Parties often strike this entire provision, so as to omit the granting of any preferential rights to purchase under the JOA. jQuery("#footnote_plugin_tooltip_18").tooltip({ tip: "#footnote_plugin_tooltip_text_18", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); how the parties will handle title examination and title issues, [19]Form 610-1989, Article IV. Patrick H. Martin and Bruce M. Kramer, Williams & Meyers, Oil and Gas Law Abridged Fifth Edition, §503.2 (LexisNexis Matthew Bender 2013). jQuery("#footnote_plugin_tooltip_4").tooltip({ tip: "#footnote_plugin_tooltip_text_4", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); However, the entire dry-hole risk is borne by this operating cotenant, who must also account to the other cotenants for their share of production, less their proportionate share of the cost of drilling for, producing and operating the property. Connecticut 8. Most oil and gas fields on the UK continental shelf (UKCS) are jointly owned by several companies and the JOA sets out the shares of those co-venturers. Austin strives to find practical business solutions to complex issues, but if necessary, he works hard to implement effective strategies in the courthouse. It is one of the most important and commonly used agreements in the oil and gas industry. 2012). This document is a template for a Joint Venture Agreement between two businesses. The best advice I have here is that you cannot rely entirely on the cover page. Oil Gas & Energy L 202 (2013). This document is perfect for limited liability companies (LLC) as it includes rules, regulations, and provisions that help administer the internal operations of the business so that it’s appropriate for the business owner’s needs. However, I have seen this result in competing interpretations of the lease: the lessor arguing that striking this language sufficiently demonstrates that the parties intended to expressly exclude preparatory activities from the definition of “drilling operations,” while the lessee argues that this merely demonstrates that the parties intended to resort to the judicially established definition of “drilling operations” as indicated by Anderson v. Hess and its progeny. What rights and obligations do these cotenants owe one another in their exploration and development activities? Missouri 26. 2012). FORM 610 - MODEL FORM OPERATING AGREEMENT - 1989 . The paper examines the Joint Operating Agreement (JOA) with a view to ascertaining the purposes of sole risk and non-consent clauses in JOA and their incompatibility or otherwise with the joint objectives of the agreement. The parties may hold leases that cover various undivided interests in a single tract of land, or they may own leasehold interests in nearby tracts of land and wish to pool their interests together in order to drill a well. All for free! One common example I have encountered this type of ambiguity, while outside the JOA context, is in North Dakota oil and gas leases. For example, several sections contain blanks where the parties are expected to negotiate terms and fill in the corresponding blank in the JOA. in Joint Operating Agreements The AAPL Form 610 Model Form Operating Agreement is by far the most commonly used joint operating agreement in the oil and gas industry, to the point, in my opinion, that any other proposed joint operating agreement should immediately be suspect. JOA are common both in the United Kingdom Continental Shelf (UKCS) and globally. jQuery("#footnote_plugin_tooltip_1").tooltip({ tip: "#footnote_plugin_tooltip_text_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); A JOA provides the contractual basis for the cooperative exploration, development, and production of oil and gas properties among multiple leasehold cotenants. It exempted newspapers from … This allows for quick access to information at a glance for operations teams, as well as acquisition and divestiture teams. North Dakota 35. Texas Supreme Court Tackles the Issue in Two Recent Cases, The Basics – Purpose of a Joint Operating Agreement, Compare Industry Expectations with the Existing Legal Precedent, New Definition – Horizontal Rig Move-On Period, Extensions to the Horizontal Rig Move-On Period, Obtaining Consent to Use of Spudder Rigs after the Well Proposal, Failure to Meet the Horizontal Rig Move-On Period, Casing Point Elections in the Vertical Context, Operations without Execution of All Parties, Background and Operations under the 1989 Form, New “Other Provisions” Included in the Form, Drafting Considerations Regarding Spudder Rigs, Requirements Regarding Specifying Horizontal Rig Move-On Period, Reserves Behind the Pipe as to Spudder Rig, Potential Modifications to Heightened AFE Requirements, Non-Operator Access to Information – “Wait and See”, Maintenance of Uniform Interest Provision. Virtual mergers are intended to unify operations to achieve cost efficiencies 3 Ernest E. Smith & Jacqueline L. Weaver, Texas Law of Oil and Gas §17.1[A] (2d ed. Many practitioners believe that no deal is truly complete if each Exhibit is not included. • can be: co-lessees of pooled mineral interests. Michigan 23. 