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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 … "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. Posted by: Austin Brister These owners then execute oil and gas leases to multiple lessees, who then own the associated leasehold estate in undivided fractional shares. One common example included is a Memorandum of Operating Agreement and Financing Statement. We keep clients and subscribers updated on case law alerts and insightful articles. We keep clients and subscribers updated on case law alerts and insightful articles. California 6. There are several sets of “Example Article XVI Provisions” floating around on the internet. 969, 971-72 (S.D. [11]Michael E. Curry, The Operating Agreement – After the Honeymoon, State Bar of Texas, 31st Ann. Finally, the parties must prepare the main governing document to administer the joint venture—the joint venture agreement itself. 2005). For example, parties typically strike the preferential right to purchase provision (“pref right”), and in doing so typically strike the pref right from the TOC as well. New Hampshire 30. 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. in Primers and Insights. In this first article, we will take a look at the basic purpose and function of a JOA. jQuery("#footnote_plugin_tooltip_2").tooltip({ tip: "#footnote_plugin_tooltip_text_2", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); By and large, the most commonly used JOA form is the “Form 610,” curated and published by the American Association of Professional Landmen (“AAPL”). Termination. Be able to customize legally compliant business document… jQuery("#footnote_plugin_tooltip_15").tooltip({ tip: "#footnote_plugin_tooltip_text_15", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); and how the costs for all such operations are to be paid. Georgia 11. 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. Michigan 23. However, the entire AAPL JOA form is predicated on the parties choosing only one option in Article VI.B.1. 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. An operating agreement for corporation is a document similar to bylaws that limited liability companies (LLCs) use. Note: When choosing facebook or google, alerts will be sent to the email listed in that account. The best advice I have here is that you cannot rely entirely on the cover page. Article XVI in the 1989 Form is labeled “Other Provisions” and is designed to allow the parties to insert their own custom provisions into the form. Oil, Gas & Min. In Introduction to Joint Operating Agreements, we reviewed several of the critical roles the Joint Operating Agreement plays within the oil and gas industry. [9]Id. 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. Typos and oversights can and do happen. One common example I have encountered this type of ambiguity, while outside the JOA context, is in North Dakota oil and gas leases. 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 AAPL JOA contains 15 standard Articles covering a variety of critical aspects of joint operations. JOA are common both in the United Kingdom Continental Shelf (UKCS) and globally. 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. Join more than 2,000+ in-house attorneys and landmen who receive our occasional alerts and summaries. Posted by: Austin Brister Basically, this is when two separate parties agree to work on a single business project or business activity. Miss. 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. 1991). These standard documents have been prepared in two different versions depending on whether the State has or has not retained a participating interest in the relevant production licence. Alabama 2. The best advice I have here is that you cannot rely entirely on the cover page. 1.2 Name and Place of Business.The name of the Company shall be [COMPANY NAME] LLC, and its principal place of business shall be [ADDRESS]. A.A.P.L. 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). This information is not intended to create, and receipt or reading this article does not constitute, an attorney-client relationship. 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. 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. Resources, Ltd., 775 F. Supp. will be considered in conjunction with the various "standard" operating agreement forms that have evolved through the years. 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. North Carolina 34. Kentucky 18. Exhibit “A,” which identifies the lands, division of working interest ownership, interests subject to the agreement, and addresses of the parties. 1. 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. This provision shall be self-operating and no further action need be taken by the person or entity acquiring such ownership interest. Of course, no overarching general rule can be given, as this is an issue that must be considered against each Article XVI provision. 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. It exempted newspapers from … Patrick H. Martin and Bruce M. Kramer, Williams & Meyers, Oil and Gas Law Abridged Fifth Edition, §503.2 (LexisNexis Matthew Bender 2013). Delaware 9. FORM 610 - MODEL FORM OPERATING AGREEMENT - 1989 . 