Articles Posted in Energy, Oil and Gas

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In August of 2009, Samson Resources Company owned oil and gas leases covering 87.78 mineral acres in Roger Mills County, Oklahoma, including the Schaefer Lease. The Schaefer Lease covered 70 net acres in the Southwest Quarter of Section 28 and had a three-year primary term that ended on November 22, 2007. If drilling operations were commenced by the end of the primary term, the lease would continue so long as such operations continued. On August 2, 2007, Newfield sent a letter to Samson, proposing to drill a well in Section 28. The estimated cost of the well was over $8.5 million dollars. On August 9, 2007, Newfield filed an application with the Commission, seeking to force pool the interests of Samson and other owners in Section 28. Newfield sent an e-mail dated April 14, 2008, to Samson that informed Samson that Newfield had commenced operations prior to the expiration of the Schaefer Lease. Newfield's e-mail stated that Samson had underpaid well costs and that an election to participate with 87.78 acres would require prepayment of $1,411,982.45. Samson responded by e-mail on the same date, informing Newfield its intent was only to elect its 17.78 acres. On April 28, 2008, Samson filed an Application seeking to have its election to participate in the well limited to 17.78 acres rather than 87.78 acres. After an administrative hearing, the Administrative Law Judge determined that Samson's timely election to participate only covered 17.78 acres of its interest and that Samson accepted the cash bonus as to its remaining 70 acres. The Oil and Gas Appellate Referee reversed the ALJ's determination, finding that the ALJ improperly relied on actions which occurred prior to the issuance of the pooling order. The Commission issued Order No. 567706, which adopted the Referee's report, reversed the ALJ, and declared that Samson had elected to participate to the full extent of its 87.78 acre interest in the unit. The Commission found Samson made a "unilateral mistake" when it elected to participate to the full extent of its interest. Samson appealed the Commission's order to the Court of Civil Appeals, which affirmed. Before COCA issued its opinion affirming the Commission, Samson filed an action in the district court alleging actual fraud, deceit, intentional and negligent misrepresentation, constructive fraud, and breach of duty as operator. Samson also alleged Newfield's actions amounted to extrinsic fraud on the Commission, rendering Pooling Order No. 550310 invalid as to Samson's working interest attributable to the 70-acre Schaefer Lease. The trial court granted Newfield's motion to dismiss for lack of subject matter jurisdiction, finding the petition to be an impermissible collateral attack on a valid Commission order. The Court of Civil Appeals affirmed. After its review, the Supreme Court found that Samson's actions for damages sounding in tort were beyond the Commission's jurisdiction, and the district court in this case was the proper tribunal for Samson to bring its claims. The trial court's order granting Newfield's Motion to Dismiss was reversed, and the case was remanded for further proceedings.View "Samson Resources Co. v. Newfield Exploration Mid-Continent, Inc." on Justia Law