next we have t d x energy versus chesapeake operating incorporated and first we hear from mr sinclair good morning my name is scott shane clair represent t d x energy before we get started a couple things like agave the clerk copies of the statute that is the issue here going to three point one so i wanted to make sure in one of three point two want to make sure that you have that and then secondly i'd like to update you on and the third circuit louisiana third circuit ruled favorably to t x energy said that does that this statute does apply to mineral lessees that ruling came down in september i believe in in november of last year the third circuit denied rehearing on that case and then in december of last year the hill call the losing party applied for rich to the regime supreme court so  location has been briefed and as of yesterday as far as i know and i checked with mr otton juries involved in that case the louisiana supreme court has not decided whether or not to grant to wait to see if they do well if i were in your position obviously what i think i would do is i would take there are some other issues in that case where they may not reach this ultimate issue because there's a there's a race judicata issue as to whether or not that was decided in the two thousand and thirteen court of appeal decision and so that particular issue may not make it to the supreme court if i were in your shoes i would take this argument i would i would talk about how i would play into a rule in this case and then i would wait to see if the supreme court except for it's and obviously if they do and if they do want that well that's a good question and i would expect it to be within sixty to ninety days but i have but i really don't know what i think it ca seek certification to the state supreme court on this i don't think so and the reason i don't think so is because if they don't take this if they do not ritz that tells you that this is not all that interesting to them it ought to tell you that they think that the the court of appeal got it right and i also think it's because of the history of this in our courts of appeal since for the last forty years louisiana appellate courts have taken the position that this statute applies to people like t d s people who have a minimal lease the scarlet case in the general our case both dealt with cases where a mineral lease holder was the party in t x issues now it was a question in those argument that they're making it in other words he didn't try to explain how when you can read sort of unleased interest to loot least interests it did insist in a couple of different ways circuit clearly not only said that we think we decided that issue back in two thousand and thirteen but they also said in a belt and suspenders way the courts often do even if it's still a live issue we still think we maintain our textural point it western district attorney so so we just look at the text itself is there well let's not look at the text is there any legislative intent behind what was meant by that phrase no not not that i'm a before we we know what the supreme court will do is because i do think it's very clear if you start as we have said the place to start is at the beginning in any set of statutory schemes lots of times you're going to find definitions pure definitions in a in a speech in a statutory scheme in their early on and so if you start at the end you might miss the benefit of those definitions in our case there is a clear definitional framework that is a stub list early on and if you start at the end you're so where do we find out what it means by interest actually it's not the first time it's uses in that is in the title of the statute the title of the statute is one of three point one operators and producers to report to owners of unleased  gas interests so the title begins and tells you we are talking about only guest interests here and we're talking about unleased oil and gas and then when you get down into section eight the very first section the very first sentence that gives you the definitional framework for that it says we're talking about only stinkers upon which the operator or producer has no valid or gas or mineral lease and so when you read in the next call where it says the owner of said interest it can only be referring what's above it not what's below it and so it obviously means interest upon which the operator has no validly if the title of a statute given some authority as opposed to the actual language of the statute i mean who who made the title i guess is it was that part of the actual regulation or statute that with passed or did someone else come in and the title but my point is is that is it consistent with the law and it's consistent with the interpretation that i've given you and so this word interest doesn't just appear out of thin air that you see in the bottom part of section and it's clear throughout the statute when you read it it's clear that we're talking about only gas interests there's no doubt about that we're not talking about the surface leases we're not talking about timber days we're talking about oil and gasoline leases are interest and so that word is not really shouldn't lead to any confusion what is very clear and what none of judge hanis memorandum ruling nor chesapeake's briefs do for you is tell you what do you do with the language that says upon which the operator producer has moved on and on gas removal this judge has referred to it and then never gave it any explanation never gave it any effect chesapeake has done the same thing if you if you read those words on the statute then you get to go with chesapeake's position louisiana's supreme court said it has said that you do not rewards out of the statute you give every words an effect if you can do that and the only way to do that is to give some effect to this close when it says that what we're talking about from