4. Don’t be surprised to see a JOA that purports to cover the _____ well, but then later find out it also covers a broader Contract Area including other wells. Perhaps one of the most common places this is found is within the pref right provision found in Article VIII.F. The agreement also details the way in which they will work together to operate the asset, share and account for costs and … This Contract Operating Agreement (this “Agreement”), dated as of May 8, 2014 (the “Effective Date”), is made by and between Sanchez Oil & Gas Corporation, with offices at 1111 Bagby Street, Suite 1800, Houston, TX 77002 (“Operator”), and Constellation Energy Partners LLC, with offices at 1801 Main Street, Suite 1300, Houston, TX 77002 (“Owner”, and together with Operator, each a “Party” … [1]Scott Lansdown, B. Reeder v. Wood County Energy LLC and the Application by Texas Courts of the “Exculpatory Clause” in Operating Agreements Used in Oil and Gas Operations, 8 Tex. Delaware 9. However, the entire AAPL JOA form is predicated on the parties choosing only one option in Article VI.B.1. We keep clients and subscribers updated on case law alerts and insightful articles. All Rights Reserved. Does striking a provision exhibit an intent to merely omit the stricken terms, or does this evidence that the parties had the opposite intent from that of the stricken terms? DISCLAIMER: The information in this article is for general information purposes only. Austin strives to find practical business solutions to complex issues, but if necessary, he works hard to implement effective strategies in the courthouse. jQuery("#footnote_plugin_tooltip_1").tooltip({ tip: "#footnote_plugin_tooltip_text_1", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); Parties occasionally strike from their leases any definition of “drilling operations” that includes this mere preparatory work. Oil Gas & Energy L 202 (2013). 1-2 . Exhibit “D,” which identifies the Insurance requirements; Exhibit “E,” which is a Gas Balancing Agreement. Exhibit “A,” which identifies the lands, division of working interest ownership, interests subject to the agreement, and addresses of the parties. All for free! in Primers and Insights. Exhibit “G,” which is a Tax Partnership, if the JOA Parties elect to utilize a tax partnership. One of the many plans and paperwork businesses need is a business operating agreement. Corporation Bylaws and LLC Operating Agreements When you own a corporation, you should have bylaws to explain the regulations and rules that direct your operation. Joint operating agreements (JOAs) are well-accepted standard agreements in the oil and gas industry which regulate the relationship between the parties to a joint venture: the operator and the non-operator. The best advice I have here is that you cannot rely entirely on the cover page. One common example included is a Memorandum of Operating Agreement and Financing Statement. Montana 27. Texas Supreme Court Tackles the Issue in Two Recent Cases, 15 sections of standard provisions labeled as “articles,”, An article designed exclusively for custom provisions, and. Introduction to Joint Operating Agreements, Strip and Gores Doctrine Extends Conveyance to Include Adjacent Severed Mineral Interest, Can Emails Form a Purchase Contract? The standard Form 610 establishes a contractual basis for these multiple leasehold cotenants to operate the properties, jointly share costs and liabilities, and own equipment and production in proportion to their respective percentage of ownership and burdens. Apparently this was done under the presumption that the parties wanted all associated authorities for expenditure (“AFEs”) to include all cost figures including completion costs, but they still wanted to allow for a casing point election. Nevada 29. jQuery("#footnote_plugin_tooltip_3").tooltip({ tip: "#footnote_plugin_tooltip_text_3", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); Several other JOA forms have been adopted by the oil and gas industry, typically designed for use in specific circumstances, including (1) the Model Form of Offshore Operating Agreement AAPL Model Form 710-2002, and Model Form of Offshore Deepwater Operating Agreement AAPL-810 (2007), both designed for offshore oil and gas operations, (2) the Rocky Mountain Mineral Law Foundation Rocky Mountain Unit Operating Agreement Form 2 – Divided Interest, designed for use in Federal Exploratory Units, and The American Petroleum Institute Forms, which are generally used for enhanced recovery operations as to fieldwide units. The nature of Oil and Gas An operating agreement for corporation is a document similar to bylaws that limited liability companies (LLCs) use. Exhibit “H” and onward, which are limited only by the imagination. Ohio 36. Miss. The joint venture agreement is typically the primary governing document for the applicable joint venture entity, such as an operating agreement for a limited liability company or a partnership agreement for a In Texas, any of the cotenants may drill for and produce oil and gas without the consent of the other cotenants. Supported by CMS Cameron McKenna. jQuery("#footnote_plugin_tooltip_11").tooltip({ tip: "#footnote_plugin_tooltip_text_11", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); However, a joint operating agreement will provide these parties with a structure to handle future disputes, unanticipated differences, and points of contention that frequently develop. This article should not be substituted for legal advice and should not be taken as legal advice for any individual case or situation. 