Dow Construction v. BPX Operating: The Fifth Circuit Redefines “Unleased Interests,” Expands Forfeiture to Post-Production Costs, and Imposes a One-Year Prescriptive Period Under Louisiana Forced-Pooling Law

1. Introduction

Dow Construction, L.L.C. (Dow) leased mineral rights within the HA RA SUE drilling unit in Louisiana. The Louisiana Commissioner of Conservation had pooled multiple tracts into this unit and appointed BPX Operating Company (BPX) as the unit operator. When BPX distributed production revenues to Dow, it deducted post-production costs (e.g., gathering, compression, and marketing). Dow sued, alleging that:

BPX forfeited the right to demand any drilling-related costs under La. Rev. Stat. §§ 30:103.1–103.2 by failing to provide timely cost reports, and
Post-production costs could not be charged at all under § 30:10.

The Western District of Louisiana ruled partly in Dow’s favour, prompting cross-appeals. On 9 June 2025, the U.S. Court of Appeals for the Fifth Circuit delivered a landmark opinion that clarifies four previously unsettled questions of Louisiana oil-and-gas law. Because no Louisiana Supreme Court precedent controlled three of the issues, the Fifth Circuit made a detailed Erie analysis, effectively shaping state law for future disputes.

2. Summary of the Judgment

The Fifth Circuit:

Affirmed that the term “unleased interests” in § 30:10(A)(3) means interests unleased as to the operator, not absolutely unleased.
Vacated the district court’s reliance on negotiorum gestio after the Louisiana Supreme Court’s opinion in Self v. BPX Operating Co.; operators cannot recover post-production costs under that doctrine.
Affirmed that “costs of drilling operations” forfeited under § 30:103.2 include post-production costs.
Reversed the ruling that a ten-year prescriptive period applies; the action is delictual and subject to a one-year prescription.
Remanded for further proceedings consistent with these holdings.

3. Detailed Analysis

3.1 Precedents Cited and Their Influence

TDX Energy, L.L.C. v. Chesapeake Operating, Inc., 857 F.3d 253 (5th Cir. 2017) – demonstrated that “unleased interests” is context dependent and warned against surplusage in statutory interpretation; heavily relied on while construing § 30:10(A)(3).
Self v. BPX Operating Co., 80 F.4th 632 (5th Cir. 2023) and, on certification, 388 So. 3d 366 (La. 2024) – Louisiana Supreme Court rejected negotiorum gestio for unit operators; compelled the Fifth Circuit to vacate the district court’s contrary reasoning in the present case.
B.A. Kelly Land Co. v. Aethon Energy Operating, L.L.C., 25 F.4th 369 (5th Cir. 2022) – explained the policy behind §§ 103.1–103.2 as addressing information asymmetry; underpinned the holding that forfeiture must encompass post-production costs to maintain that policy.
XXI Oil & Gas, LLC v. Hilcorp Energy Co., 206 So. 3d 885 (La. App. 3 Cir. 2016) – only Louisiana appellate decision reading § 103.2 forfeiture broadly; treated as persuasive authority for including post-production costs.
DePhillips v. Hospital Service District No. 1, 340 So. 3d 817 (La. 2020) and Terrebonne Parish Sch. Bd. v. Mobil Oil Corp., 310 F.3d 870 (5th Cir. 2002) – delineated contractual vs. delictual duties; guided the prescription analysis.

3.2 Court’s Legal Reasoning

3.2.1 Interpretation of “Unleased Interests” – § 30:10(A)(3)

Because “unleased interests” appears twice in § 30:10 and once is followed by the phrase “not subject to an oil, gas, and mineral lease,” the Court held that a uniform reading (interests not subject to any lease) would render that qualifier superfluous. Employing civil-law canons (La. Civ. Code arts. 9–12) and federal surplusage doctrine (TRW v. Andrews), the Court construed “unleased interests” as “unleased by the operator.” This harmonizes the statute and advances its anti-free-rider purpose.

