XXI Oil & Gas, LLC v. Hilcorp Energy Co.
206 So. 3d 885
| La. Ct. App. | 2016Background
- Hilcorp recompleted the Trahan No. 1 unit well (production began Jan. 11, 2011); XXI acquired mineral leases covering 21.0646257% of the unit in Feb. 2011.
- XXI sued Hilcorp (Sept. 2011) under La. R.S. 30:103.1 and 30:103.2 for failure to provide a sworn, detailed, itemized costs statement and required quarterly reports.
- Trial court denied Hilcorp's exception of no cause of action; this court previously affirmed that Hilcorp breached §30:103.1 and that §30:103.2 forfeiture is the remedy (XXI Oil & Gas, LLC v. Hilcorp Energy Co.).
- Bench trial produced stipulations of unit revenues ($1,743,355.49) and leases; trial court awarded XXI penalties of $367,231.30 (XXI's 21.0646257% share of revenues) under §30:103.2.
- Hilcorp appealed, arguing (1) the statutes do not apply to mineral lessees, (2) “costs of the drilling operations” excludes post‑production costs, (3) it provided required quarterly reports, and (4) XXI’s leases are invalid or Hilcorp may attack them.
Issues
| Issue | Plaintiff's Argument (XXI) | Defendant's Argument (Hilcorp) | Held |
|---|---|---|---|
| Applicability of La. R.S. 30:103.1/.2 to mineral lessees | Lessees of unleased portions have standing to demand reports; prior appellate rulings support this | Statutes apply only to owners of unleased interests, not to mineral lessees; federal decision argued otherwise | Court applied law-of-the-case: statutes apply to lessees here; prior appellate rulings bind and federal opinion not controlling; Hilcorp liable |
| Scope of “costs of the drilling operations” (pre‑ vs post‑production) | Forfeiture should include both pre‑ and post‑production (drilling, completing, equipping, operating) | Term should be strictly construed to mean only pre‑production drilling/completion costs | Majority: reading §30:103.1 and §30:103.2 together shows drilling operations includes drilling, completing, equipping and operating costs (pre and post). Dissent would limit to pre‑production only |
| Requirement to provide sworn quarterly reports | XXI: Hilcorp failed to provide sworn, detailed, itemized initial and quarterly reports after demand | Hilcorp: argued it did provide or was not subject to quarterly reporting as applied | Court: previously held Hilcorp submitted an unsworn statement and failed to comply; no evidence of sworn quarterly reports — penalty applies |
| Validity of XXI’s recorded leases and burden to attack them | XXI: recorded leases entitled to presumption of validity; party attacking leases must prove invalidity | Hilcorp: contends XXI failed to show lessors owned interests or proper authority (succession administrator authority; trustee issues) | Court: burden on Hilcorp to prove lease invalidity; Hilcorp lacks standing to collaterally attack executed leases here; trial court correctly found leases valid |
Key Cases Cited
- Pumphrey v. City of New Orleans, 925 So.2d 1202 (La. 2006) (rules and principles for statutory interpretation and legislative intent)
- Shell Oil Co. v. Secretary, Department of Revenue and Taxation, 683 So.2d 1204 (La. 1996) (state courts are not bound by federal decisions on state‑law interpretation)
- Menoah Petroleum, Inc. v. McKinney, 545 So.2d 1216 (La. Ct. App. 1989) (burden on party attacking recorded mineral lease to prove invalidity)
- Katie Realty, Ltd. v. Louisiana Citizens Property Ins. Corp., 100 So.3d 324 (La. 2012) (canons for statutory construction; penal statutes strictly construed)
- White v. Phillips Petroleum Co., 232 So.2d 83 (La. Ct. App.) (treats penalty as covering drilling and operating costs in prior appellate consideration)