2010). Note: When choosing facebook or google, alerts will be sent to the email listed in that account. jQuery("#footnote_plugin_tooltip_10").tooltip({ tip: "#footnote_plugin_tooltip_text_10", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); In each of these scenarios, the parties involved will likely share common fundamental goals, and their respective interests are more or less aligned. You are encouraged to contact an attorney for legal advice concerning the information provided in this article. Typically a provision at the beginning of Article XVI will provide that, in the event of conflict between Articles I-XV, and Article XVI, then Article XVI is to control. The CD also includes a PDF of the user guidance notes and short form accounting procedures that have been produced in association with the Oil Industry Finance Association (OIFA). jQuery("#footnote_plugin_tooltip_12").tooltip({ tip: "#footnote_plugin_tooltip_text_12", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); For the reasons described above, a JOA is typically entered into when more than one party holds title to the oil and gas leasehold estate in a prescribed geographical area. L. Inst. Exhibit “C,” which identifies the accounting procedure the Parties agree to use. In this multi-part series, we will explore many areas of JOAs, from basic to advanced. It sets the guidelines/modalities for running the operations. in Primers and Insights. Operating Agreement, INSTITUTE ON THE OIL AND GAS JOINT OPERATING AGREEMENT at 1-1 to 1-2, (Rocky Mountain Mineral Law Foundation, May 1990). Common law principles are, unfortunately, not sufficiently clear as to which costs the operating cotenant is entitled to recover from the non-operating cotenants. Resources, Ltd., 775 F. Supp. [20]Form 610-1989, Article VIII. Posted by: Austin Brister Maryland 21. Michael E. Curry, The Operating Agreement – After the Honeymoon, State Bar of Texas, 31st Ann. Often times, oil and gas lessees will desire to include other parties in the exploration and development projects in order to share risks and raise capital. This provision shall be self-operating and no further action need be taken by the person or entity acquiring such ownership interest. Meridian Press 2000). investors who are participating in a promoted prospect for the first time. The joint venture established pursuant to this Agreement shall not be considered to be a company, cf. The agreement consists of a main part – Special provisions – and two attachments; Attachment A – Joint Operating Agreement and Attachment B – Accounting Agreement. Due to differences in industry practices, standards, laws and customs, AIPN drafting committees are composed of a broad-based group of practitioners and negotiators who work together to develop a balanced and comprehensive model contract, using options and … 1.1 Formation.On [DATE OF FORMATION], the articles of organization of the Company (“Articles of Organization”) were filed in the office of the Secretary of State of [STATE] in accordance with and pursuant to the Act. However, the AAPL Model Form 610 remains the most common JOA form for domestic onshore oil and gas production. Resources, Ltd., 775 F. Supp. The AAPL JOA contains 15 standard Articles covering a variety of critical aspects of joint operations. Several placeholders for exhibits which parties may identify. The Joint Venture shall be considered a joint venture between the Parties in all respects, and in no event shall this Agreement be construed to create a partnership or any other fiduciary relationship between the Parties. J. [3]3 Ernest E. Smith & Jacqueline L. Weaver, Texas Law of Oil and Gas §17.1[A] (2d ed. Be able to customize legally compliant business document… Hill v. Heritage Res., Inc., 964 S.W.2d 89, 109 (Tex.App.-El Paso 1997, pet. The Fractionalized Nature of Leasehold Ownership, The Rights of Leasehold Cotenants Without a JOA. This information is not intended to create, and receipt or reading this article does not constitute, an attorney-client relationship. Oil, Gas & Min. the joint operating agreement • a joint operating agreement (joa) is usually entered into after period of negotiation among the participants. Exhibit “F,” which is typically a Non-Discrimination and Certification of Non-Segregated Facilities. Benefit. (Apr. This article should not be substituted for legal advice and should not be taken as legal advice for any individual case or situation. Basically, this is when two separate parties agree to work on a single business project or business activity. One such set pertains to updating the 1989 JOA to adequately address horizontal drilling operations. 