LEGAL DEVELOPMENTS IN 2012 AFFECTING THE OIL AND GAS EXPLORATION AND PRODUCTION INDUSTRY
| Jurisdiction | United States |
Editor 1
McAfee & Taft
Oklahoma City, Oklahoma
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I. Alaska
A. Judicial Developments.
In Center for Biological Diversity v. Salazar,2 the Ninth Circuit Court of Appeals addressed challenges by environmental organizations to regulations issued by the U.S. Fish and Wildlife Service in 2008 that authorized incidental take of polar bears and Pacific walruses resulting from oil and gas exploration activities in the Chukchi Sea and on the adjacent coast of Alaska. The organizations argued that the regulations violated the Marine Mammal Protection Act, the Endangered Species Act, and the National Environmental Policy Act. The Ninth Circuit upheld the regulations, holding, in part, that "the Service permissibly determined that only 'relatively small numbers' of polar bears and Pacific walruses would be taken in relation to the size of their larger populations, because the agency separately determined that the anticipated take would have only a
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'negligible impact' on the mammals' annual rates of recruitment or survival."3
In Center for Biological Diversity v. U.S. Dep't of Interior,4 the D.C. Circuit Court of Appeals revisited a case in which it had, in 2009, vacated a five-year program that allowed for the expansion of leases for offshore oil and gas development in the Beaufort, Bering, and Chukchi Seas off the coast of Alaska, concluding that the Department of Interior's interpretation of section 18 of the Outer Continental Shelf Lands Act (OCSLA), 43 U.S.C. § 1344, was irrational. See Center for Biological Diversity v. U.S. Dep't of Interior.5 Following that decision, the Native Village of Point Hope, a plaintiff in the underlying litigation, petitioned for reimbursement of attorney's fees and costs pursuant to OCSLA's fee award provision, 43 U.S.C. § 1349(a)(5). The D.C. Circuit granted the petition in part, awarding more than $200,000 in fees and costs.
In Native Village of Kivalina v. ExxonMobil Corp.,6 the Ninth Circuit Court of Appeals affirmed the dismissal of a federal common law public nuisance action brought by the City of Kivalina, which is located on the tip of a barrier island on the northwest coast of Alaska, and the Native Village of Kivalina, a native Alaskan tribe, against multiple oil, energy, and utility companies. Kivalina had alleged that the companies' greenhouse gas emissions had resulted in global warming which in turn severely eroded the land upon which the village was situated. The court concluded that the Clean Air Act, along with the Environmental Protection Agency action that the Act authorizes, displaces Kivalina's claims, pursuant to the United States Supreme Court's 2011 decision regarding greenhouse gas emissions in American Electric Power Co. v. Connecticut.7
In Shell Offshore Inc. v. Greenpeace, Inc.,8 the U.S. District Court for the District of Alaska issued a preliminary injunction barring Greenpeace from tortiously or illegally interfering with Shell's Arctic exploration activities during the summer of 2012. The court held that Shell had "demonstrated by a preponderance of the evidence that it is likely that Greenpeace USA would intend to commit tortious or illegal acts against Shell's Arctic drilling operations in the absence of preliminary injunctive relief."9
In 2012, Shell also filed three lawsuits against a group of environmental organizations, asking the U.S. District Court for the District
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of Alaska to declare that a variety of federal authorizations for Shell's 2012 Arctic exploration operations had been properly issued (incidental harassment authorizations, oil spill response plan, incidental and intentional take authorizations).10 Shell acted pre-emptively, expecting that the environmental organizations would eventually be filing their own lawsuits challenging the federal authorizations. The environmental organizations moved to dismiss the lawsuits, arguing that there were not yet any challenges to be resolved. The district court denied the motions, allowing Shell's suits to proceed.