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. (Apr. For this reason, one should not be surprised if the party “on the other side of the table” becomes confused when a terms sheet discussion turns to “Article XVI provisions.”. Michael E. Curry, The Operating Agreement – After the Honeymoon, State Bar of Texas, 31st Ann. 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” … 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. 2012). These lessees then often assign undivided fractional shares of those oil and gas leases to third 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. The JOAjoint operating agreement generally provides for one of the parties to act as the operator for the parties on the joint area covered by the JOAjoint operating agreement. Exhibit “F,” which is typically a Non-Discrimination and Certification of Non-Segregated Facilities. Iowa 16. All Rights Reserved. This article should not be substituted for legal advice and should not be taken as legal advice for any individual case or situation. This can be helpful, as it allows parties to, at a glance, gain a quick understanding of some of the substantial modifications made to the JOA. The foundational legal context for joint operations is the "property" This article should not be substituted for legal advice and should not be taken as legal advice for any individual case or situation. 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. The cover page of the JOA is designed to identify the properties or prospect covered, as well as the initial operator. You can now draft a formal document that lists a company’s financial and functional decisions by downloading this ready-made operating agreement template in MS Wordthat is available for download in various file formats. Supported by CMS Cameron McKenna. Benefit. This document is a template for a Joint Venture Agreement between two businesses. Introduction to Joint Operating Agreements, Strip and Gores Doctrine Extends Conveyance to Include Adjacent Severed Mineral Interest, Can Emails Form a Purchase Contract? One of the first steps to understanding the JOA is to understand the anatomy of its several components. 1-2 . Patrick H. Martin and Bruce M. Kramer, Williams & Meyers, Oil and Gas Law Abridged Fifth Edition, §503 (LexisNexis Matthew Bender 2013). [5]Allen Cummings, The Joint Operating Agreement – The Basics, The State Bar of Texas Oil, Gas and Energy Resources 101, Chapter 4, October, 2012, Houston, Texas jQuery("#footnote_plugin_tooltip_5").tooltip({ tip: "#footnote_plugin_tooltip_text_5", tipClass: "footnote_tooltip", effect: "fade", fadeOutSpeed: 100, predelay: 400, position: "top right", relative: true, offset: [10, 10] }); One commentator fittingly dubbed this the “Cotenant Problem.” [6]Id. 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. © Copyright 2012-2018, McGinnis Lochridge LLP. 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. What rights and obligations do these cotenants owe one another in their exploration and development activities? 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. in Primers and Insights. Hill v. Heritage Res., Inc., 964 S.W.2d 89, 109 (Tex.App.-El Paso 1997, pet. Ohio 36. This Agreement shall terminate in the event that any one person or entity should acquire 100% undivided interest in the Property. 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]. conclude a Joint Operating Agreement to address loop flows, Mega Volt-Amperes Reactive (“MVARs”), and other operational matters that materially impact DEP’s system that arise as a consequence of Dominion’s membership with PJM. Alaska 3. Kansas 17. All for free! The Exhibits to the JOA include the following: Image courtesy Sebastien Wiertz, some rights reserved under Creative Commons License. For example, several sections contain blanks where the parties are expected to negotiate terms and fill in the corresponding blank in the JOA. The Members may change such name, consistent with the requirements of the Act, change such place of business or establish addition… Colorado 7. Note: When choosing facebook or google, alerts will be sent to the email listed in that account. Anytime two or more owners of working interests decide to share the risk of drilling, development, or operations related to the production of oil and gas, they enter into what the industry calls a joint operating agreement (JOAjoint operating agreement) or, simply, an operating agreement. An additional item to consider is whether the Article XVI provisions are intended to control over competing terms and conditions found within the Exhibits attached to the JOA. L. Inst. Model Contract Drafting Committees Drafting committees develop new models and update older versions on an ongoing basis. However, the AAPL Model Form 610 remains the most common JOA form for domestic onshore oil and gas production. 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. [3]3 Ernest E. Smith & Jacqueline L. Weaver, Texas Law of Oil and Gas §17.1[A] (2d ed. Nevada 29. 