Oil and Gas
Public and Private Royalty Owner Lawsuits
Susman Godfrey has represented public and private royalty owners in royalty disputes. Our experience in this area is extensive:
- Susman Godfrey served as lead counsel to Encana Oil & Gas (USA) before a private arbitration panel in Denver, Colorado. The dispute, which arose from the joint development of a major natural gas field, involved an Earning and Development Agreement relating to the Jonah Field in Sublette County, Wyoming. The plaintiff, Exaro, sought more than $165 million from Encana. The dispute settled on the eve of the final hearing for roughly 10 percent of what Exaro originally sought.
- From 2014 to 2016, Susman Godfrey defended Hess Corporation against Jack Grynberg’s claims involving a net profits agreement on oil and gas interests in Mississippi’s Tallahala field. The plaintiff filed suit in Colorado federal court, and soon after, a related action was filed against Hess in Mississippi state court. The Colorado court dismissed Grynberg’s claims against Hess on procedural grounds. The Mississippi court granted summary judgment on claims against Hess and other claims were settled on terms favorable to Hess.
- Susman Godfrey was co-lead counsel in a class action filed in 2000 against ConocoPhillips for alleged underpayment of royalty due on natural gas liquids produced from the San Juan Basin of northwestern New Mexico and processed at the New Blanco Plant near Bloomfield, New Mexico. After several years of litigation, ConocoPhillips agreed to settle the claims for $29.5 million. The district court approved the settlement, and in August 2006 the clients – more than 4,300 royalty and overriding royalty owners across the United States – received a net recovery totaling more than $18.9 million.
- In 2006, on behalf of 4,300 royalty and overriding royalty owners across the United States, Susman Godfrey attorneys, working with New Mexico, co-counsel obtained a $27.5 million settlement with ConocoPhillips for alleged underpayment of royalty on natural gas liquids produced from the San Juan Basin of northwestern New Mexico and processed at the New Blanco Plant near Bloomfield, New Mexico
- In 2005, less than a week before the start of a jury trial in Clayton, New Mexico, OXY USA, Inc. agreed to pay $12 million to settle a class action lawsuit brought by Susman Godfrey and New Mexico co-counsel on behalf of a class of royalty owners who had leased mineral rights to OXY for the production of C02 at the Bravo Dome Unit in northeastern New Mexico. The $12 million settlement represented approximately 90% of the total amount of actual damages sought by the class. The settlement also required OXY to pay litigation expenses of $400,000 and settlement administration expenses of $200,000. Finally, OXY has agreed to change how it calculates plaintiffs’ royalty on a going-forward basis. This change resulted in a near doubling of the royalty amounts OXY was paying the class members before the filing of this lawsuit in 2004.
- In 2004, Susman Godfrey won a net $40 million settlement in Shockey v. Chevron U.S.A., a royalty class action, after prevailing on hotly contested issues of class certification and choice of law.
- Susman Godfrey successfully represented thousands of mineral interest owners in a class action lawsuit against Meridian Oil Inc. challenging the prices paid for gas production. Similarly, we were plaintiffs’ counsel in a class action against major oil companies challenging the use of posted oil prices that are too low to calculate royalty payments. Our clients in this case included the Texas General Land Office.
Other Contract Disputes
Susman Godfrey has extensive experience representing oil and gas producers, processors, and pipeline companies in litigation. We have represented both plaintiffs and defendants in numerous disputes over the rights and duties of operators of oil and gas wells. Our experience includes issues relating to the obligation to develop leases and protect against drainage, claims of environmental and other damage to the surface or groundwater, disputes over joint accounting procedures under COPAS, drilling disputes, claims arising under gas processing and gas balancing agreements, rights to seismic and other geologic data, and litigation over farm out and AMI agreements. The lawsuits we have handled have given us substantial experience with issues arising from oil and gas development in many different parts of the world.