In State, Dep't of Natural Resources v. ExxonMobil Corp.,11 the State of Alaska and the working interest owners of the Point Thomson Unit on Alaska's North Slope settled their long-running dispute over the alleged lack of exploration and development within the Unit. Under the settlement agreement, the Unit remains intact (the Alaska Department of Natural Resources had previously attempted to terminate the Unit) and the working interest owners agreed to take new steps toward development that could result in production starting in 2016.12 The settlement resulted in the dismissal of both the Alaska Supreme Court and trial court litigation over the dispute. Shortly after the settlement and dismissal of the related litigation, one-time Alaska gubernatorial candidate Bill Walker asked the DNR to reconsider its approval of the settlement. The Alaska Attorney General rejected the request, explaining that the exercise of his broad authority to settle litigation is not subject to administrative review. Walker appealed this determination to the superior court, which agreed with the State and dismissed the appeal.13
In State v. BP Exploration (Alaska) Inc.,14 involving litigation relating to a 2006 oil spill on Alaska's North Slope, the parties entered into a Dispute Resolution Agreement which required the matter to be resolved by a three-member arbitration panel whose decision would be final, binding and non-appealable. The panel issued a $245 million arbitration award in favor of the State.15 In addition, BP will pay $10 million to settle civil assessments for the spills.
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B. Administrative Developments.
The Regulatory Commission of Alaska (RCA) approved the transfer of Koch Alaska Pipeline Company's ownership interest in the Trans Alaska Pipeline System (TAPS) to the three largest owners: BP Pipelines (Alaska) Inc., ConocoPhillips Transportation Alaska, Inc., and ExxonMobil Pipeline Company.16 This is the first time that a TAPS owner has unilaterally relinquished its interest pursuant to Article 8 of the TAPS System Agreement, thereby forcing the remaining owners to absorb the interest pro rata, as opposed to an owner transferring its interest pursuant to a private agreement with a buyer. According to the RCA's order approving the transfer, the owner of the smallest interest in TAPS, Unocal Pipeline Company, has also initiated a similar transfer of its interest.
II. Arkansas
A. Judicial Developments
Arkansas' Strohacker Doctrine controls whether particular substances, primarily oil and gas, were included within early instruments containing nonspecific grants or reservations of "minerals" or "mineral deposits." Here is a capsule summary of the doctrine, named for the case of Missouri Pacific Railroad Co. v. Strohacker.17 A generic mineral grant or reservation includes specific substances if, and only if, those substances were generally recognized, in legal and commercial usage, at the time and place of the grant or reservation, to be minerals.
The advent of the Fayetteville Shale Play, a natural gas development in counties without any prior history of exploration for oil or gas, has spawned new litigation, testing the meaning of the Strohacker Doctrine as applied to those counties. In Staggs v. Union Pacific Railroad Co.,18 the Arkansas Supreme Court held that by 1934, the year of the reservation in that case, oil and gas were regarded as minerals, statewide. The court inferred that the statewide date could be much earlier, citing its decision in Osborn v. Arkansas Territorial Oil & Gas Co.,19 in which the court stated that natural gas is a mineral.
Then, in Nicholson v. Upland Industrial Development Co.,20 the Arkansas Supreme Court dealt with a deed of February 16, 1903, under which St. Louis, Iron Mountain and Southern Railway Company, the
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deed's grantor, reserved "all coal and mineral deposits." The case involved White County lands, where there was no leasing or exploration for oil or gas as early as 1903 and, no successful oil and gas operations until very recently. However, the grantor's successor in interest proved, through the expert testimony of a history professor, that beginning around 1900, there was frequent mention of oil and gas operations elsewhere in newspapers circulated throughout White County. That proof was relied upon by the trial court in its decision that, by 1903, in the area including White County, it had become general knowledge that oil and gas were minerals. The Arkansas Supreme Court affirmed, concluding that the trial court's decision was not clearly against the preponderance of the evidence. The appellants, who were the owners of the surface and of those minerals not reserved to the railroad, argued unsuccessfully that actual leasing or drilling activities were required to trigger inclusion of oil and gas into the generic term, "minerals." They also contended that evidence of such activities must be limited to White County. The court disagreed, taking the broader view that the "area where the instrument is executed" includes, at least, surrounding counties.
In May v. Akers-Lang,21 royalty owner taxpayers raised constitutional claims in their challenge to Arkansas' method of imposing ad valorem taxes on the assessed value of their producing mineral interests. The court affirmed the denial of the taxpayers' constitutional claims as lacking substance. However, it dismissed a claim challenging the assessor's appraisal methodology only for procedural reasons, finding that taxpayers are first required to challenge specific valuations by the counties' equalization boards.
In Walls v. Humphries,22 Humphries entered into an unrecorded contract to...
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