Texas Oil and Gas Flashcards
What is the “Rule of Capture”?
The rule of capture is a rule of nonliability for causing oil and gas to migrate across property lines, resulting in drainage of oil and gas from under another person’s land
What doctrine limits the “Rule of Capture”?
The doctrine of “correlative rights,” which means that every oil and gas owner has a right to a fair opportunity to produce oil and gas from a common reservoir underlying his property.
What is the Doctrine of Correlative Rights?
Although an owner has a legal privilege to capture oil and gas, he has a legal duty to adjacent owners not to exercise the privilege in a manner that injures the common source of supply.
What are some limitations to the Rule of Capture? (4)
(1) The right to be protected from negligent operations (damages) (e.g., well blowout)
(2) “Stored gas” is the personal property of the extractor and is not subject to the rule of capture when reinjected into the ground for storage
(3) The right to enjoin or seek damages for willful injury to the reservoir
(4) The duty to refrain from unlawful or wasteful production
Who has the burden to show that the gas is stored and not native gas?
The one who stored it.
What rights do mineral interest holders have? (3)
(1) The development right: exclusive right to explore, produce, and develop the minerals.
(2) The executive right: the right to lease the minerals
(3) The economic benefits under an oil and gas lease
What are the economic benefits that mineral interest owners possess? (3)
(1) Bonus: an upfront payment for signing the lease (usually based on dollars per acre leased).
(2) Royalty: a fractional share of any oil and gas produced that is free of the costs of production (usually 1/8)
(3) Delay rentals: compensation for deferring drilling during the primary term of the lease (also based on acreage).
Which estate is dominant?
The mineral estate
What limitations does the mineral estate owner have in regards to exploration?
The owner of the mineral estate can use the surface as reasonably necessary to develop the oil and gas.
What is the accommodation doctrine?
This doctrine requires the mineral owner to accommodate surface uses in three conditions.
When must the mineral owner accommodate the surface use? (3)
(1) The surface owner has a preexisting use of the surface
(2) The mineral estate owner (or lessee) has a reasonable alternative method of developing the oil and gas that is less destructive of the surface, but still allows the mineral estate to drill and produce economically [cannot be unreasonably costly]
(3) The reasonable alternative is available on the leased tract