- In October 2016, after a two week trial, a federal jury awarded $43,214,515.83 in favor of Susman Godfrey client Apache Deepwater. The jury unanimously found that W&T Offshore breached its contractual obligation to pay its 49% share of the costs to plug and abandon three deep-water sub-sea oil and gas wells in the Gulf of Mexico. Apache Deepwater (affiliate of Apache Corporation) had a 51% interest in the three wells and was the designated operator. W&T had a 49% interest in the wells and was the non-operator. Apache used drilling rigs successfully and safely to plug and abandon the three deep-water wells in compliance with federal regulations, and invoiced W&T for its 49% share of the costs. Although federal law and the contract required the wells to be plugged and abandoned, W&T refused to sign Apache’s Authorizations for Expenditure or pay its share of the costs because it objected to Apache’s use of drilling rigs. W&T had wanted Apache to use what evidence showed was a more risky intervention vessel that would be less expensive. Despite a finding of bad faith and $17 million offset, Apache is confident that these findings are of no legal consequence under controlling Louisiana law and expects to recover the full $43.2 million amount of the verdict, plus $24.8 million that Apache already recovered from W&T after filing this lawsuit, plus millions more in interest and attorney’s fees.
- Also in 2016, Susman Godfrey defended a subsidiary of Hess Corporation against claims for breach of an Area of Mutual Interest Agreement concerning an oil and gas prospect covering the Bakken and Three Forks shale formations in Williams County, North Dakota. The plaintiffs claimed over $400 million in damages. Susman Godfrey secured two favorable summary judgment rulings that resulted in the complete dismissal of the plaintiffs’ key claims. Those rulings were preceded by three favorable rulings striking certain opinions of the plaintiffs’ damages expert that reduced the plaintiffs’ claim by over $100 million.
- Susman Godfrey served as lead counsel to Olympia Minerals and Olympia Minerals Leasing in a suit against Aspect Resources that spanned a decade. The lawsuit concerned an agreement for joint development of oil and gas on 135 square miles located in Louisiana. As part of that agreement, Aspect agreed to conduct a 3D seismic survey on Olympia’s lands, but only completed about half of the project and provided only processed seismic data to Olympia. Aspect accused Olympia of misusing the seismic data and allowing other parties to use it, suing Olympia for millions in allegedly lost profits and a 5 percent royalty on future discoveries. Susman Godfrey won for Olympia at trial, on appeal to the Louisiana Supreme Court, and then again in 2015 when the case was remanded back to the trial court. In addition to defeating the claim against Olympia for more than $70 million in alleged damages, the firm secured more than $10 million in damages for Olympia from Aspect.
- Susman Godfrey represented Admiral, an affiliate of KKR, in a suit against EXCO Operating Co. The case involved a dispute over a Participation Agreement relating to more than 120 oil and gas wells in Zavala County, Texas and sought more than $50 million in damages. In July 2016, Susman Godfrey won on behalf of the Admiral entities a summary judgment establishing that EXCO breached the Participation Agreement by failing to buy Admiral’s interest in oil and gas wells.
- Susman Godfrey currently represents Newfield Production Company in a dispute with Eighty-Eight Oil LLC regarding the prices Eighty-Eight paid Newfield for crude oil it obtained under a crude oil delivery contract. The contract involved deliveries of crude oil in the Bakken region of North Dakota, and the case is proceeding in the United States District Court for the District of North Dakota.
- In April 2015, Susman Godfrey secured a complete summary judgment win for its client EP Energy against plaintiff Fairfield Industries, Inc. on Fairfield’s breach-of-contract claims in a multi-million dollar seismic data licensing dispute. On cross-motions for summary judgment, the 157th District Court in Harris County, Texas ordered that Fairfield take nothing on its claims against EP Energy. This is a significant victory for EP Energy and sets an important precedent for other seismic data licensees who may be sued for unjustified “transfer fee” penalties in a depressed oil and gas economy
- In December 2014, Susman Godfrey won a federal court jury trial for Apache Corporation and defeated a $20 million breach of contract and other claims brought by W&T Offshore, Inc. After a two week trial, the jury took less than an hour to find that Apache did not breach the parties’ contract, and to reject W&T’s other claims. Susman Godfrey won a 3-0 decision in the U.S. Court of Appeals for the Fifth Circuit affirming its win in the district court, and collected over $100,000 in costs from W&T.
