Mayhall Fondren Blaize

Agency cancels oil/gas lease agreement in long-standing dispute

In a previous post, we wrote about a lease dispute between Louisiana oil company Solenex LLC and the Department of the Interior, which sought cancellation of a lease for land in Badger-Two Medicine area in Montana on the grounds that the lease was not properly issued. The lease is decades old, as we noted, but the company has been unable to benefit from it.

Earlier this month, the Bureau of Land Management made a final decision to cancel the lease, and the Department of the Interior began the process of filing a court action to cancel the lease. According to Solenex, the government does not have the authority to cancel the lease, and the company may seek to challenge the action.  

The bureau’s decision to cancel the lease was critical of its own work—specifically for failing to sufficiently review the environmental impact of land development on the sacred grounds and the impact on the tribe. Federal law was apparently violated in issuing the lease, which is why the bureau said it had the authority to cancel it.  

Oil and gas companies can be on either side of attempts to cancel a lease. In either case, it is important for a company to understand not only the terms of the lease agreement, but the law governing interpretation of such agreements. In cases where an oil company seeks to cancel a lease, it is important to work with an experienced legal advocate to minimize the consequences of the cancellation. By the same token, an oil company being subjected to a lease cancellation should also work with an experienced attorney to ensure it takes appropriate action to enforce the terms of the lease, whether that means recouping lease payments, penalties and other fees, or seeking an injunction to halt the lease cancellation. 

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