O & G Flashcards
hook: NIS is in iran, and corresponds with Kurdistan, either way, they’ve got oil
What are the rights and limitations on the rule of capture?
Correlative rights
Limitations: NIS
What are the rights and limitations on the rule of capture?
Correlative rights
NIS
rights: every O&G owner has a right to fair opportunity to produce O&G from a common reservoir underlying his property
limitations: Negligently drilled O&G, Illegally drained O&G (violation of the Texas/Conservation order), Stored gas (stored gas is personal property and thus not subject to the rule of capture
hook: DEE jennings from FW, FW has mineral rights
What are the Mineral Interest’s Rights?
DEE
What are the Mineral Interest’s Rights?
DEE
Development right (the exclusive right to explore, produce, and develop minerals);
Executive right (right to lease the minerals);
Economic benefits (under an O&G lease: Bonus, Royalty, and Delay Rentals)
3 ex: are SOP, Braveheart rasta mod + British yuppies
What is the accommodation doctrine?
Requires mineral owner to accommodate surface uses, but only under the following 3 circumstances:
SOP
ME/L RAsta MOD
RAA
What is the accommodation doctrine?
SOP
ME/L RAsta MOD
RAA
Requires mineral owner to accommodate surface uses, but only under the following 3 circumstances
Surface Owner has a Preexisting use of the surface
Mineral Estate owner or Lessee has Reasonable Alternative Method Of Developing the O&G that is less destructive
Reasonable Alternative is Available on the leased tract
What are the Life Tenants & Remaindermen general rules?
hook: DOGS always trespass
What are the four types of trespass against mineral rights?
DOGS
What are the four types of trespass against mineral rights?
DOGS
Drilling dry well: damage to the speculative lease
Ordinary trespass: when the lease expires but the lessee stays on the tract, lessee is a trespasser (remedy: injunction and damages)
Geophysical or seismic trespass: when someone on adjacent land explores lessor’s land using seismic vibrations, and gains information lessor’s mineral potential (remedy: sue in assumpsit)
Slant well drilling
*note: secondary recovery operations are not a trespass since they’re approved by the government
Trespass damages Good Faith v. Bad Faith?
hook: Private First Class w/ Major want to keep losses on the low
What are the elements to slander of title?
PFC w/ M LOSSLO
What are the elements to slander of title?
PFC w/ M LOSSLO
Publication of a False Claim of title to the property
w/ Malice
Loss Of a Specific Sale or Leasing Opportunity by the rightful owner b/c no buyer wanted to purchase property with disputed title
*note: damages: measured by the difference between the market value of the lease at the time of the slander and its value at trial when cloud removed
both stephen and STIPpec have P
What is the Habendum Clause?
The habendum clause sets for the duration of Lessee’s interests in the premises
P Fixed NOpe
STIP
What is the Habendum Clause?
P Fixed NOpe
STIP
The habendum clause sets for the duration of Lessee’s interests in the premises. Typically:
P: Primary term, which is a
Fixed: Fixed period during which Lessee has
NOpe: No Obligations to conduct drilling operations
ST: Secondary Term, which is
I: Indefinite but normally linked to
P: Production
What is the formula for production in paying quantities?
PPQ
Formula: R - R - OC = positive #
What is the formula for production in paying quantities?
PPQ
Formula: R - R - OC = positive #
PPQ: production in paying quantities.
Formula: R - R - OC = +# -> Revenues - Royalties - Operating Costs = positive #
*note: usually viewed on a yearly basis
*note: standard: would a reasonably prudent operator interested in making a profit rather than speculation continue to operate the well at a loss
hook: cessation can be sad, sad songs on radio (like a breakup)
What is the temporary cessation doctrine?
Common law exception to PPQ
Applies when there is a sudden stoppage due to a mechanical breakdown or the like
If the lease has an express clause, it will control
Must have production resumed w/in a reasonable amount of time
Key Factors: SADFM
What are the temporary cessation doctrine key factors?
SADFM
S = Short, temporary shutdown
ADF = lessee Acts Diligently to Fix
M = b/c Mechanical breakdown, or the like
What is the difference between an “Unless” vs “Or” Delay Rental Clauses?
hook: Ozarks, Petticoat, and Acres started in springfield (SGF)
What is the Commencement of Drilling Clause?
