Amoco Production Co. v. Thompson
| Decision Date | 26 June 1990 |
| Docket Number | Nos. 90,s. 90 |
| Citation | 566 So.2d 138 |
| Parties | AMOCO PRODUCTION COMPANY v. The Honorable Herbert W. THOMPSON, Commissioner of Conservation. CHEVRON U.S.A., INC. v. Herbert W. THOMPSON, Commissioner of Conservation. AMOCO PRODUCTION COMPANY v. The Honorable J. Patrick BATCHELOR, Commissioner of Conservation. CHEVRON U.S.A., INC. v. J. Patrick BATCHELOR, Commissioner of Conservation. CA 0036 to 90 CA 0039. |
| Court | Court of Appeal of Louisiana — District of US |
Tom Phillips, Baton Rouge, Jackson Cooley, New Orleans, for plaintiff-appellee Amoco Production Co.
Hampton Carver, Stephen Lastrapes, New Orleans, for plaintiff-appellee Chevron USA, Inc.
George C. Gibson, New Orleans, for defendant-appellant J. Patrick Batchelor, Com'r of Conservation.
William Strain, Baton Rouge, for intervenor-appellant Sabine Corp.
Veron Terrell, Jr., New Orleans, for appellee Conoco, Inc.
Randall Songy, Lafayette, for intervenor-appellee Energy Production Co.
Before COVINGTON, C.J., WATKINS, J., and DOHERTY, J. Pro Tem. *
This is an appeal from a trial court judgment which reversed, in part, an amended administrative order issued by the Commissioner of Conservation, 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. The Commissioner's order was the result of a remand from this court, Amoco Production Co. v. Thompson, 516 So.2d 376 (La.App. 1st Cir.1987), writs denied, 520 So.2d 118 (La.1988). The issue before us is whether the Commissioner complied with the requirements of our previous decision when he ordered an accounting in cash for a specified period of time during which the units were produced.
The facts and history of the case are set out in our previous opinion:
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. This 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....
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 of September 9, 1984.... 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."
. . . . .
Suit was filed by Amoco on December 14, 1984, requesting that Commissioner Thompson's order be rescinded and Commissioner Martin's order be reinstated....
. . . . .
On December 6, 1985, the trial court rendered what purported to be an interlocutory judgment which remanded the case to the Commissioner ... [for additional findings related to the basis of accounting.] The interlocutory judgment also affirmed Commissioner Thompson's order in all other respects.
. . . . .
On March 4, 1986, in compliance with the trial court's judgment, Commissioner Thompson issued an amended order....
. . . . .
Amoco filed an amended petition for judicial review in its original suit. Chevron filed a separate suit for judicial review. Energy and the nonmarketing owners, which had intervened in the Amoco suit, also intervened in the Chevron suit. The Amoco and Chevron suits were consolidated.
On July 11, 1986, the trial court rendered a judgment which (1) made its interlocutory judgment final, (2) affirmed Commissioner Thompson's amended order, (3) dismissed the Amoco and Chevron suits and the Energy interventions, and (4) stayed execution of judgment until the judgment was no longer subject to appellate review.
Amoco appealed suspensively. Chevron, Energy and the nonmarketing owners appealed devolutively. The nonmarketing owners also answered both appeals.
In our previous opinion we held that the conservation law is sui generis in authorizing a special species of partition for mineral co-ownership in compulsory units and that the Commissioner has the authority to exercise this power. We concluded that Commissioner Thompson committed legal error when he held that he did not have the power to partition co-owned gas produced from a compulsory unit, that the gas produced from the various units had not been partitioned by the orders establishing the compulsory units, and that he did not have the power to order balancing. Deferring to the Commissioner's "unique expertise in the field of mineral conservation," we declined to decide the case in the furtherance of judicial economy; we remanded the case to the Commissioner for reconsideration pursuant to our views. In so doing, we noted:
The Commissioner is particularly suited by his expertise in this field to gather the necessary facts, weigh the various policy considerations and expeditiously make the initial determination of what is in the best interest of efficiently and fairly developing the state's mineral resources.
Subsequent to a public hearing on September 26, 1988, the Commissioner issued the following findings referred to as the "Supplement" by the court below:
1. That Office of Conservation Orders in the 1102 Series established a number of units in the Morganza Field for the 17,900' Tuscaloosa Zone, Reservoir A, including the units designated 17900 TUSC RA SUA, SUB, SUC, SUH, SUI, SUJ, SUL, SUP, SUO, SUR, SUT, SUU, SUV AND SUX, force pooled and integrated all separately owned interests, and provided for sharing in unit production on a surface acre basis of participation.
2. That said Orders require the unit operator therein designated to allow the owners to take in kind their shares of the unit production, owned in indivision upon capture, which taking in kind effects a partition of the ownership of the unit gas produced and gives each owner sole ownership of his share of gas.
3. That, as mandated by the Court decision, the Commissioner has the authority to modify or deny the right to take in kind under certain circumstances.
4. That commencing with initial production some owners did not take in kind their shares, and some owners did take in kind their shares as well as the shares of the non-taking owners; that as a result thereof certain owners are overproduced in that their total production taken is in excess of their shares, and others are underproduced...
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95 1185 La.App. 1 Cir. 2/23/96, Amoco Production Co. v. Fina Oil & Chemical Co.
...including cash balancing, depending on the circumstances. Subsequently in the appeal from the remand, in Amoco Production Company v. Thompson, 566 So.2d 138, 145-46 (La.App. 1st Cir.), writs denied, 571 So.2d 627, 628 (La.1990), which is generally referred to as Amoco II, the appellate cour......
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