QEP Prevails in Lease Cancellation Appeal
HOUSTON, July 19, 2011 /PRNewswire/ — Jones Walker attorneys Michael B. Donald, Joshua A. Norris and Nicole M. Duarte, partners in the firm’s Houston office, recently prevailed in a case on appeal for clients QEP Energy Company (formerly known as Questar Exploration and Production Company) and Ollie A. Phelps in the Second Circuit Court of Appeal in Louisiana. The action was the first “failure to develop” case arising out of the recently discovered Haynesville Shale natural gas play in northwest Louisiana.
Specifically, the mineral lessors filed suit less than a year after discovery of the play seeking cancellation of a longstanding mineral lease on the ground that QEP had failed to explore and develop the property as a reasonably prudent operator by failing to commence a Haynesville Shale well. The trial court granted lease cancellation, finding essentially that the Haynesville Shale was so special and prolific that QEP should have begun drilling by the date of trial.
However, the Second Circuit reversed the lease cancellation, holding that the evidence fell “far short” of establishing that QEP had breached its duty as a reasonably prudent operator.
“This decision has ramifications for all operators in the Haynesville Shale play, some areas of which are still in the process of being unitized and drilled,” stated Ms. Duarte. “The trial court’s judgment would have created an unworkable timeframe for essentially immediate and simultaneous development of all areas of the play, and would have done so on the basis of a lack of concrete and property-specific evidence concerning the operator’s duty to drill on the particular tract at issue. The second circuit’s ruling is consistent with prior Louisiana decisions and avoids this harsh and legally incorrect result.”
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SOURCE Jones Walker