Joint Operating Agreement: Consent Election Joint Operating Agreement: Commencement of Drilling Operations

摘要

Anadarko and Valence are parties to a joint operating agreement where Anadarko is the operator. On December 14, 1999, Valence proposes the immediate drilling of 4 wells and gives Anadarko 30 days to consent to the project under the terms of the JO A. Anadarko does not consent to the drilling program and pursuant to the JOA, Valence becomes the operator for the proposed wells. The JOA further provides that a party proposing a new drilling program must commence work within 90 days of the election notice being sent out and complete the project with due diligence. Valence prepares an AFE in December 1999, receives a topographic map of the well locations and stakes the locations in January 2000, and receives drilling permits from the Railroad Commission on March 16, 2000. The wells are not spudded until after March 17, 2000. Anadarko files this action asserting that Valence did not commence operations before the contractual deadline and thus breached the JOA. The jury finds that Valence did not commence the drilling operations within 60 days of the end of the 30-day consenton-consent period. It thus awards damages to Anadarko. Held: affirmed. While actual drilling or spudding the well is not required to comply with an obligation or limitation to commence drilling operations, the ultimate issue of whether a party has commenced operations is a mixed question of fact and law.