3.2.2 Rejection of Negotiorum Gestio for Post-Production Costs

The Louisiana Supreme Court in Self clarified that a unit operator acts with statutory authority, so it cannot be a “gestor” acting “without authority” under La. Civ. Code art. 2292. Consequently, operators lack a quasi-contractual basis to charge post-production costs to unleased owners. The Fifth Circuit therefore vacated the part of the district court’s summary judgment predicated on the doctrine.

3.2.3 Post-Production Costs Within “Costs of Drilling Operations” – § 30:103.2

Reading §§ 103.1 and 103.2 as a single scheme, the Court adopted the XXI Oil & Gas analysis: “costs of drilling operations” incorporates every category of costs an operator must report—including “operating costs and expenses” and “all other unit costs.” If post-production expenses were excluded from forfeiture, operators would have little incentive to report them, contrary to the legislature’s remedial design to eliminate information asymmetries.

3.2.4 One-Year Delictual Prescriptive Period

Dow’s claim was rooted in breach of a statutory accounting duty, not a specific contractual obligation. Under DePhillips and Terrebonne, violations of duties “imposed by law” are delictual, attracting a one-year prescription (La. Civ. Code art. 3492). Labeling the claim as quasi-contractual could not circumvent this rule.

3.3 Anticipated Impact

Operational certainty for unit operators. Operators now know that any mineral interest they have not personally leased is an “unleased interest” under § 30:10(A)(3). They must treat such owners as statutorily protected and must pay revenues within 180 days without taking risk-charge deductions.
Expanded exposure to forfeiture. Failure to provide timely reports can cost an operator not only drilling and completion expenses but also downstream post-production costs. This materially increases the penalty and should incentivize diligent compliance.
No quasi-contract safety net. By foreclosing negotiorum gestio, the Court forces operators to rely on explicit statutory or contractual rights for cost recovery. Absent such rights, operators must absorb post-production costs when dealing with unleased owners.
Accelerated litigation timeline. Claims must be filed within one year, sharply limiting owners’ ability to wait and see how revenues accrue before suing. Practitioners must monitor operator reporting more closely.
Guidance for Louisiana courts. Until the Louisiana Supreme Court addresses these statutory questions directly, this Fifth Circuit opinion will serve as the leading interpretation in both federal and state courts (unless a state court departs under its own authority).

4. Complex Concepts Simplified

Forced Pooling / Compulsory Unitization: A regulatory mechanism allowing the state to combine multiple tracts into one “unit” for drilling. Prevents waste and ensures every owner gets a fair share of production.
Unleased vs. Unleased by Operator: A tract may be leased to some party (e.g., a prior lessee) yet still be “unleased” vis-à-vis the current operator if the operator never obtained a lease from that owner.
Post-Production Costs: Expenses incurred after hydrocarbons leave the wellhead—gathering, compression, dehydration, processing, transportation, marketing, and severance taxes.
Negotiorum Gestio (Management of Affairs): A civil-law doctrine allowing reimbursement when a person voluntarily manages another’s affairs without authority. Now inapplicable to unit operators acting under statutory authority.
Forfeiture (under § 30:103.2): Statutory penalty stripping the operator of any right to demand contribution for drilling (now including post-production) costs if it fails to give timely cost reports.
Prescription: Louisiana’s version of a statute of limitation. Delictual actions (torts) prescribe in one year; personal or contractual actions typically in ten years.

5. Conclusion

Dow Construction v. BPX Operating dramatically clarifies Louisiana’s intricate forced-pooling framework. The Fifth Circuit’s opinion establishes four pivotal rules:

“Unleased interests” in § 30:10(A)(3) are defined relative to the operator, closing a loophole that might have allowed “free-riding.”
Negotiorum gestio cannot justify recovery of post-production costs by operators; statutory or contractual authorization is required.
Post-production costs are swept into the forfeiture penalty of § 30:103.2, reinforcing reporting compliance.
Actions under § 30:103.2 sound in delict and must be filed within one year.

Collectively, these holdings recalibrate the economic balance between operators and non-operator owners, enhance transparency, and compress the window for litigation. Until the Louisiana Supreme Court speaks directly, this decision will be the compass guiding courts, counsel, and industry stakeholders through the labyrinth of Louisiana’s mineral code.