Crude Oil & Natural Gas

Question 1

Conventional vs. Unconventional
(2+)

Answer 1

(1) Conventional: drilling a hole straight down
- oil is trapped in layers of sedimentary rock.

(2) Unconventional: fracking
- shale oil and oil sands, trapped in rock matrix
- Coalbed Methane (CMB) - trapped in coal seams, held in place by water, remove water and allow CMB to flow to surface

Question 2

Crude Oil Primary vs. Secondary vs. Tiertiary Production
(3+)

Answer 2

(1) Primary - natural pressure causing oil to be produced, or a pump if natural drive is depleted
- Preferable system

(2) Secondary - water flooding operations
- Flooding the field with water from outside wells to squeeze oil out of the middle wells

(3) Tertiary - similar to secondary production, but using CO2.

Question 3

Oil & Gas Transportation (1+)

Answer 3

(1) Transporation is hard, especially for natural gas - stranded in very rural areas, and pipelines are expensive
- Convert NG to LNG, saving 600x more space & easier shipping
- Reheat to gaseous state and transported via pipeline to end users

Question 4

Natural Gas Storage
(2)

Answer 4

1. Natural gas is primarily used in winter, so natural gas companies buy porous deleted rock that can hold the gas until it is needed.
2. Usually stored near major cities

Question 5

Natural Gas
(3+)

Answer 5

(1) Bridge Fuel
(2) Characteristic: lighter than air, oderless, burns almost completely, relatively little air pollution
(3) Production
a. From natural gas wells
b. Co-produced with oil
c. From coal beds as coal bed methane

Question 6

Rule of Capture & Correlative Rights

Answer 6

(1) Rule of Capture: you have rights to the oil and gas under your feet, but if someone else drills and captures it, no remedy
(2) Correlative Rights: the rule of capture is not absolute (Elliff - prohibition of negligent waste of common pool stemming from Correlative Rights)

Question 7

Conservation Regulation
(3)

Answer 7

(1) Well Spacing: wells have to be spaced apart according to regulation.
- If you can’t drill on your property, this may be a taking, so states have pooling

(2) Pooling Statute: any person unable to drill a well due to well spacing regulations can apply and force the well owner to share profits
- hardly any litigation, people accept it

(3) Unitization: If you can get a threshold percentage of people to agree to your formula on how to calculate profits (acreage, historic production, well uptime, etc), then the state will take care of the rest and force the holdouts to join the operation of secondary production.

Question 8

Split Estates, Mineral Dominance, Surface Accomodation

Answer 8

(1) Split Estates: Surface can be severed from the subsurface/mineral estate

(2) Mineral Dominance: the mineral estate has priority over the surface
- NSO Lease - way to ensure no surface occupany

(3) Surface accomodation: States have adopted statutes or caselaw that ask mineral estates to reasonably accomodate the surface estate
- Activity would completely preclude or impair their existing use of surface
- No reasonable alternative to continue use of surface
- Reasonable, industry accepted alternatives available to mineral estate
- VirTex

Surface Accomodation is really a suggestion, otherwise it could be a taking.

Question 9

Oil and Gas Lease
(3)

Answer 9

(1) Carefully negotiated document, all kinds of things that can be negotiated
(2) Vested interest via fee simple determinable that reverts back upon cessation of production of the well
(3) Where the oil and gas market is hot, leverage is with the landowner and vice versa.

Question 10

Oil and Gas Production on Federal Land
(2)

Answer 10

(1) BLM entrusted with the “orderly and efficient exporation, development and production of oil and gas”
(2) Healthy Community : uses NEPA as a hook for litigation (arbitrary and capricious), found one because BLM did not consider downstream air emissions and culmulative impacts on wildlife.