Oklahoma

In Naylor Farms, Inc. v. Chaparral Energy, LLC, the plaintiff royalty owners (collectively, Naylor Farms) contended that Chaparral systematically underpaid royalties on production from approximately 2,500 Oklahoma oil and gas wells by improperly deducting from royalty payments certain costs that the plaintiffs contended should have been borne solely by Chaparral under Oklahoma law. The district court granted Naylor Farms’ motion seeking certification of a class of royalty owners under Rule 23 of the Federal Rules of Civil Procedure. In the present proceedings, Chaparral has appealed the district court’s order granting class certification

Oklahoma Oil and Gas Update

The author reviews updates and developments to oil and gas law in Oklahoma

Oklahoma

The case of White Star Petroleum, LLC v. MUFG Union Bank, N.A. presented two questions of state law certified to the Oklahoma Supreme Court by the United States Bankruptcy Court for the Western District of Oklahoma: (1) Are the “trust funds” create[d] by Title 42 O.S. § 144.2, entitled “Creation and Appropriation of Trust Funds for Payment of Lienable Claims,” limited to obligations due nonoperator joint working interest owners, or do such funds include payments due [to] holders of mechanic’s and materialmen’s liens arising under and perfected by Title 42 O.S. § 144? (2) Does the Oil and Gas Owners’ Lien Act of 2010 grant an operator and non-operator working interest owner a lien in proceeds from purchasers of oil and gas which is prior and superior to any claim of the holder of a mechanic’s and materialmen’s lien asserted under Title 42 O.S. § 144? The above questions were certified to aid in the bankruptcy court’s resolution of two particular adversarial proceedings

Oklahoma

PenSa further argued that operating agreements imposed on Bays, as operator, a duty of good faith and fair dealing, which Bays violated. The court first recognized that, under Oklahoma law, the common law duty of good faith and fair dealing does not extend to the contractual relationship created by an operating agreement. However, the operating agreements at issue in this case expressly provided that the parties were obligated to act in good faith in their dealings with each other with respect to the activities under those agreements. Since the duty of good faith between the parties in this suit arose from the provisions of the contracts, the court concluded that PenSa\u27s cause of action was for breach of contract and not a tort claim. The court granted summary judgment against PenSa to the extent that it sought recovery in tort