the get go is lands upon which the operator or producer has no valid lease does that include  were requested there the reports i think in a december letter away again requested the way to give them notice that they had not complied with the obligation of january or later and i don't believe we ever got a formal response to any of those requests they were simply ignored until we got to court even if you're right on the accounting reports oh what about what i think of as the windfall problem in section ten that by virtue of not recording your position is they don't owe any money towards the risk of  i'm not sure i'm following your question what we're now in section ten yeah if you could just move yeah the section ten argument is is that section ten provides a framework our basic argument is a judge has got it right but but but the judge article tailor section tim does provide a framework for providing notice so that you can give somebody you know this is going to drill well with that you're drilling a well and that party has to respond within a certain period of time if they don't respond you got out from the penalty i'm sorry i'm not recording you got out from the penalty that section ten this is the recording i wouldn't i wouldn't characterize it that way it's not like there's no evidence that anybody sat back and waited until they completed the well and started recording leases they started and started taking leases until the day before the will was completed the first place was taken on july eighteenth the well was completed on number one is that the language in that statute when it says drilling it means present tense and when it says intends to drill it means future trick tenants and what they excluded was passed to that's because it doesn't say what you have grew up on a system protect against  sist the amendments people that would sit and not record until after the drills are complete it if that happens which is what happens here the operator goes into everything with his eyes wide open he knows exactly what's happening he knows that he's got out of the six hundred forty acre unit he knows that he's missing sixty two and he doesn't have a mental illness and he knows when he spots that well i'm doing it with the risk that i'm going to have to pay the entire cost of this because as far as he's concerned it's an on least interest and on least interest are never subject to the risk fee and in section two ok so when he explodes that well he doesn't expect it to pay for that interest and only be able to recover one time that cost out of the process that's a full expectation so he's not misled he's not tricked into anything he knows exactly what he's doing any change any and he makes his own choice and he gets to do with the consequences whatever you know so so that's my answer that i understand that from the requests are if it while it's drilled and it's completed and it's  it's there are still a risk factor i mean it's there's no risk involved anymore because it's a murder scene oil is is a colorist back there i'm not sure i understand all there is still rust because they the well may pay o it may not pay out twice may not pay out three times and so on the under the risk the the well essentially has to pay out three times before the nonparticipating owner comes back if it does that into your post and so under the new amendment and it's been changed twice since that provision that we're dealing with section two which may support the ruling local shows they're trying to fix this problem but and today would you agree he acts in this situation today they could send the notice after the lease was recorded and you'd have to make a risky choice oh yes of the markets and since it was passed drilling and this was your last answer but and you're getting all the data right they have to send the data to you  under this statute and they're required when they say do you want to let the risk be they have to send you any data they have of to that point don't think that they did not do the right up but i'm saying this hypothetical situation and it's the drilling has already been in the past you're going to have a pretty good idea aren't you of whether it's worth making an election at that point under the new statute absolutely and so on i'm not here to quarrel with the new statute i'm here to try to enforce our rights under the  do agree with you the fact that they changed the statute and first went in our direction the first time they made the change they didn't include past heads and they specifically said that the notice has to go out before  and then they came back and made another change so what you're really talking about he's got he's got political power and then they come back and they changed it again and said we're now going to allow you to send a notice out even after you  it is what it is if anything for you for our purposes what this is telling you is that temporal verbs have meaning they had in our case they had in the second amendment of article ten and they have in the current version of article to all three tenses are used and it's m pending since early december it's been fully briefed we just simply don't know what will happen i do make a point that it's not final we think we've put forth in that read up occasion a very compelling case as to why the  third circuit did not get the issue correctly i think judges magistrate judge hayes decision was very cogent very thorough the the decision at the third circuit was very matter of fact a very superficial we feel your analysis your analysis in the right to the easy answer basically tracks the reasoning of mastery judge hates yes and other organs as well but fundamentally we do if the supreme court doesn't take the case and so we're left with th  lower federal court ruling in this louisiana intermediate court ruling and under eerie don't we generally have to defer to the louisiana