Originally from Dispute Resolution Journal

Having worked in-house for an exploration and production (“E & P”) company, I can personally attest that oil and gas companies are constantly inundated by legal disputes both on the domestic and international fronts. Unfortunately, however, too many of these disputes are handled litigiously rather than through the pursuit of other means like negotiation or mediation. Whether this is a result of the industry’s culture or simply sheer ignorance on the part of oilmen, mediation is an excellent dispute resolution mechanism and should be the first line of attack when solving oil and gas disputes. As Shade states, “[T]he oil and gas industry has been slow to embrace mediation as a means for resolving such disputes.”1 Oil and gas companies exist to generate profits, and the overuse of litigation directly impinges on that goal. The nature of oil and gas disputes requires the preservation of capital and the maintenance of relationships. Because these issues require business solutions, mediation is the best choice for resolution—both parties contribute to the solution and a zero-sum outcome is avoided. In this paper, I first identify three areas in the oil and gas industry in which the increase of the use of mediation would be beneficial: term disputes in oil and gas leases, environmental disputes between environmentalists and production companies, and international/trans-border commercial disputes. I then point out ways in which mediation would prove useful to either one or both parties, focusing primarily on the benefits that exist for E & P companies. Finally, I advocate the creation of a domestic alternate dispute resolution (“ADR”) organization created specifically with the intent of servicing the domestic and international needs of the energy industry, specifically those of American domestic producers.