Oil & Gas Mini-Outline

Basic Info I. Reservoir must have these characteristics: a. Porosity: higher the better; void space between grains of sand b. Permeability: holes must be interconnected II. Oil and gas is fugacious c. Constantly on move d. Once trapped in reservoir, fairly stable till drilled

Property Rights III. Ownership e. Possession is key. f. CL : Heaven to hell IV. Absolute Ownership (TX / Maj) g. Basically HTH; gas migrates so qualified by ROC h. FS estate in reservoir BUT only FSD in o&g i. corporeal V. Morphing Interest j. Exists as real prop when underground, minute its extracted becomes personal prop. VI. Non-Ownership Theory k. Basically, ROC concept. Must reduce to capture to own minerals i. Don’t absolutely own it till you capture it l. Only own right to remove og not own minerals m. Incorporeal n. Profit a pendre: like easment, have excl. right to take and you have int. VII. Rule of Capture o. Even though you own minerals under your land, still subject to ROC p. Not liable for taking and converting q. Encourages exploration r. Remedy – self help (must drill you own well to get a share) s. Frac job ii. SC generally says fj can be claim of subsurface trespass VIII. Correlative Rights Doctrine t. Limitation to ROC – must balance with it u. Equitable: recog. That underlying elements in common res. Where many can benefit. iii. Ones action can affect rights on anothers land. v. Duty not to engage in act. That would injury common res. (overproduce or too many wells) iv. Ex. Massive blowout caused by neg. w. Each has opp. To produce what is under our land. x. Must act in legit lawful way to ext. y. Perman. Damages awarded IX. Drilling regulations z. Reg. by state: TX RRC X. Damages (2 types) {. Permanent: before / after value |. Temporary: occurring during continuance of incident value of fas while spewing) }. Can get BOTH at same time XI. Sub-surface storage ~. Once you remove personal prop. . No right to royalties if it is coming from the stored res. of another. XII. Classifications & Consequences – Bundle of Sticks . Mineral Estates: v. Explore & develop vi. Execute lease vii. Receive bonus viii. Receive delay rentals ix. Receive royalties . OG int. may be owned by many x. Fractionalized int. is RULE NOT EXCEP. . Rights with whats under your land: xi. You can remove and recover yourself you bear all costs and recover all profit xii. You can execute leasehold int. gives excl. rights to go on, sever and produce for certain period of time. xiii. You could give mineral int reserve right to sever and remove while granting land to someonelse xiv. Royalty interest: if production by lessee, royalties paid to landowner. xv. Can also grant: 1. Surface and min. estate owned by two entities (two distinct and separate FS estates) 2. Can convey ½ of minerals and be co-T XIII. Corporeal v. Incorporeal . Corporeal Int. xvi. FSA (fs absolute) 3. Cant abandon a FS in TX but can lose title to AP xvii. LE (possessory int.) xviii. Cant lose this except for AP . Incorporeal Int. xix. Easement (non-possessory) xx. Profit a pendre xxi. Subj to abandonment . Difference: can abandon incorp. XIV. Surface & Sub-Surface Trespass . T who drills a dry hold is liable to owner of ME even if done in good faith. . Concurrent Ownership: equal right to possession, undivided in the whole. xxii. Not liable as long as you don’t deprive coT of possession