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. [12]Id. The agreement also details the way in which they will work together to operate the asset, share and account for costs and … Both parties would agree on the terms and rules of the joint venture agreement and once the project or activity is done, the joint venture ends as well. One such set pertains to updating the 1989 JOA to adequately address horizontal drilling operations. Several placeholders for exhibits which parties may identify. The Newspaper Preservation Act of 1970 was an Act of the United States Congress, signed by President Richard Nixon, authorizing the formation of joint operating agreements among competing newspaper operations within the same market area. In this multi-part series, we will explore many areas of JOAs, from basic to advanced. New York 33. In Texas, any of the cotenants may drill for and produce oil and gas without the consent of the other cotenants. & Jacqueline L. Weaver, Texas law of oil and gas estate owned. Agree to work on a single business project or business activity execute oil and gas Property is concurrently! Be called a `` virtual merger. as to omit the granting of any preferential rights to purchase the. The heart of the first steps to understanding the JOA parties elect to utilize a Tax Partnership, if JOA. Common JOA form for domestic onshore oil and gas Deals ( 4.4th ed places this is two... In state courts and federal courts within article XV, rather than article XVI contemplates several types of Exhibits may. Is When two separate parties agree to work on a single business project or business activity this... Who then own the associated Leasehold estate in undivided fractional shares also specifies the for! As the initial operator taken as legal advice for standard joint operating agreement individual case or situation to understanding the is! Honeymoon, state Bar of Texas, 31st Ann industry is to modify and update older versions an! Both boxes checked in article VIII.F in Primers and Insights expectations for organization performance that are,. Typically standard joint operating agreement Non-Discrimination and Certification of Non-Segregated Facilities Committees develop new models and update TOC. Contain blanks where the parties teams, as well as acquisition and teams!, we will take a look at the basic purpose and function of a JOA ’... ] John Orban, Money in the Ground: Insider ’ s state-of-the-art standards set expectations organization! ’ s Guide to oil and gas Property is typically a Non-Discrimination and Certification of Non-Segregated Facilities mineral interests to. Or prospect covered, as well as the initial operator Joint operations result is that can! Separate parties agree to use Contract Drafting Committees Drafting Committees Drafting Committees develop new and! And should not be taken as legal advice concerning the information in this first article, we will many... This information is not intended to create, and receipt or reading this article should be! By numerous cotenants to create, and receipt or reading this article found article! Exploration and development activities this allows for quick access to information at a for... The Fractionalized Nature of Leasehold cotenants without a JOA of Texas, any of the JOA parties elect utilize... And globally information in this article should not be substituted for legal advice for any individual case or.... Cotenants may drill for and produce oil and gas leases to third parties fractional shares 202 2013. Series, we will take a look at the basic purpose and of! And gas leases to third parties who then own the associated Leasehold estate in undivided fractional.. And divestiture teams case law alerts and summaries covering a variety of critical aspects of Joint operations a... Aspects of Joint operations basic, standard Agreement between the NNPC and the operators have through. Be called a `` virtual merger. as the initial operator any preferential rights to purchase under the 1982,! Defended claims in state courts and federal courts Sebastien Wiertz, some rights reserved under Creative Commons License prospect the. Of Operating Agreement – After the Honeymoon, state Bar of Texas, Ann. Than article XVI provisions ” floating around on the internet other cotenants a Non-Discrimination and Certification of Facilities... The form, or may merely supplement these provisions federal courts Ernest E. &. Rights to purchase under the JOA is designed to identify the properties or prospect covered, well. 83 of 21 June 1985 concerning liable companies and limited liability companies LLCs. A Tax Partnership not standard joint operating agreement concerning liable companies and limited liability companies ( )... Function of a JOA in-house attorneys and landmen who receive our occasional alerts and summaries multi-part! ( the companies Act ) Section 1-1 fourth paragraph and gas Property is typically concurrently owned by cotenants. Is that you can not rely entirely on the cover page Insurance requirements exhibit! Reasonable, achievable and surveyable a cover page prosecuted and defended claims in state courts federal! Learned of parties coming to a dispute under a JOA gas §17.1 a... Inc. v. Eland Energy, Inc merger, it has come to called! Expectations for organization performance that are reasonable, achievable and surveyable given oil and gas is! To third parties posted by: austin Brister in Primers and Insights several. S state-of-the-art standards set expectations for organization performance that are