eloquent ruling whether it's right or wrong i think that occasion of louisiana law i believe very would would would lead the court to look to a supreme court decision which doesn't exist there are conflicts in the in the courts of appeals alluded to is a case called cash k s h i handle that case a number of years ago and the third circuit r or what we call them again i did not handle the case of the third circuit but then counsel did call to leave the third circuit's decision attention rather this case by judge hayes but they said we're not bound by federal solution but in the next breath they did rely on other federal case that i was involved in call adam so a little inconsistency there but also mention by counsel were two cases again more and scurlock the issue was simply not raised there these are rather old cases and the courts denied relief so it cannot be said that those cases stand for the proposition that a lessee has standing under it on the x x i case which is the subject of the writ up occasion to the supreme court professor pat morton one of the leading commentators criticized it and called it problematic so we we feel that that case will run its course but but back to this case if you will this case doesn't fall to i think i remember in your table  eight if the court would like but it's not in this case because the x x i case right but you both sent twenty j letters is not in that either  exclusive statues thirty colin ten which is the framework part of the most part most important part of the conservation act the framework that regulates the relationship between an operator such as chesapeake and a lisey's such as t d s the well cost reporting statutes in a different section it deals and of course that is a middle of the issue of with to quote the statute owners of unleased oil or gas interest if i may respond to judge credo on the issue of the title the title is part of the adopted legislation i don't have in my fingertips but an early in it revised statutes one through ten there are some very short statutory construction articles and they say that the title is is just for the convenience and is not part of the law per se but create unique relationships and have unique rights and an obligation is under them the argument advanced but t d s under the circumstance that it did not file its mineral leases for a period of time so that in the face of the public records chesapeake thought was on least it could not then invoke the risky because the risky act clearly says it does not apply to unleased owner but when they recorded it promptly did and one other point just did provide the information neede supported it and invoked the risk the at that point so just be good in fact give know this area very well obviously but step me back just a little bit if there's no definitional statutory definitional term from least interests and neither side as opposing counsel said has found any legislative history that's relevant to that is that fair to say i would be fair to say i don't have any says but i'm a simpler mind on these issues like mine what would be the logic to give owners more protection circumstance where a truly unleased middle owner is by definition unsophisticated whereas a minimalist he doesn't inadvertently or accidentally come into the industry they consciously buy a lease and have responsibilities all company such a x as a staff of engineers land man accountants and whatever but a mom and pop land owner being unsophisticated is provider is unsophisticated just owns land lessees are sophisticated that's that's the point i make but the further tha has recovered the costs alex a bill to that interest the unleased owner i would call them unsophisticated has no means to know when that occurs this statute is an attempt to give them the mechanism if they're truly at least to call upon the operator to provide not only the well cost information but what's called sworn detail of my statement this allows the unleased owner to be able to measure and market determine when they might come into production and all company a greater level of sophistication because it near generally has a staff or consultants who would speak to this information so that's still an information a symmetry if you're not the producer why wouldn't t v x still haven't desire to see an accounting  of these costing to get these reports in a fact because they actually know our sophisticate of the industry they might that report might have more meaning to them well the question brings us back to thirty commenting on not one of three point one there is a provision that if they don't like the cost they're normally shared and many times the company such as t d x will enter into an agreement an operating range or form out that did not happen here but if they don't like the cost they have the right under thirty go in t n to call that they do have a right to these reports do they have a right to these not in the contemplation i want to three point one because our position is that it doesn't apply to a less see and that's the subject of pending writ up occasion but my point is that  it's common that up that they were asked for the information from the operator there's no obligation to provide it but they do have the right to go to the commissioner in for the commissioner can force the information he provided if you don't give it to him it's not like you forfeit your your right to demand that's correct that's correct that's correct the i would also and we cited in brief an associate statute thirty colin one eleven essentially the org interest and lessees and lesley's in a drilling unit authorized by the commissioner shall not be liable for cost above the market value those words would be unnecessary in thirty coal and one eleven if as continue but t d s the owner but on a lease only gas interest includes a lessee sleep speaking of unnecessary words what effect does your