Legal Memorandum: Operation of Wells and Minerals Leases in LA

Issue: Under La. Rev. Stat. 31:177, is a party’s claim estopped if it cannot prove that a another party consented to the operation of wells under a minerals lease?

Area of Law: Environmental Law
Keywords: Minerals lease; Co-owner consent; Operation of wells
Jurisdiction: Louisiana
Cited Cases: 78 So. 2d 829; 165 So.2d 905
Cited Statutes: La. Rev. Stat. § 31:177; La. Rev. Stat. § 31:171; La. Rev. Stat. § 31:176; La. Rev. Stat. § 31:175; La. Rev. Stat. § 31:173; La. Civ. Code § 4
Date: 12/01/2013

La. Rev. Stat. § 31:177 provides:

A co-owner of the lessee’s interest in a mineral lease may not independently conduct operations or, except as provided in this article and Article 171, deal with the interest without the consent of his co-owner.  He may act to prevent waste, destruction, or termination of the lease and to protect the interest of all, but cannot impose upon his co-owner liability for any costs or expenses except out of production.

While not particularly clear, Article 177 establishes the basis upon which a co-owner of the lease may conduct operations.  First, Article 177 requires the consent before a co-owner may operate the wells.  In that respect, an affirmative defense of estoppel is arguably correct.  However, Article 177 establishes two exceptions to the consent requirement.  A co-owner may nonetheless operate the wells “to prevent waste, destruction, or termination of the lease and to protect the interest of all” and as allowed by Article 171, which is inapplicable under these circumstances.  If the co-owner operates under either of these exceptions, e.g. without consent but for a purpose allowed by Article 177, the co-owner may recover its operating expenses only out of production.  This understanding is supported and demonstrated in the Comment to Article 177 and other Articles of the Mineral Code.

As referenced above, the “out of production” limitation on an operator’s recovery of a portion of its operating expenses applies only when the operating party operates without the consent of […]

Subscribe to Litigation Pathfinder

To get the full-text of this Legal Memorandum ... and more!

(Month-to-month and annual subscriptions available)