Law and oil

June 20, 2005
The US is a litigious society. People, it seems, will sue at the drop of a hat.

The US is a litigious society. People, it seems, will sue at the drop of a hat. Sometimes, the twists and turns of the legal system border on the surreal.

The oil and gas industry has ridden through many such swerves. Houston attorney Ron Welsh told OGJ about some of his past cases-some colorful, many costly, all interesting.

Too good to be true

Years back, the city of Baytown, Tex., decided it would try to charge pipelines a usage fee for crossing under its streets. Since the statute of limitations doesn’t apply to governmental bodies, Baytown said it could go back in history to calculate the usage fees.

In a test case, the city sued a pipeline for more than $1 billion. The precedent set by the test case would have given the city-and any other city in Texas-a similar claim against the myriad other pipelines that crossed under city streets.

During the development of the case, lawyers suggested that the pipeline mount a behind-the-scenes publicity campaign to explain to Baytown residents what a bad idea it was for the city to, as the saying goes, kill the goose that laid the golden egg.

After the judge dismissed the case, Baytown officials found out about the campaign. The city council decided not to appeal.

Seismic tresspass

An international oil company wished to shoot a seismic survey across an area that included a farmer’s land. Surrounding landowners granted permission for the survey, hoping for a large discovery. The farmer did not.

The oil company shot the survey on both sides of the farmer’s land. It eventually decided not to drill.

The farmer then sued the oil company, claiming that it had placed its seismic energy sources on one side of his property and its receivers on the other side in the seismic equivalent of directional drilling.

In deciding not to drill, the farmer claimed, the company in effect condemned the area, including his land, as not worth developing. The farmer said that, based on the allegedly purloined seismic data from his property, the appeal of his mineral rights was destroyed-something he valued at $52.5 million.

Although the jury did suspect that the oil company had acquired data from beneath the farmer’s land, it decided that the actual value of the information didn’t reach eight figures-or seven figures. In fact, it didn’t even reach six figures-an amount far less than the farmer’s attorney fees.

Shortly afterward, litigation began between the farmer and his first set of lawyers over who owed whom.

It’s in the mail

A man purchased a ranch along with mineral rights in the Austin chalk. A large oil and gas company held a lease from the former owner. The lease provided for the usual delay rentals. The oil company had not done any exploration or production on the property and was paying delay rentals.

The new owner, however, said he had sent a certified copy of his deed to the oil company but hadn’t received any delay rentals. As a result, he sued to cancel the lease for failure to pay. The Austin chalk at that time was booming.

The new owner and his secretary swore at the trial that they had mailed the certified copy of the deed with the correct address and postage on the envelope.

Welsh consulted the county clerk-the official who records deeds and keeps records of who buys certified copies.

During the trial, the clerk carried her record book into the courtroom and testified that not only had the plaintiffs not purchased a copy of the deed in question, nobody had.

The court was in a rural Texas county. Most of the farmers on the jury knew the county clerk.

It didn’t take the jury long to conclude that the oil company still had its lease.