Newhall Land & Farming Co. Lawsuit vs Kerr-McGee and Medallion (2001-2003)
In 1990, Sun Operating Limited Partnership (Sun LP) owned both the lease from the Newhall Land & Farming Company (NLFC) to Barnsdall Oil Company (the RSF Lease) and the lease from the Newhall Corporation to C.G. Willis (the Ferguson Lease). In October of 1990, Sun LP sold the leases to DKM Offshore Energy, Inc. and Neste Oil Services Inc. Sun also indemnified DKM and Neste from environmental claims for 10 years. That meant that they insured the two companies against potential damages or losses due to environmental claims.
DKM then acquired Neste's rights and became Medallion California Properties Company. KCS Energy would then purchase Medallion California.
In the meantime, Sun LP became Kerr-McGee Oil & Gas Onshore LP, still with the environmental indemnity to Medallion (owned by KCS).
So, by December 31, 1999, KCS Energy, Inc. of Houston, Texas, owned both the RSF Lease and the Ferguson Lease.
On January 30, 2001, the NLFC filed a lawsuit in Los Angeles Superior Court (Case BC244203) against Kerr-McGee (the indemnity holder) and several Kerr-McGee affiliates, and Medallion (owned by KCS) for damages associated with oil field contamination on property owned by the NLFC and leased to Kerr-McGee or its predecessors, who transferred the lease to others, including Medallion. NLFC was seeking damages resulting from the defendants' failure to clean the property in accordance with the lease terms. They also wanted a declaration from the court that NLFC may terminate the RSF Lease or alternatively, that it may terminate those portions of the Lease on which there is currently default under the Lease.
Of course, there would be many motions and cross-complaints filed. The case wouldn't be settled until 2003.
In 2002, NLFC instigated and obtained an environmental site assessment of the leased property.
The Los Angeles Times of January 9, 2003, reported that "Since 1998, Kerr has hauled away thousands of cubic yards of contaminated dirt during the last five years. Newhall Land is trying to force Medallion to close down its oil and gas opeations early to clear the way for the development of Newhall Ranch. As of January of 2003, Medallion still operates 51 oil and gas pumps and the lease should allow them to continue pumping for a decade."
In May of 2003, there was a tentative $9 million settlement reached in which the two companies would clean-up and restore the Newhall-Potrero oil field to a level that makes it safe for development.
A final settlement was reached in October. The level of clean-up and restoration was agreed upon. Financial issues were also resolved.
Sources:
KCS Energy, Inc., Houston, Texas: SEC Form 10-K For Fiscal Year Ended December 31, 1999 (from the internet).
KCS Energy, Inc., Houston, Texas: SEC Form 10-K For Fiscal Year Ended December 31, 2002 (from the internet).
Los Angeles Times January 9, 2003; May 29, 2003.
Newhall Land and Farming Company: SEC Form 10-K For Fiscal Year Ended December 31, 2002 (from the internet).
Newhall Signal, May 29, 2003; October 25, 2003.