- During 2011, Susman Godfrey represented a mid-stream company in an expedited arbitration against a joint-venture partner on one of its pipelines. The arbitration involved claims that the joint-venture partner breached its fiduciary duties by refusing to agree to increase throughput on the pipeline to return it to its nameplate capacity under the parties’ operating agreement. After limited document and oral discovery, the case settled favorably for our client.
- Susman Godfrey represented Enterprise Products Operating LP in an arbitration involving Marathon Oil Company’s claims that Enterprise’s predecessor in interest had breached a long-term gas dedication provision in a gas processing contract. After Enterprise prevailed on most issues on summary judgment, the parties settled.
- In 2010, Susman Godfrey LLP successfully represented Apache Corp. in major litigation against Concho Resources Inc. regarding the exercise of preferential purchase rights on hundreds of millions of dollars of oil and gas assets in the Permian Basin of West Texas and New Mexico. The dispute arose in connection with the acquisition by an Apache subsidiary of BP America’s and BP America Production Company’s interest in certain Permian Basis oil and gas assets, and Concho’s acquisition of private producer Marbob Energy’s interest in those same Permian assets. The case settled on commercial terms favorable to Apache, with Apache securing operating rights and a 60% interest in the disputed assets, after we filed a motion for summary judgment to establish the legal validity of Apache’s exercise of its preferential rights.
- In 2010, Susman Godfrey represented Enterprise Products Operating LLC and Mid-America Pipeline Company, LLC as plaintiffs in a lawsuit against Flint Hills Resources, L.P., a subsidiary of Koch Industries. The dispute arose in connection with a natural gas liquids storage and purchase agreement between Enterprise and Flint Hills. Enterprise and MAPL built a pipeline as part of the agreement. Flint Hills sent notice of early termination but refused to pay a contractual termination fee of up to $30 million to Enterprise. Susman Godfrey filed a lawsuit in Harris County, Texas on behalf of Enterprise and MAPL seeking the termination fee and attorneys’ fees. The case settled on confidential terms less than a month before trial and after we filed a motion for summary judgment on all issues besides attorneys’ fees.
- Susman Godfrey represented Jonah Gas Gathering Co. in a declaratory judgment action against Williams Field Services on Williams’ claims that Jonah breached an interconnect agreement to deliver gas to a Williams’ gas processing plant in Wyoming. Williams moved to dismiss that case against Jonah (a Texas resident) based on forum non conveniens. Jonah successfully defeated Williams’ motion in the trial court, and subsequently defeated Williams’ mandamus petitions in the Fourteenth Court of Appeals and the Texas Supreme Court.
- Susman Godfrey represented Enterprise Products Operating L.P. in a dispute with Sunoco Pipeline over who was entitled to purchase a shareholder’s stock in Dixie Pipeline Company. After expedited discovery and a bench trial that lasted a total of six weeks from start to finish, the court found for Enterprise.
- During the summer of 2005, Hurricanes Katrina and Rita devastated natural gas production and pipeline infrastructure on the Gulf Coast. Certain natural gas producers could not make gas deliveries and declared force majeure under their NAESB contracts. Apache hired Susman Godfrey to represent it when one of its buyers challenged the force majeure declaration. After extensive discovery, the trial court granted Apache’s motion for summary judgment that a producer is not obligated to make deliveries to alternate locations or to acquire gas from other, unaffected sources. This matter settled favorably for Apache after an appeal..
- Susman Godfrey was lead counsel in a successful defense brought against our client NIPSCO (now NiSource), the electrical power company for Northern Indiana. The case settled favorably for our client after two weeks of trial in federal district court in Chicago. The successful result came on the heels of another positive result we secured for NIPSCO in defending the company against a $200 million claim.
