Suit claims well operator misused land

Kelly Holleran Jun. 6, 2011, 8:19am

A Jefferson County company claims it lost land and payments it should have received after the operator of an oil and mineral well misused the land.

JLC Royalty Management and Jefferson Land Co. filed a lawsuit May 25 in Jefferson County District Court against Milestone Operating and DSTJ Corp.

JLC Royalty Management claims it became part of a Farmount agreement with DSTJ Corporation after ExxonMobil assigned its right, title and interest in two leases to JLC Royalty Management.

In accordance with the agreement, JLC Royalty Management attempted to assign DSTJ acreage, but DSTJ failed to accept the offer, according to the complaint. At the same time, JLC Royalty Management alleged that DSTJ failed to meet its continuous drilling obligations, thereby terminating the Fairmont agreement, the suit states.

Before the agreement was terminated, DSTJ violated it by drilling a well and failing to inform ExxonMobil of the payout it made, the complaint says. JLC Royalty Management claims it was important for ExxonMobil to be notified of payment because it could have escalated its overriding loyalty interest by 2.5 percent.

In a separate lawsuit ExxonMobil filed June 1, 2009, a judge with Harris County District Court ruled that the Farmount agreement should be terminated and that DSTJ has no further rights to drill wells on the subject property, according to the current complaint.

In its current complaint, JLC Royalty Management and Jefferson Land Company say they should receive reimbursement for the destruction of their land.

"The unreasonable and excessive uses include: (a) the failure to restore the premises used for JLC #63 well site including the abandonment of a mud pit for more than one year; (b) the failure to clean up and remove trees and debris cleared and piled up by DSTJ for the JLC #43 well site; © the failure to clean up and remove trees and debris cleared and piled up by DSTJ for laying pipeline from the JLC #60 and #61 wells; (d) the failure to remove or replace a temporary cattle guard DSTJ installed at the JLC #60 site; and (e) DSTJ's failure to keep or restore the surface of the Leases clear of debris and damages resulting from its operations," the suit states.

In their complaint, JLC Royalty Management and Jefferson Land Company seek declaratory relief, asking that their former assignment allotting DSTJ acreage be declared null because of the company's refusal to adhere to numerous obligations imposed in the assignment.

If the court declares the assignment valid, JLC Royalty Management and Jefferson Land Company allege breach of contract, saying DSTJ failed to provide timely notice of the payout of the well and failed to pay proper royalty payments for oil produced and sold.

The plaintiffs also want the court to declare that DSTJ no longer has rights to drill on their land.

They seeks declaratory relief, title, actual damages, specific performance, attorneys' fees, pre- and post-judgment interest, costs and other relief the court deems just.

Mark C. Harwell of Cotham, Harwell and O'Conor in Houston and Donald F. Lighty of Stevens, Baldo, Freeman and Lighty in Beaumont will be representing them.

Judge Donald Floyd, 172nd District Court, has been assigned to the case.

Case No. E190-101

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