If the delay rental clause states that “if operations for drilling are not commenced on or before [date], the lease shall terminate unless” lessee pays delay rentals, “commencement” depends on two factors:
OPA
SGF
2 factors “commencement” depends on
OPA
SGF
OPA: Objective Physical Acts done on the leased premises (such as building a road, cutting down trees, or drilling a water well)
SGF: Subjective Good Faith to pursue drilling operation
hook: Sports Illustrated FMCo has Pitchers, Designated Hitters, and Closing Pitchers on air
What are some of the savings clauses?
SIFMCO P, DH, CP
What are some of the savings clauses?
SIFMCO P, DH, CP
SI: Shut In: when a well ceases PPQ due to market conditions, the lessee can hold the lease by paying shut in royalties
FM: Force Majeure: excuses performance, or extends the time for performance, because of unforeseeable factors beyond Lessee’s control. (Exam tip: look to see if the force majeure clause covers only covenants or also conditions)
CO: Continuous Operations: end of the primary term operations have commenced, but there was not yet actual production
P: Pooling: allows Lessee to hold several tracts under lease with PPQ from just one well located on one of the tracts. The royalty from the one well is typically split between the various tract owners. Courts require that the Lessee exercise pooling in good faith.
DH: Dry Hole: lessee drills a dry hole, she can maintain the lease by starting to drill another well within the stated time
CP: Cessation of Production: if a well ceases producing, lessee can maintain the lease by commencing repairs within the stated time
What are the rules of the 1991 Division Order (D/O) Act?
Applies to D/Os executed after 1991
D/Os are binding until revoked but,
A D/O can never contradict a lease. If it does, it is invalid; as if it was never valid, a Royalty Interest Owner should get past underpayments.
hook: San Diego Department of Public Works to Offset Drainage Damages (San Diego River)
What is the Implied Covenant to Protect Against Drainage?
The lessee must act as a reasonably prudent operator to protect the leased premises against drainage, lessor must prove three elements:
SD - DPW to OD - Damages
3 elements to lessor prove reasonably prudent operator
SD - DPW to OD - Damages
SD: Substantial Drainage
DPW to OD: lessee could Drill a Profitable Well to Offset Drainage
Damages
hook: east coast has good Rapid Transit, good media (BPR) + good markets
What is the Implied Covenant to Market?
Lessee has an implied covenant to market the oil and gas
RT: Reasonable Time
BPR: at Best Price Realizable
*note: lessee’s actions in marketing are judged by the reasonably prudent operator standard
What are the two tests in determining the meaning of minerals?
hook: TV is surface level, so are channels and streaming service
What are some of the substances that belong to the surface estate as a matter of law?
WGN Lifetime CBS SS
What are some of the substances that belong to the surface estate as a matter of law?
WGN Lifetime CBS SS
WGN = Water, Gravel, Near-surface lignite
LIfetime = Limestone, Iron ore
CBS = Caliche, Building stone, Sand
SS = Surface Shale
hook: melania don’t care (Don’t Care 4 Date Time or Location)
What are the general rules in regard to Duhig problems?
DC 4 DTL
What are the general rules in regard to Duhig problems?
DC 4 DTL
DC: Deed Construed against grantor
4: 4 corners rule requires that courts try to harmonize all the clauses in a deed to give effect to each clause
DTL: courts read Deed Terms very Literally (ex: there is a difference between “the land conveyed” and “the land described.” (1/2 of 1/8 royalty based on land described v. ½ of ½ of 1/8 based on the conveyance)
Mineral Interest v. Royalty Interest Language?
What are the Drilling Permits and Spacing Rules?
Rule: drilling permit required for drilling, and spacing rule requires applicant have a minimum of 40 acres to drill
Exceptions:
Confiscation (ex: drainage) is proven
Subdivision: the small tract was subdivided by deed before oil and gas was discovered in the area or before the land was leased. Subdivisions into small tracts that occur after oil and gas is discovered or after the land was leased are voluntary subdivisions and are not entitled to a confiscation exception
hook: O-NO-out of TX t!
What is the duty to plug order?
O-NO-TX
What is the duty to plug order?
O-NO-TX
Operator: the person responsible for the physical control of the well at the time it is about to abandoned
NO: Non-Operator who owns a working interest
TX: state of TeXas
*note: no duty to plug is imposed on mineral interest holders, royalty owners, and other interested persons who do not have a working interest in the well
