the gas of the nonmarketing owners for an indefinite term at the same rate it paid Amoco. Apparently, the nonmarketing owners acquiesced in this arrangement. In 1982, a national gas surplus developed, and the price of gas dropped. Columbia advised Amoco that it would no longer accept delivery of the nonmarketing owners' share of the gas produced from the Field. Amoco notified the nonmarketing owners of this fact. Thereafter, Amoco delivered to Columbia and to the purchasers of the other marketing owners all of the production from the units. However, when Columbia terminated its agreement to buy the gas of the nonmarketing owners, they were left without a purchaser in a depressed market. That factual setting has caused the present dispute.
On February 10, 1984, Amoco applied to the Commissioner for an order which would allow it to separately market its share of production from the Field and balance (give in kind at a later date) the share of the nonmarketing owners. A hearing was held on this application on March 2, 1984, by Patrick H. Martin, the Commissioner at that time. Commissioner Martin rendered his decision on March 9, 1984. Commissioner Martin found as fact that (1) there were mineral owners in the Field who did not have markets for their share of the natural gas produced from the Field; and (2) mineral owners who had markets for their share of the gas would not be able to recover their share of the gas from the Field if they were prevented from separately marketing their share of the gas. Commissioner Martin then ordered the following: (1) each mineral owner who did not have an applicable gas balancing agreement must elect to either (a) assume full responsibility for marketing his share of gas production, and, if he failed to take his share of production at the time of production, he later would be given an opportunity to receive his share of the gas on a cubic foot for cubic foot basis "at a rate not to interfere unduly with the rights of the other owners to take and market their ... shares from the pertinent unit well", or, (b) authorize the unit operator (Amoco) to sell his share of the gas production for a period of two years "on terms that are fair and reasonable and reflect the market value of the gas at the time the contract is entered into"; (2) if a mineral owner who elected option (a) failed to take his share of the gas production at the time of production, the unit operator was authorized (not mandated) to deliver all of such production "to those owners with markets"; and, (3) if the unit operator failed to market the gas for owners electing option (b), it "shall account to such owner as required by law." Finding 6 of the order provided that the order "should not supercede any contractual rights of the owners among themselves or with others."
On March 12, 1984, Herbert W. Thompson replaced Martin as Commissioner. On March 16, 1984, some of the nonmarketing owners applied to Commissioner Thompson for a rehearing, which was granted. Commissioner Thompson held a hearing on June 5, 1984. Commissioner Thompson rendered his decision on September 9, 1984. He found as fact that Commissioner Martin's order (1) "does not prevent waste, but in fact will cause waste", (2) "will result, or tends to result, in reducing the quantity of gas ultimately recoverable from the pool", and (3) "fails to afford the owner of each tract the opportunity to recover or receive his just and equitable share in the pool without unnecessary expense." Commissioner Thompson ordered that (1) Commissioner Martin's order be rescinded effective its date of issuance; (2) Amoco "deliver to each owner, absent an agreement between affected owners to take in kind, his just and equitable share of the proceeds of production after repayment of any costs that may be due"; and (3) in the absence of an agreement to take in kind, Amoco and the nonmarketing owners "shall be deemed to have contracted for the operator to market all the common supply of gas", Amoco shall account to itself and the nonmarketing owners on a pro rata basis for all such sales, and this "election contracted for shall continue until the operator and the non-marketing owners may mutually agree otherwise, or until depletion."
Amoco applied for a rehearing on Commissioner Thompson's order, which was denied. Suit was filed by Amoco on December 14, 1984, requesting that Commissioner Thompson's order be rescinded and Commissioner Martin's order be reinstated. In the alternative, Amoco requested that Commissioner Thompson's order be modified to (1) be prospective only, (2) require the marketing (nonoperating) owners to account (as well as Amoco), and (3) eliminate the statements in the order indicating that there were contracts between Amoco and the nonmarketing owners for marketing.
On October 16, 1985, the trial court rendered written reasons for judgment. These reasons contain five basic holdings. First, the trial court held that Commissioner Thompson correctly held that the "molecular theory" was applicable to adjudicate the rights of the parties. The "molecular theory" means that each mineral owner in a compulsory unit is an owner in indivision of each molecule of gas produced, or, stated another way, each mineral owner in a compulsory unit owns in indivision his proportionate share of the minerals in the unit. Second, it was held that the Commissioner had jurisdiction over marketing issues to provide for the orderly development, production and utilization of the state's mineral resources to prevent waste. Third, it was found that Commissioner Thompson's order did not set forth any basis for accounting to nonmarketing owners. Fourth, Commissioner Thompson's order did not provide for an accounting by all marketing, nonoperating owners. Fifth, Commissioner Thompson's order did not provide for a reasonable election period for nonmarketing owners. On December 6, 1985, the trial court rendered what purported to be an interlocutory judgment which remanded the case to the Commissioner to (1) specify the basis on which Amoco would account to the nonmarketing owners, (2) determine if the marketing, nonoperating owners had to account to the nonmarketing owners on the same basis as Amoco, and (3) provide for...
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95 1185 La.App. 1 Cir. 2/23/96, Amoco Production Co. v. Fina Oil & Chemical Co.
...of the gas that he did not receive. Pogo Producing Company v. Shell Offshore, Inc., 898 F.2d at 1066-67. In Amoco Production Company v. Thompson, 516 So.2d 376 (La.App. 1st Cir.1987), writs denied, 520 So.2d 118 (La.1988), which is generally referred to as Amoco I, the court held that, whil......
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...case law4 to support their unjust enrichment argument. Alternatively, the Chesapeake Defendants point to Amoco Prod. Co. v. Thompson, 516 So. 2d 376 (La. App. 1 Cir. 1987), to support their contention that principles of co-ownership support the right of the operator to be reimbursed for pos......
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