Maine Stephan Goodfellow, George F Goolsby

therefore had a duty to account, was an equitable claim of unjust enrichment, which
claim did not supersede the contrary terms of the contract between the parties.46
Chevron has been followed by the Louisiana state courts see Amoco Prod Co. v
Fina Oil & Chem. Co., 95 1185 (La.App. 1 Cir. 2/23/96); 670 So.2d 502. The facts in
Amoco are similar to those in Chevron. Amoco claimed that it was entitled to cash
balancing to restore an imbalance after well depletion despite having omitted a cash
balancing provision from the gas balancing agreement. The court noted that the
balancing in kind clause in the agreement did not limit itself solely to the period
when the wells were producing, or if enough gas remained for an underproduced
party to recover its underproduction. The court held that, at a minimum, Pogo and
Chevron establish that, where the parties have agreed to the method of balancing and
failed to provide for cash balancing, that agreement will be given effect, even if
it deprives a party of its pro rata share of the gas.47 The court added, a fair
interpretation of Chevron is that a failure to mention cash balancing in a balancing
agreement will preclude that remedy, even if the well depletes (emphasis added).48 As a
result, parties who are evaluating which form to use should carefully consider
whether to use a form providing only for balancing in kind, even if it has provisions
that attempt to assure the reservoir will have sufficient gas to allow make up. Those
protections may not work, and if they do not, no cash balancing will be available.
The 14th Court of Appeals of Texas has also added the issue of the limitations
imposed on the parties in seeking relief under a gas balancing agreement.49 The gas
balancing agreement in Lowmar stated that it was the parties intent to use the gas
balancing agreement to bring the parties accounts into balance as soon as possible
and not to use gas balancing rights as a means to store gas, delay marketing or
otherwise withhold the gas from the market.50 Energy Development, as the
underproduced party, contended that the imbalance arose because it was unable to
sell its share of the gas to its parent company, to which it argued it was contractually
bound to sell.51 Because the imbalance allegedly arose from a situation beyond its
control, and Energy Development asserted that it was entitled to exercise its rights as
an underproduced party. The court held that because Energy Developments gas
purchase contract with its parent permitted Energy Development to sell gas to
another pipeline company, and Energy Development had not taken steps to receive
and market its full share of gas, it breached the gas balancing agreement and was not
entitled to exercise its rights as an underproduced party.52 The court further found
that Energy Development was using the gas balancing agreement as a storage
mechanism, which violated its duty to the other working interest owners under the
agreement. The breach by Energy Development excused Lowmar from liability under
the gas balancing agreement.

46 Ibid.
47 670 So. 2d 502, at 514.
48 Ibid.
49 See Energy Dev. Corp. v Lowmar Exploration Co., No. 14-98-00619-CV, 2000 WL 795893 (Tex. App.
Houston June 22, 2000, no pet.) (not designated for publication).
50 Ibid at *6.
51 Ibid at *2.
52 Ibid at *8.

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