What's New in Exploration

It was bound to happen—exploration litigation for everyone. Do you have some emotion about an experience with your former employer or partners? Were you dragged out of your corporate chair somewhere? Were you promised a bonus pay-out if you “helped” find new oil or gas? While behavior today is better than in the “there will be blood [for oil]” days, don’t expect an apology from anyone.

Here is recent correspondence from an attorney, who has been running an ad in the AAPG Explorer:

I love representing little guys in the oil and gas business. What I see mostly is that geo’s don’t adequately document their deals, and often wait too long to try and correct things. I think a lot more geo’s end up getting cheated out of what is rightfully due them, than what actually complain. In Marlin v Cobra, which I tried to verdict in Brazoria County, the jury was very receptive to the generating geologist and awarded over $5 million in damages against the company that failed to honor his confidentiality agreement. 

Geo’s are often reluctant to come forward and pursue their rights ... A couple of years ago, a geo saw my ad and came to me with a complaint that he thought a well had been drilled too close to his property some 15 years past. After checking it out, he was right—the well was 67 ft too close to the property line. Despite the time lag, we were still able to get a $1.35 million settlement on verge of trial. I’ve also been successful in a variety of different disputes involving not only geo’s, but landmen, who had disputes involving ORRI.

When I was a V.P. at PGS, in geophysical processing, we were constantly involved in suits regarding who did what to whom, and when. Them vs. us, or us vs. them. We had in-house council, and he always brought in out-of-house counsel, who brought in outside experts. We would gather in a conference room to discuss the alleged grievance—our science guys and/or programmers, me and the legal crowd.

Repeatedly, I would have to translate programmer speak, or geo-speak, into English and common legal terms. White board time was used to show a tiny variance in an Eigen vector term or some such abbreviated C-code term. Lawyers were paid big time just to sit there and take notes on something barely understandable. We, or our complainant, always settled out of court, based on how much was earned on whatever was in litigation vs the cost to continue litigation, or of taking the risk of losing in front of a jury.

No one wanted to sit a jury in the 5th Circuit of East Texas [http://www.txed.uscourts.gov/court-locator]. Yes, that is the federal court for most patent infringement claims coming from Houston. Or you could just go straight to the 13th Circuit in Washington, D.C. Imagine explaining eikonal equations to a jury of your peers in Marshall, Texas, or even in your own oil company.

So, what’s the point? Big guy or little guy, everything you do in exploration has a legal upside or downside. Everything. Ask BP—no don’t. Ask Shell about their Arctic adventures. Where did they get stalled or stopped—Courts? Bureaucrats? You should realize that the EPA has its own arbitration court system, for its own regulations that it created! Regulations have the force of real law, and government has gazillions of lawyers to access its favored federal courts [https://www.epa.gov/enforcement/enforcement-basic-information]. Congrats to the recent attempt by the Trump administration to cut regulatory budgets!

What is new but should not be? Follow advice from the attorney who advertised, and paper early what you do, or want to do, in exploration. Document, document, document. What does a memo or document do? Nothing, by itself. It is merely evidence. It does not grant a legal right, no matter the language, if you do not intend to enforce it. No one will come to your rescue—no government, no friend, and no one not already financially at risk. I know two prominent attorneys, one in private practice, and one at an oil company, who both had successful careers as geologists and geophysicists. They would likely tell you the same. Yes, I admit that I also have a law degree.

Contracts and patents only grant the right to enforce a right. Example: Texaco, years ago, had a written contract for exploration with the Nigerian government, with what could be called a hefty up-front buy-in. When a new president came to power, that paper was worthless. Texaco was morally, legally and technically in the right, but the oil was still in Nigerian waters and under their control. A new exploration, and now production, agreement was reached, and another large buy-in occurred. Does anyone think that the World Court could enforce either contract? The patent battle among the geos with Amoco [BP] over coherence seismic technology is well-known, including commercial work-arounds. The courts found more strength in the “trade name” than they did in programming digits. So, you think that you can enforce your IP rights in China? Really?

We used to think we could not, or should not, sue over affronts like these. That was not considered professional, litigation was for losers, and it was expensive. Admittedly, I do not tell lawyer jokes anymore, but that does not excuse avoiding using attorneys to stand up for yourself, and your ideas, company and profession. We are now regulated, with a strong effort made to punish non-licensed participants or offending members. We have allowed ourselves to be put into what appears as an ever-decreasing small box. Maybe that was partially from outside public pressure, and partially from unethical practitioners. However, what attaches itself to your career may leave you “frac’d.” Do not let that happen to you. 

About the Authors

William (Bill) Head

Contributing Editor

William (Bill) Head is a technologist with over 40 years of experience in U.S. and international exploration.