By Eric Hornbeck
All Content © 2003-2016, Portfolio Media, Inc.
Law360, New York (December 3, 2010, 2:47 PM ET) — The Mayo Clinic’s foundation has sued BP PLC subsidiaries for wrongly deducting production and other costs from oil and gas royalties on properties in the Texas panhandle and for failing to properly develop the properties.
The Minnesota-based health care provider and research nonprofit alleges that BP American Production Co. and BP Co. North America Inc. underpaid royalties by “substantially in excess of $75,000,” in a complaint filed Thursday in the U.S. District Court for the Northern District of Texas on behalf of Mayo by John Mozola of Mullin Hoard & Brown LLP.
The Mayo Foundation for Medical Education and Research claims that BP and its predecessors took out several oil-and-gas leases from Mayo and its predecessors on properties located in Roberts County, Texas, beginning in the 1970s.
However, BP deducted “post-production and processing costs” from some of the royalties it paid to Mayo, even though the leases don’t permit those deductions, the complaint alleged.
Furthermore, Mayo insists that, under the terms of some of the agreements, the leases are terminated if they stop producing and BP doesn’t take action to drill new wells within 60 days and that the leases require BP to rework them when production peters out on any one unit.
Yet according to records from the Texas Railroad Commission, some wells appear to have stopped production and it isn’t clear what actions, if any, BP has taken to rework the leases, the complaint alleges.
Mayo wants BP to provide “an accounting as to how BP or its predecessors claim to have satisfied their obligations to reasonably develop the leased premises,” the complaint said.
Failing an accounting, Mayo wants the court to declare that “BP has failed to reasonably develop the leased premises or parts thereof, and/ or alternatively identifying the wells which BP must drill and the timing of that drilling in order for BP to retain the leases in effect as to acreage covered by the leases,” the complaint said.
The complaint also seeks attorneys’ fees.
Representatives for the Mayo Foundation and BP declined to comment. Attorneys involved in the case didn’t immediately respond to requests for comment Friday.
Mullin Hoard & Brown LLP represents the Mayo Foundation.
Counsel information for BP wasn’t immediately available.
The case is Mayo Foundation for Medical Education and Research v. BP America Production Co. et al., case number 2:10-cv-00283, in the U.S. District Court for the Northern District of Texas.