JurisdictionUnited States
Oil and Gas Agreements: The Exploration Phase
(Mar 2010)


David G. Ebner *
Lohf Shaiman Jacobs
Hyman & Feiger PC
Denver, Colorado

David G. Ebner recalls that oil was once viewed as an exciting alternative energy source, richly laden with tax incentives as befitted such a welcome replacement for wind and water energy. He consequently takes a long view of business cycles. He himself has enjoyed participating in these cycles, having worked as a lawyer in hard rock mining, uranium, domestic oil and gas, and international exploration and production transactions. Through it all, however, he has remained at one firm, even though that firm has gained a number of names and lost almost all of its punctuation over the years.


Papers on legal ethics generally tend to be much more about law than about ethics. The Model Rules of Professional Conduct1 set forth a well-organized series of specific rules, backed by the daunting admonition in Model Rule 8.4(a) that the violation--or even the attempted violation--of any such rule is, ipso facto, professional misconduct. It's little wonder that the Model Rules are as often referred to as disciplinary rules as ethical rules.

Indeed, it's not surprising that this should be so. We are, after all, lawyers, and we're trained to research, consider and apply statutory law as glossed by case law decisions. It is therefore quite easy (and, in view of the disciplinary penalties, quite appropriate) to fall into the pattern of resolving ethical questions by looking for the relevant rule, reviewing the available opinions issued by the various ethics committees, and then considering the views of scholarly commentators.

Moreover, this act-centered ethical system has a distinguished pedigree that traces to Aristotle, and a history of application that may arguably have reached its zenith in Commonwealth England. To Aristotle, political science focused on the pursuit of justice and agreed ethical norms, while Oliver Cromwell's Commonwealth minutely regulated, if not morality, then certainly the public appearance of morality. It was an easy transplantation of these Puritan concepts onto United States soil, and over the next three hundred years the idea of legislating morality passed to John Kenneth Galbraith and Patrick Buchanan. It now flowers in an era where Constitutional amendments are debated in terms quite suitable for moral discourse.

The historical arc of act-centered ethical systems is, of course, neither as grand nor as certain as this over-simplified history suggests, but it is included as a demonstration, not a proof, of the historical longevity of this way of thinking about ethics. It may sometimes appear that there is an increasing contemporary trend toward legislating individual morality, but in reality

[Page 12-2]

it's nothing new. The appearance of novelty perhaps owes more to the increasing diversity and heterogeneity of society, which makes the effort to find common ground both more difficult and more audible.

The legal profession's adoption of ethical rules falls squarely into this historical and philosophical tradition, and is further propelled by both a practical interest in upholding the public image of the profession and a desire to avoid governmental regulation. The proscription against the appearance of impropriety previously set forth in Canon 9 of the Code of Professional Responsibility may have been explicitly rejected, at least in the disqualification context, by the Model Rules, but the interest in ensuring the public perception of professional integrity by requiring certain conduct often seems to lie just beneath the surface. More explicitly, the Preamble to the Model Rules clearly observes that the occasion for government regulation is obviated to the extent that lawyers meet the obligations of their professional calling. In order to avoid the government's promulgation of mandatory rules governing conduct, the Bar has adopted its own mandatory rules.

And that's why the study of legal ethics often appears to be more about studying law than ethics. Such study is both useful and necessary, but it also may be one of the reasons why questions in grey areas often become so troublesome. The Model Rules so frequently provide unmistakable answers to ethical questions that there is no need for personal reflection, while in many other cases the hard, thoughtful effort is directed toward classifying the problem so that the proper rules can be applied. When problems not explicitly covered by the Model Rules arise, the tough choices begin.

We set forth below one simple ethical matrix for ethical decision making outside the Model Rules of Professional Conduct. This matrix not an answer key, but a process, and it is not the process, but only one of a great many available processes. Each of us has a personal process for ethical decision-making, and this particular matrix is selected for its breadth and its ability to accommodate so many individual moral systems. With both the Model Rules and this matrix in mind, we then consider some of the hard and easy ethical questions that arise in the legal representation of oil and gas exploration enterprises. In particular, we consider exploration in environmentally sensitive areas, fee arrangements involving interests in the exploration property, confidentiality of exploration data, and one particular problem in negotiation ethics.


In an insightful article first published more than twenty years ago, Kenneth E. Goodpaster and John B. Matthews, Jr. of the Harvard Business School argued that business corporations-the entities themselves-can and should be morally responsible in their commercial endeavors, and that they should frame their business conduct accordingly.2 The article was issued during a period of intense academic debate over the propriety of projecting ethical responsibility onto business organizations, and still deserves careful reading today.

[Page 12-3]

We are drawn to the article not by its path-breaking argument, however, but by its succinct summary of William K. Frankena's analysis of the process of morally responsible judgment.3 Frankena maintains that this process is characterized by two principal traits: rationality and respect. First, the process is rational in that involves a consideration of alternatives and consequences, as well as a certain clarity about goals and purposes. Second, the process "includes a special awareness of and concern for the effects of one's decisions and policies on others, special in that it goes beyond the kind of awareness and that would ordinarily be part of rationality, that is, beyond seeing others merely as instrumental to accomplishing one's own purposes."4 The telling feature of this sort of respect is the treatment of others as valuable in and of themselves.

As Goodpaster and Matthews explain, a rational but not respectful person will not lie unless she is reasonably confident that the lie will not be uncovered. Similarly, she will defend the rights of others unless the personal cost of doing so becomes too great. On the other hand, a rational and respectful person will care about the injury suffered by the other.

The twin considerations of rationality and respect do not furnish an answer or an outcome; they merely provide a process. Indeed, the Goodpaster and Matthews formulation does not address, other than by its teasing reference to the cost to one's self, the issue of neutrality, whether the evaluation is conducted independently of any consideration of the good to the decision maker. The central significance of this process is that it moves from an act-centered ethical system like the Model Rules into an agent-centered system that focuses on the personal situation of the decision maker. That is a big step, although similar steps could be taken in many other directions, for example, by invoking utilitarian or other ethical systems. Nonetheless, this is the step we are taking and the process to which we allude to in the subsequent discussion of specific problem areas. Other ethical systems could as easily be substituted into the analysis, sometimes reaching the same and sometimes different ultimate conclusions on the propriety of particular actions.


Oil and gas, of course, is where it is found, and it is sometimes found in environmentally sensitive portions of the public domain that have been withdrawn from mineral leasing or other disposition under the public land laws. Occasionally, lawyers hesitate when asked to undertake efforts to open such areas to oil and gas exploration.

Flipping through the Model Rules provides no meaningful guidance in reaching such a personal decision. Model Rule 1.2(b) flatly states that "a lawyer's representation of a client . . . does not constitute an endorsement of the client's political, economic, social or moral views or activities," so the mere fact of representation does not impute the client's position to the lawyer. Model Rule 3.1 allows a lawyer to bring an action so long as there is a basis in law or fact that is not frivolous, with an express recognition that a good faith argument for extension, modification, or reversal of existing law is not a frivolous basis. If such good faith arguments are possible, the

[Page 12-4]

only guidance in the Model Rules is contained in Model Rule 1.7(a)(2), which requires that representation be declined when the lawyer believes the representation would be adversely affected by the lawyer's own interests. This notion is primarily directed toward business or familial interests, but certainly it is broad enough to extend to philosophical differences. If a lawyer may represent a client without such representation constituting an endorsement of the client's activities, then surely it must follow that the lawyer may disclose the difference of opinion and, after...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT