Thursday, March 28, 2013

The Legas Effect of a Severance

Today we enter into Chapter 2 of Texas Law of Oil and Gas.  The first section of Chapter 2 is "The Mienral Estate and The Surface Estate. 

When we look at general property law in Texas, from the time of Patent, the owner of the land owns the oil, gas and other minerals below the surface in Fee Simple (the authors cite Texas Co. v. Daugherty, 107 Tex. 226, 176 S.W. 717).  It is, however, possible to sever the ownership interest between the surface and the oil, gas and other minerals.  The most often means of doing so is via a mineral reservation in a deed, however, it's also possible for there to be a conveyance of the oil, gas and other minerals via deed or other conveyance. 

There are legal consequences and other considerations involved in a severed estate.  For example, the authors cite Glasscock Underground Water Conservation District v. Pruit (915 S.W.2d 577 - Tex. App.--El Paso 1996, n.w.h.), where surface owners claimed that their having joined a water conservation district bound the owners of the severed mineral estate to... annex the land described in (a petition) be annexed into the Glasscock Underground Water Conservation District.  However, the court held that the owners of the mineral estates held equal right to use, dispose and tax the water.  The conclusion reached by the court was that the surface owner also owns the water beneath his land, so he can entrust exclusive jurisdiction of it tot he district he chooses to join, howeve,r the subsurface water owner does not have the exclusive right to use.  The owner of the dominant mienral estate has a right to use water belonging to the surface estate for various exploration and development purposes (this would be a part of the bundle of sticks included in the mineral estate), and only if the owners of the mineral estates remain in the Santa Rita Water District and began withdrawing water for secondary recovery would there be the need for conflicting assertions of jurisdiction and regulation.  This sounds to me a bit as if the court punted on the issue, but that's what the conclusion is. 

Tune in next time when we delve into the Mineral Estate.

Wednesday, March 27, 2013

Cycling Operations

I'm going to start today's post with a word for word restatement of the first sentence in the Cycling Operations section of Texas Law of Oil and Gas, Second Edition (by Ernest E. Smith and Jacqueline Lang Weaver):

From an operational standpoint cycling operations are somewhat similar to pressure maintenance and, like pressure maintenance, are typically undertaken early in the life of a reservoir.

Companies use cycling when we have reservoirs with both condensate ("wet gas") and  law-condensate gas ("dry gas") - note this is a very cursory overview of the difference between wet and dry gas.  For a better description, look here.  If the operator allows the internal pressure of a reservoir to decline too much, then the heavier hydrocarbons could liquefy, which would make them unrecoverable.  In order to help prevent this from happening, companies will produce the wet gas, take out the heavy hydrocarbons, and then re-inject the dry gas left over back into the reservoir to help maintain pressure, and push the remaining wet gas toward the wells which allows for a longer life of the reservoir. 

The authors note that a loss of title case for cycling operations is not as strong as that for pressure maintenance.  Chemically, dry gas is different than wet gas, so one can argue an earlier in time reduction to possession.  Additionally, the authors report that there is often some expectation that the dry gas will be produced at a later time (this would be part of why they participate in cycling operations). 

There is still a problem inherent in injecting dry gas into a reservoir with multiple operators with multiple producing wells. 

The authors cite Corzelius v. Harrell (Tex. 509, 186 S. W. 2d, 961) as a related, though not on point, case - where the courts and the parties appeared to assume that the rule of capture applied to reinjected dry gas.

That's the end of Chapter 1.  Next time, we'll move on to Chapter 2 - Types of Interests.

Monday, March 25, 2013

Pressure Maintenance

Well, it's been a while since I've done a post on Oil and Gas Law, but that's changing now.

When last we spoke on the subject, we discussed Gas Storage.  Today, we're going to address a related subject, Pressure Maintenance. 

One of the ways of storing gas is through injecting gas into a producing reservoir.  Essentially, what you're doing is increasing the efficiency and lengthening the life of an oil reservoir spurred by solution gas expansion or from a "gas-cap drive."  (the authors of the Book link to Tex. Nat. Res. Code Ann Sec. 91.176).  They do this by removing gas that has been produced with the oil and then they will re-inject it at various places in the oil reservoir.  to help keep up the pressure that produces the oil.

Inasmuch as gas and oil migrate, there is no way to ensure that the gas that is re-injected will not end up moving to other parts of the oil reservoir and then be produced by other companies who might hold a lease on a different spot.  The question that would arise when it's re-produced would be, "who owns it?"  As of the time of printing of Texas Law of Oil and Gas (second edition), there has not been a Texas case on point - the authors note that this is native gas withdrawn and replaced, citing the correlations to the wild animal theory.  Additionally, gas withdrawn for reinjection is done so expressly not for future withdrawal, but to make the efficient production of oil last longer. 

The authors cite a couple cases related to the subject that differentiate between a true pressure maintenance situation where multiple parties own leases in a reservoir and where only one does, as well as reinjection into a depleted gas reservoir for storage, but the crux of the matter is, while not decided as a matter of law, ownership of native gas that has been reinjected for the purpose of prolonging production of an oil well would belong to the subsequent producer of said gas. 

Friday, March 15, 2013


Okay, home and rested!

So, this was my first ever cruise, and I chose to go with the whole family, as well as with my father and step-mother.  We had fun.

Because it was our first cruise, and because there were so many of us going, we decided to go with Carnival, as it provided the best value and the timing was best suited for when we wanted to sail.  If you decide to go, check multiple lines (I looked at Carnival, Royal Caribbean and Norwegian, the latter of which did not have anything in the Western Caribbean, at least not in the time frames we were sailing), and different departure ports.  I was able to save about $800 by driving to New Orleans for our embarkation as opposed to the same cruise out of Galveston one day earlier.  Even factoring in gas, lodging, and meals, that was still over $500 less that we had to pay.

The cruise ship itself sort of felt aged, decor-wise, but it was about 15-20 years old, so that seems reasonable.  I would say the food was decent to fair; not outstanding, but with Carnival, I was not expecting 5 star dining.  I did buy the soda card, which was about $35 for me and $25 for my son - this gave us unlimited soft drinks on the boat (normally $4 a glass), but I drink soda pretty regularly, so I made out ahead by going this route. 

Alcohol is not cheap, but there's so much to do that finding time to have more than one or two glasses would take real effort. 

There is plenty to do on the cruise ship, yet at the same time, we found plenty of time where we were trying to figure out what to do "now."  We're not young, and I'm not exactly in beach shape, so hanging out by the pool trying to tan was not really in the cards for me - mental note, I need to drop about 25 lbs before my next cruise.

The shore excursions were pretty cool - we saw some Mayan ruins (Dzibilchaltun), which were impressive, and we hired a private driver for our tour of Cozumel, which was definitely money well spent.  We took a tour of a tequila factory as well as a chocolateria, where the kids got to grind their own cocoa beans for hot chocolate.  Definitely a good things for youngsters. 

On the cruise, there are kid's areas - Camp carnival for kids up to age 11, Circle C for ages 12-14, and O2 for 15-17.  These areas are full of fun activities for the kids, but there are limits on the hours of operation - I think we managed about 2-3 hours at a time with the kids in these areas.  My 14 year old more or less just had run of the ship, but the other two we kept closer tabs on.  There were some kids who were just left to fend for themselves, and in my opinion, shouldn't have been, but that's a different story.  All in all, we had a great time. 

One thing we did on the ship was a wine tasting/pairing, which was really good. 

Now, Carnival ships have had a rough go of it lately, with Costa Concordia, Triumph, Dream, and Legend each having varying degrees of calamities strike.  Unfortunately, our ship also had some problems, however, nothing so severe as to prevent us from getting to and from the various ports safely.  We had an issue with steering due to a malfunction on the starboard azimuth (I don't know what it does, but it apparently affects steering), which required a technician to be flown in to Progreso to work on during our shore excursion. 

We really enjoyed our cruise, and I would be more than happy to do another one.  I have already tentatively started trying to plan a family cruise for Summer 2014, hopefully somewhere new - maybe Jamaica and Grand Cayman, or, if I could swing it, the Mediterranean.  If you decide to take a cruise, sailing to Progreso and Yucatan is an absolutely great first cruise. 

Sorry I went on so long, but once I started recapping the cruise, I couldn't find a good place to stop - there's a lot more to share, but this covers the basics pretty well.