Oil and Gas Disputes

by James M. Gaitis, John Burritt McArthur, Gary V. McGowan, and Susan S. Sousan

Abstract:

The oil and gas industry has long been a leader in promoting the resolution of industry disputes through the use of binding arbitration. In the international sphere, the oft-mentioned Abu Dhabi, Qatar, ARAMCO, Aminoil, and Libya cases played a critical role in promoting the acceptance of investor-state arbitration and the applicability of international law to oil & gas industry disputes involving host nations. Today, the vast majority of international commercial oil & gas disputes are resolved through arbitration. Arbitration of domestic oil and gas disputes also gained an early foothold in the United States. As early as the 1950s, U.S. “natural gas companies” began to incorporate arbitration provisions into Natural Gas Act–era gas purchase agreements. By the 1970s, industry contracts, such as the Trans Alaska Pipeline System Agreement, included arbitration clauses, as did a series of very large Alaska Royalty Settlement Agreements in the early 1990s. Nevertheless, even in the 1980s and thereafter, many forms of oil and gas contracts did not incorporate arbitration provisions. With the advent of the twenty-first century, most sectors of the oil and gas industry now include arbitration provisions in many, if not most, of their contracts. Overall, the domestic and international oil and gas industry has become one of the leading players in the promotion of arbitration and the development of arbitration materials. For example, the Association of International Petroleum Negotiators (the AIPN) has developed model form arbitration provisions to be utilized in a broad variety of oil & gas contracts, and other oil & gas industry organizations, such as the American Association of Petroleum Landmen (AAPL) and the International Association of Drilling Contractors, too, draft arbitration provisions for use in oil and gas contracts. Oil and gas contracts inherently give rise to many forms of disputes, large and small. The following discussion identifies many of the kinds of disputes that frequently arise in the oil and gas industry and discusses the many reasons why binding arbitration can benefit the parties and better ensure a prompt, rational, and final resolution of those disputes.

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