2005). Florida 10. Oil & Gas UK is to launch the new industry standard Joint Operating Agreement (JOA) at a seminar in Aberdeen today. Oklahoma 37. Arizona 4. jQuery("#footnote_plugin_tooltip_16").tooltip({ tip: "#footnote_plugin_tooltip_text_16", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); The Form 610 covers a multitude of other matters, [17]Williams & Meyers, supra note 4, at §503.2 jQuery("#footnote_plugin_tooltip_17").tooltip({ tip: "#footnote_plugin_tooltip_text_17", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); including how the interests of the parties are to be calculated, [18]Form 610-1989, Article III. Maine 20. John Orban, Money in the Ground: Insider’s Guide to Oil and Gas Deals (4.4th ed. Join more than 2,000+ in-house attorneys and landmen who receive our occasional alerts and summaries. jQuery("#footnote_plugin_tooltip_22").tooltip({ tip: "#footnote_plugin_tooltip_text_22", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); Here is a table of contents of what I have already written, and will be publishing piece by piece to the OilandGasLawDigest.com: Austin represents oil and gas exploration and production companies and landowners in a wide variety of complex commercial litigation matters, including contract and property disputes, royalty disputes, breach of lease cases, lease termination/perpetuation disputes, and an array of other issues in the upstream oil and gas sector. DISCLAIMER: The information in this article is for general information purposes only. New Mexico 32. denied); Patrick H. Martin and Bruce M. Kramer, Williams & Meyers, Oil and Gas Law Abridged Fifth Edition, §503 (LexisNexis Matthew Bender 2013). All Rights Reserved. Perhaps you were hoping for more here, but it’s just a cover page! Joint Operating Agreement Any contract, agreement, Joint Venture, or other arrangement entered into by two or more businesses in which the operations and the physical facilities of a failing business are merged, although each business retains its status as a separate entity … Indiana 15. Oregon 38. jQuery("#footnote_plugin_tooltip_20").tooltip({ tip: "#footnote_plugin_tooltip_text_20", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); Under a JOA, the leasehold cotenants appoint one party as “operator,” who is then has full control of conducting and directing all operations in the contract area, under the confines of the JOA. As stated above, one method parties often use to modify the form JOA to better meet their specific deal terms is to strike certain provisions of the JOA they do not wish to appear in their customized agreement. jQuery("#footnote_plugin_tooltip_14").tooltip({ tip: "#footnote_plugin_tooltip_text_14", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); a voting mechanism for specifying future subsequent operations, [15]Form 610-1989, Article VI.A. The Relationship Under a Joint Operating Agreement. The Joint Operating Agreements (JOA) is the basic, standard agreement between the NNPC and the operators. The standards focus on important patient, individual, or resident care and organization functions that are essential to providing safe, high quality care. The joint venture formed by this Agreement (the “Joint Venture”) will conduct its business under the name [JOINT VENTURE NAME], and will have its registered address at [ADDRESS]. Kansas 17. California 6. In North Dakota, the definition of “drilling or reworking operations” has been liberally construed to include certain types of mere preparatory work that may occur months prior to the actual spudding of a well. Alaska 3. © Copyright 2012-2018, McGinnis Lochridge LLP. Note: When choosing facebook or google, alerts will be sent to the email listed in that account. 2005). Iowa 16. [13]Hill v. Heritage Res., Inc., 964 S.W.2d 89, 109 (Tex.App.-El Paso 1997, pet. The foundational legal context for joint operations is the "property" The TOC to the JOA is well organized with each Article specifying one major area of joint operations that calls for special attention and understanding. jQuery("#footnote_plugin_tooltip_9").tooltip({ tip: "#footnote_plugin_tooltip_text_9", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); Additionally, one of the most common methods of spreading the costs and risks of exploration, drilling a development is by selling or “farming out” undivided fractional leasehold interests in the oil and gas properties. Come Big or Stay Home, LLC v. EOG Resources, Inc. Seagull Energy E & P, Inc. v. Eland Energy, Inc. 1. jQuery("#footnote_plugin_tooltip_8").tooltip({ tip: "#footnote_plugin_tooltip_text_8", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); For example, many of the ongoing methods of raising money for the exploration and development of oil and gas properties involves the purchase and sale of undivided interests in the leasehold estate to investors. As we examined in my previous article covering the “new” AAPL Horizontal JOA, most of these typical additional provisions have been implemented directly into one version of the AAPL JOA form itself. Exhibit “B,” which identifies a Form Lease to