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Compensation For Drainage From Federal Leases: An Industry Perspective on Questions of Notice, Statutory Time Bars, and Liability

Marla J. Williams, Rhonda R. Johnson, Federal Drainage Protection & Compensatory Royalties (1994)

Government actions seeking compensation for breach of the duty to protect a federal lease from drainage, provide fertile ground for dispute. Any given case can involve numerous issues, both technical and legal, resolution of which will have significant impacts on the rights of parties involved. Regardless of the specific arguments raised, however, the ultimate questions come down to whether compensation must be made, how much is owed and who should bear the burden of payment. The answers to these questions will in part turn on issues of notice, applicable statutes of limitation and allocations of liability. Since these issues, in themselves, present so much room for debate, we present each in terms of how they have been previously addressed by the courts and government agencies and how they should be addressed in the future.

I. ESTABLISHING NOTICE IN A DRAINAGE CASE

Some of the most critical issues that industry and government professionals face in federal drainage cases can be classified in general terms as “notice” issues. Although any given case may raise a variety of legal questions pertaining to notice, of primary importance are those involved in determining when a lessee's or operator's1 duty to protect against drainage is triggered and when its right to administrative review attaches. Outside of broad rulings confirming the importance of sufficient noti