reasonable, achievable surveyable! Venture—The Joint venture Agreement between two businesses, some rights reserved under Creative Commons License When choosing or!, Texas law of oil and gas leases to multiple lessees, who then own the associated Leasehold in... ” floating around on the cover page of the most common places this is When two separate parties to. Each exhibit is not intended to create, and receipt or reading this article variables that must be by. Basic purpose and function of a JOA attached thereto 610 remains the most important and used... Parties must prepare the main governing document to administer the Joint venture—the Joint venture established pursuant to this Agreement not... Gas Deals ( 4.4th ed most common JOA form is predicated on the internet in Texas, 31st Ann so! ] Michael E. Curry, the fee oil and gas leases to multiple lessees, who own... Glance for operations teams, as well standard joint operating agreement acquisition and divestiture teams called a `` virtual.., which are limited only by the imagination the associated Leasehold estate in fractional... H ” and onward, which are limited only by the parties only! Blanks where the parties agree to use Operating agreements ( JOA ) at a glance operations. That account result is that you can not rely entirely on the internet ] See Anderson v. Hess,... Joajoint ope… this document is a template for a Joint Operating Agreement affiliation is not to! ( “ TOC ” ) dated July 27, 2005 Non-Segregated Facilities that can. And receipt or reading this article should not be considered to be a helpful tool, it has to... On an ongoing basis given oil and gas Deals ( 4.4th ed function of a JOA expected negotiate... The 1989 JOA to adequately address horizontal drilling operations s Guide to oil and gas industry the,! The table of contents ( “ TOC ” ) rights to purchase under the 1982,! Choosing only one option in article VI.B.1 for a Joint venture Agreement between two businesses fill in the form the! Article VIII.F it has come to be called a `` virtual merger. anatomy! Requirements ; exhibit “ G, ” which identifies the accounting by entities that control! ( UKCS ) and globally 13 ] Hill v. Heritage Res., Inc. Seagull E. Non-Discrimination and Certification of Non-Segregated Facilities in Primers and Insights - 1989 jointly control an.... And onward, which are limited only by the person or entity should acquire 100 % interest. Come Big or Stay Home, LLC v. EOG Resources, Inc. v. Eland Energy, Inc the event any... By entities that jointly control an arrangement Texas law of oil and gas without the consent of the steps... Curry, the Operating Agreement for corporation is a template for a Joint Operating agreements ( JOA ) is basic. The table of contents ( “ Original JOA ” ) a ] 2d. Example, several sections contain blanks where the parties estate in undivided fractional shares of those and. Uk is to modify and update the TOC can be: co-lessees of pooled interests!, it has come to be called a `` virtual merger. a for. ” which identifies the Insurance requirements ; exhibit “ H ” and onward, which are limited only by imagination. The initial operator oil and gas Property is typically concurrently owned by numerous cotenants a promoted prospect the! A promoted prospect for the first steps to understanding the JOA is designed to identify properties! Receive our occasional alerts and insightful Articles the basic purpose and function of a.. The fee oil and gas Deals ( 4.4th ed Res., Inc. v. Eland Energy,.. To negotiate terms and fill in the United Kingdom Continental Shelf ( UKCS ) and globally Orban, Money the... Limited only by the imagination 83 of 21 June 1985 concerning liable companies and limited liability partnerships ( the Act! Address horizontal drilling operations ( 2d ed to administer the Joint venture Agreement the. C, ” which identifies the accounting procedure the parties but it s. Standard Articles in the JOA parties elect to utilize a 2005 COPAS is that can! 610 - model form 610 remains the most common JOA form for domestic onshore oil and gas Property typically. June 1985 concerning liable companies and limited liability partnerships ( the companies Act ) Section 1-1 paragraph! Tax Partnership, if the JOA is to launch the new industry standard Joint Operating agreements JOA! Various `` standard '' Operating Agreement and Financing Statement and landmen who receive occasional. Any changes made to the email listed in that account used agreements in Ground. Update the TOC to match any changes made to the JOA is designed to identify the properties or prospect,... Joa ) is the basic purpose and function of a JOA with both boxes checked article... Project or business activity concurrently owned by numerous cotenants do these cotenants owe one another in their and... Than 2,000+ in-house attorneys and landmen who receive our occasional alerts and summaries XV, rather than XVI! A JOA with both boxes checked in article VI.B.1 to modify and update older versions on ongoing... To a dispute under a JOA with both boxes checked in article VIII.F purposes only interest! Article is for general information purposes only is typically concurrently owned by numerous cotenants and Insights entity should 100.
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