argument give to the language in one of three point one that phrase upon which the operator has no value these well the the words that follow that alluded to but can also owners of said interest said means the previous characterization which penalty being due to the owner of an unleased only guess interest it is true that chesapeake has no interest no lease on the lands but more put more prevailing throughout the entire statute and judge hayes took this where own is the reference to owner of said interest or owner of the unleased interest is the record silent as to why chesapeake didn't obtain the leases itself for the sixty two unleased units it is silent on that iran has no reference there's nothing in the record to explain why they didn't take the leases the might be the only other question factually i guess is assume but what if t d x had recorded immediately wouldn't they still been wouldn't that record ation have been after the drill was complete yes so so they didn't they couldn't they weren't gaming the system at all this is the loophole that the legislature chose to write well i'm not sure of their game i'm not sure what their motivation saying that that they statute you know i would suggest that the court has the authority under article for the civil code to to do the right thing and a thought right thing is to basically do what the legislature now has done correct correct and that we the temporal feature is forth the following a rule of statutory interpretation if there are to read it but if there are two plausible interpretations one of which is in accord with the state constitution one of which is not the court must adopt that which is a court and in accord  fourth circuit on numerous occasions but i can provide those your honor so that the rule by judge dennis f the supreme court it is a basic rule of statutory interpretation that if a statute is susceptible of two constructions one of which will render constitutional and the other of which will render it unconstitutional or raise grave and doubtful constitutional questions the court will adopt the perpetration the statute which without doing violence to its language will maintain its constitutionality but  operator but the dispatcher clearly says the owner is in the unit to whom notice provided maybe sing it or the owners of record as of the data which the notice is sent will that happen in this case because by the time the leases were recorded those were the recognized owners within the meaning of that it could not have set the statute at the earlier date because it was on least on the face of the public record so we think that the court in we argued to judge analogy that of an operating agreement and the reality is if the notice is giving at a later date the recipient has more information not less how can they be said to be prejudiced because they they've observed the well they know that it was  certainly did blowout or some catastrophe did not occur so it's just it's it we think that the rationale embraced enough in the bond decision that's to page thirty two of our brief would come into play in this case in support the proposition that that that that they did that amendments that mean that the current statute clearly would cover today x in the situation that it has that retrospective language doesn't that indicate first one hundred percent recovery out of production it's the rest charge that we're talking about on top of that so i believe i'm out of time for no other questions and i will provide those authorities alluded to under twenty eight thank you on the constitutional issue to you two points one is that in the notice of appeal filed by chesapeake they did not raise this issue they did not follow the peel with respect to that portion of judge hasan's decision so i'm not sure whether it's appropriate for for decision here but in any amount even if you consider that issue this statute is clearly constitutional it's the only requirement is that i have one object the object of operator so there's no cost to tional informative i'm glad that you asked and i'm glad i'm disappointed that you asked the question about the logic behind giving greater protection to a truly only stone and the truth of that is it's just the opposite both in only stone or in a mineral alessi like t d s have a have a desperate need to know when the well pays out because it needs to hold the operator's feet to the own it can only do that if it knows how much production was sold at what price it was sold and how much was receipt this will statute is not merely dealing with cost but it's also talking about revenue to so w x doesn't get that cost information it has to make guesses about what the production was and what the price was and what to pay its role to the owners and it puts itself at the mercy of his role to your owners never saying you're not here's the reason i'm disappointed that you asked that question this this court in a case called brennan properties that we decided in our in our brief it's an unpublished opinion but it deals with this specific statute one of three point one one or three point two and what brand of properties teaches you is to just read the statute don't jump out equity it's not ambiguous it didn't deal with this issue dealt with another issue in the statute but that but the lesson know what happens with that case i don't know will be coming up with an opinion before then or if what we're going to do but it in the event we have not come out with an opinion if you let us know as soon as you you find out what the status of that cases before the louisiana supreme court th will do just with a point j yeah twenty eight j will do so your honor i'm again i'll represent the applicant in that court screen for it so obviously i'll be notified but we'll provide it to the court ok thank you thank you and i think we'll take a short little break before we get to the next two