Oil & Gas Flashcards
Conventional vs. unconventional drilling?
(1) Conventional - oil is trapped in permeable sedimentary rock formations called “geological bains/pools”; extracted by drilling a hole
(2) Unconventional - oil is trapped in low permeable shale oil or oil sand; extracted by fracking
- Coal Bed Methane is in coal seams and removed by flooding with water
What are the different methods of oil and gas recovery?
(1) Primary - natrual pressure causes production; can use pump to boost production rate
(2) Secondary - water flooding required to squeeze the oil to the middle well
- Anti-commons problem –> requires unitization (dep. on state)
(3) Tertiary - CO2 flooding
Explain the mechanics of gas transportation & storage
(1) Transport is hard - NG must be converted to LNG then re-gasify. Pipelines otherwise ($$$)
(2) Storage - porous rock near cities until gas is needed in winter
Why does flaring happen?
Flaring happens when there is no storage and transportation mechanism to capture the recovered natural gas as a byproduct of oil recovery.
What are marginal wells?
Marginal wells are conventional wells that are low-producing.
Smaller companies will hold on to them and not report them as “nonprofitable” in case oil & gas (methane) prices increase, and also to avoid reclamation and cleanup costs.
What are the property law issues in oil and gas? Private Land (5)
(1) Rule of Capture
(2) Conservation Regulations
(3) Correlative Rights
(4) Split Estates
(5) Mineral Dominance & Surface Accomodation
What is the Rule of Capture and why is it important to energy law? (5)
(1) Rule of capture governs property interests in fugitive resources
(2) Oil & gas is considered a fugitive resource (wild animal analogy)
(3) Landowner considered first possessors of unowned fugitive resources because they have constructive possession of them while they are on the property (Ratione Soli)
(4) Ownership requires actual control, and rule of capture is not absolute
(5) No remedy if fugitive resource is captured in neighboring property
What are the limitations to the Rule of Capture? (3)
(1) Rule of capture encourages maximizing the productive use of the land by rewarding extraction.
(2) The race to the bottom creates a tragedy of the commons
(3) Requires regulation to constrain wasteful behavior
What are conservation regulations in the oil & gas context? Give examples (5)
Under the doctrine of waste, conservation regulations constrain wasteful behavior & limit raising Rule of Capture as a defense
(1) Well-spacing statutes require a certain distance between each oil well to avoid physical waste from lower pressure
(2) Pooling statutes avoid a takings liability - any person unable to drill due to well-spacing is entitled to % of revenue
(3) Unitization - once a threshold of owners in an area agree on profit calculation, the remaining holdouts are compelled by statute to join secondary production (anti-commons)
What is the doctrine of correlative rights? (5)
(1) Each owner over a common reservoir of oil & gas has a correlative right to it and
(2) must have a reasonable opportunity to produce his fair share of O&G (Ellif).
(3) Rule of Capture is not absolute & not a defense for
(4) negligent waste or destruction of common reservoir
(5) bc negligent waste is not a legitimate or reasonable drainage of the common pool
What issues arise from split estates in the oil & gas context? Give examples. (3)
(1) O&G is characterized by split estates because the surface property interests can be severed from the subsurface mineral estate.
(2) Under the principle of mineral dominance, where the conveyance of the lease was silent about surface use, the mineral estate is the dominant estate over the surface subservient estate &
(3) has implied easement to use the surface estate as reasonably necessary to produce and remove minerals
What is the accomodations doctrine, and how is it relevant to energy law? (5)
Under accomodations doctrine Courts engages in fact-intensive rules (VirTex)
(1) surface owner must prove complete preclusion of existing use
(2) no reasonable alternative exists for continued use (3) alternative industry-accepted method is available for mineral owner
(4) But, if there is no alternative for the mineral estate holder, then the complete preclusion of the surface owner’s existing use does NOT bar the mineral holder’s use of the surface estate
(5) Some states have codified the CL accomodations doctrine, but too much may lead to a takings liability so is merely a suggestion
What is the oil and gas leasing process on private land? (5)
(1) Fee simple determinable that reverts back
(2) Term provision - Primary term (exploration) –> if produce in profitable quantities, –> secondary term (until no longer profitable)
(3) Lessor profits from (high)** bonus payment** + 1/8 royalties from (short) primary term
(4) Lesseee profits from (low) bonus payment + long primary term
(5) Private interests & information asymetry drive negotiations
What is the oil and gas leasing process on public land? (3)
(1) NEPA
(2) Mineral Leasing Act
(3) Fed Land Policy and Management Act
What is the oil and gas leasing process under NEPA? (3)
(1) Citizens for a Healthy Community
(2) BLM acted A&C by not taking “hard look” at foreseeable indirect effects of “downstream emissions” and “cumulative impacts” on wildlife
(3) If an action being analyzed is part of a larger process, then the agency must analyze the “cumulative impacts” of the whole process