be used if any of the JOA Parties own a mineral interest within the Contract Area. "If the Joint Operating Agreement forms an alliance similar to a marriage, it is likely to have 16 parties: four richer, four poor, four better, and four worse. [4]Patrick H. Martin and Bruce M. Kramer, Williams & Meyers, Oil and Gas Law Abridged Fifth Edition, §503 (LexisNexis Matthew Bender 2013). © Copyright 2012-2018, McGinnis Lochridge LLP. The 15 standard Articles in the JOA have variables that must be identified by the parties. jQuery("#footnote_plugin_tooltip_19").tooltip({ tip: "#footnote_plugin_tooltip_text_19", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); and several issues related to future acquisitions and/or dispositions within the contract area. In Introduction to Joint Operating Agreements, we reviewed several of the critical roles the Joint Operating Agreement plays within the oil and gas industry. Alabama 2. including a joint operating agreement, a partnership agreement, articles of incorporation, bylaws, a code of regulations, or management contracts. There are several sets of “Example Article XVI Provisions” floating around on the internet. [7]Id. The standard Form 610 establishes a contractual basis for these multiple leasehold cotenants to operate the properties, jointly share costs and liabilities, and own equipment and production in proportion to their respective percentage of ownership and burdens. Miss. The Joint Commission’s state-of-the-art standards set expectations for organization performance that are reasonable, achievable and surveyable. jQuery("#footnote_plugin_tooltip_7").tooltip({ tip: "#footnote_plugin_tooltip_text_7", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); However, this is not to say that leasehold cotenants always have competing interests. Considered in conjunction with the various `` standard '' Operating Agreement – After Honeymoon... Joa with both boxes checked in article VIII.F have here is that you can rely. Come to be a helpful tool, it is not the heart of JOA! Aspects of Joint operations is designed to identify the properties or prospect covered, as well as acquisition divestiture! Is that you can not rely entirely on the cover page of the JOA itself from to. Ground: Insider ’ s just a cover page will be considered in conjunction with the various `` standard Operating. For corporation is a document similar to bylaws that limited liability partnerships ( the Act... Article VI.B.1 for the first steps to understanding the JOA has come to be a company, cf any person! Deals ( 4.4th ed what rights and obligations do these cotenants owe one another in exploration. Typically concurrently owned by numerous cotenants owe one another in their exploration and development activities with boxes! Agreement affiliation is not a true merger, it is not the heart of the may., which are limited only by the parties choosing only one option in VI.B.1. Joa have variables that must be identified by the person or entity should acquire 100 % undivided interest in United. Choosing facebook or google, alerts will be sent to the email listed that... Designed to identify the properties or prospect covered, as well as acquisition and divestiture teams be.! Example, several sections contain option boxes that can be: co-lessees of pooled mineral interests ( ed. Finally, the entire AAPL JOA contains 15 standard Articles covering a of! The initial operator is the basic, standard Agreement between the NNPC and operators... Learned of parties coming to a dispute under a JOA with both boxes checked in article VI.B.1 to! Finally, the Operating Agreement affiliation is not included v. Hess Corp.,, 733 F. Supp once have! The basic purpose and function of a JOA to identify the properties or prospect covered, as well as initial. Of oil and gas §17.1 [ a ] ( 2d ed in United. For operations teams, as well as the initial operator Deals ( 4.4th ed JOA parties elect to a! Article does not constitute, an attorney-client relationship ( JOA ) at a in... One such set pertains to updating the 1989 JOA to adequately address horizontal drilling operations,. The other cotenants template for a Joint Operating Agreement ( JOA ) at a glance for operations,! Receipt or reading this article Leasehold estate in undivided fractional shares of those oil and gas.! The TOC can be: co-lessees of pooled mineral interests it ’ s just a cover page of other! The result is that any given oil and gas without the consent the. Fractional shares of those oil and gas production federal courts here, but it ’ s just cover! Have evolved through the years ) Section 1-1 fourth paragraph, or may merely supplement these provisions expressly. Reasonable, achievable and surveyable is the basic, standard Agreement between two businesses in Aberdeen today an... Sent to the JOA have variables that must be identified by the person or acquiring. Res., Inc. Seagull Energy E & P, Inc., 964 89! Series, we will explore many areas of JOAs, from basic to advanced the imagination the! Certification of Non-Segregated Facilities Agreement - 1989 is predicated on the cover page template for Joint.