- Susman Godfrey has successfully represented both producers and pipelines in lawsuits over take-or-pay gas contracts. In 1989, we obtained a judgment of more than $600 million for TransAmerican Natural Gas Corporation in its take-or-pay lawsuit against El Paso Natural Gas Company. The case subsequently settled. The Texas Lawyer described this lawsuit as “the first case in which a pipeline company was found to have repudiated its take-or-pay contract.” Four years later, we successfully defended Tennessee Gas Pipeline in a lawsuit by Coastal Oil & Gas Corporation seeking benefits under a gas contract valued at more than $740 million. A South Texas jury found for our client on all issues. We obtained summary judgment for our client, Southern Natural Gas Pipeline, in a $100 million take-or-pay contract lawsuit against Exxon Corporation, and we have successfully tried or settled on favorable terms numerous other disputes over long-term gas contracts in which we have represented the producer, the pipeline, or the ultimate user of the gas. In 1996, we won a defense verdict for Intratex Gas Pipeline in a suit brought by producers alleging a fraudulently administered special marketing program.
- In January 1997, we successfully represented Enron Clean Fuels Company in a declaratory judgment action in federal court in the Southern District of Texas. The issue was whether Chevron could cancel a 5-year gasoline additives contract. In its counterclaim, Chevron sought $30 million in actual damages, plus punitive damages. The jury found for Enron on all issues.
Establishing Rights to and Value of Minerals
- In 2006, Susman Godfrey was hired to oversee a Canadian trial team in a major trial. Apache Corporation’s Canadian subsidiary sought the return of bids obtained through improper use of confidential drilling data worth more than $100 million. The subsidiary faced a counterclaim of $300 million. The eight- week trial resulted in a total victory for Apache’s subsidiary.
- In 1998, a Dallas jury awarded our client, London-based Breezevale Limited, more than $38 million in a lawsuit against Exxon Corp. The jury found that Exxon breached an oral contract to give Breezevale a 2.5% working interest in oil blocks off the coast of Nigeria after Exxon acquired the blocks with Breezevale’s assistance.
Industry Consolidation — Realignment — Antitrust
- Susman Godfrey represented Enterprise Field Services in a declaratory judgment action over long-term gas gathering agreements in the San Juan Basin of northwestern New Mexico. Susman Godfrey also defended Enterprise Field Services in multiple forums against ConocoPhillips’ allegations of state antitrust and regulatory violations relating to those gas gathering agreements. The parties settled these matters.
- Susman Godfrey successfully represented American Central Gas Companies in an arbitration in connection with antitrust claims. During a two-week binding arbitration — less than two months after being ordered to arbitration — we proved that defendants, Union Pacific Resources and Duke Energy Field Services, had attempted to monopolize and had monopolized the market for natural gas processing in Panola County, Texas. The arbitrator awarded American Central treble damages. Upon release of the arbitrator’s decision, the defendants tried to seal the arbitration order. We opposed. The arbitrator and the federal district judge both refused to seal the arbitration order.
- When Mesa Petroleum attempted a hostile acquisition of Unocal Corporation, Susman Godfrey represented Unocal in an antitrust lawsuit challenging the proposed takeover. Similarly, we represented InterNorth in an antitrust action when Coastal challenged its merger with HNG.
Power Plant Disputes
- We represented the City of Austin, Texas in a two-month jury trial in Houston against Houston Lighting & Power over the South Texas Nuclear Project. The parties settled during jury deliberations. HL&P paid our client $20 million and agreed to step aside as operator of the project. We also represented Tenneco Ventures in a dispute over an agreement to build and operate a cogeneration plant on a university campus.
- Susman Godfrey won a jury trial and follow-on bench trial in a $500 million dispute over power plant outages, environmental controls, and lignite mining. The jury rejected Alcoa’s claims, ruled that Alcoa had breached a long-term power supply agreement and a contract mining agreement, and awarded Luminant Generation $10 million on its counterclaim. The bench trial likewise resulted in rejection of Alcoa’s claims and an award of more than $5 million in damages to Luminant Mining.
- Susman Godfrey client LS Power brought claims in arbitration against Brazos Electric over a long-term power supply contract relating to a joint investment in a new coal power generation plant near Waco. The case settled favorably for client.