Background
The plaintiffs own royalty interests in Claiborne Parish land subject to 2012 mineral leases. Their lessee, AIX Energy, and later Contango Resources, produced gas from eight wells on plaintiffs’ tracts. Condensate removed from the gas stream was collected in a tank attached to a nearby well and sold, with proceeds allocated among contributing wells.
After AIX’s bankruptcy, a different owner acquired the nearby well and hired Petro-Chem Operating Co. to operate it. With Contango’s consent, Petro-Chem sold accumulated condensate and paid the proceeds to Contango after receiving production and ownership information. Plaintiffs brought a putative class action alleging Petro-Chem converted their minerals by collecting and selling condensate without their consent or compensation.
The Court’s Holding
The court reversed the denial of Petro-Chem’s summary-judgment motion, rendered judgment for Petro-Chem, and dismissed the suit. Conversion requires interference with the plaintiff’s possessory or ownership rights. Petro-Chem showed that plaintiffs lacked ownership or possession of the condensate when it was captured and sold.
Under the leases and Louisiana Mineral Code, plaintiffs granted their lessee the exclusive rights incident to exploration, production, ownership, possession, and transportation of minerals in exchange for royalties. Title to fugitive minerals such as gas vested when they were reduced to possession at the wellhead; therefore, ownership of the condensate vested in Contango, not plaintiffs. Plaintiffs’ expert affidavit did not create a factual dispute because its ownership assertion was an unsupported legal conclusion outside the expert’s demonstrated qualifications.
Key Takeaways
- A conversion plaintiff must establish a possessory or ownership right in the property allegedly converted.
- For fugitive minerals, title vests upon reduction to possession at the wellhead.
- An unsupported expert assertion on a legal ownership issue cannot defeat summary judgment.
Why It Matters
The decision confirms that royalty owners who lease production rights do not necessarily retain ownership of produced gas or condensate. Claims over unpaid proceeds may lie against the lessee responsible for royalty payments, rather than an operator that sold condensate with the lessee’s consent.