Friday, January 25, 2013


I'm taking a brief break from Oil and Gas writing today.  Instead, I went and watched Movie 43, which was quite possibly the worst movie with the most talent I've ever seen.  I don't understand how Kate Winslett, Hugh Jackman, Emma Stone, Halle Berry, Patrick Warburton, and so many others could let themselves end up in a movie that bad.  I don't think I could quantify just how bad this movie was, and this is after going in knowing it was a January release. 

One other thing I noticed, was that before the 20 minutes of movie previews (!), was something I've never imagined would be possible.  It was a preview for a commercial.  There was a commercial preview at the movie theater before the movie previews, complete with a reference to go look up the product for the complete Super Commercial (I'm guessing the "premiere" of the commercial will be at the Super Bowl). 

We are screwed as a nation. 

(WOMBAT is an acronym that means "Waste of Money, Brains and Talent")

Wednesday, January 23, 2013

On Gas Storage

Continuing my studies from Texas Law of Oil and Gas, Second Edition, I am currently on the authors' section on Rights in Natural Gas Injected into Underground Reservoirs (This begins on Page 1-21 for those following at home). 

With regard to ownership over escaped oil, the authors note that disputed are more likely to be in the form of disclaimers as opposed to outright title assertions. 

They then note that there is a distinction between oil and natural gas in the matter.  When natural gas is injected underground for storage or other purposes, there can be legal title questions raised.  They then note that there are several relevant factors to consider when title to natural gas is disputed, including among others the reason for injecting, the structure of the underground reservoir, the contents, the ownership of rights to production from the reservoir and the applicability of the Underground Gas Storage and Conservation Act.

It makes sense that natural gas is used more in cold weather for heating, or during severe weather as opposed to fair weather.  In order to ensure a steady supply during periods of peak use, it makes sense that Natural Gas would be stored, and with gas, it also makes sense to make use of natural storage spaces, such as underground, such as from a previously depleted gas unit, or from leaching salt from a salt dome formation.  With regard to the former, there is one challenge - the depleted formation will invariably still have some gas from the original source, which the authors dub "native" gas. 

If we remember from our previous discussions, oil and gas that has been produced becomes Personal Property, as opposed to Real Property.  Being personal property, ownership of natural gas that is stored underground can be abandoned like other property.  If the storage company is unable or unwilling to assert control, such as through negligence, however, the Court in Lone Star Gas Co. v. Murchison, the authors note, held that the company that injected the gas that migrated to a part of the reservoir not subject to the company's storage rights had NOT abandoned the property because the primary tenet in the doctrine of abandonment is the intent to abandon, and the injecting company "unquestionably" planned to withdraw the gas during peak consumption.

Another concept of abandonment comes through the concept of commingling, where personal property which is fungible that belongs to two or more people becomes mixed in such a way that it's impossible to determine whose property belongs to whom.  The Texas Supreme Court has held that commingling is not grounds for abandonment based on commingling in Humble Oil  & Refining Co. v. West, where a reservoir that was still capable of producing (the book does not state whether it was producing, rather that it had not yet ended its productive life), was the target of injection.  The injecting company in that case had to pay royalty on the native-gas portion of the withdrawals, and had the burden of establishing with reasonable certainty the property of injected gas to native gas. 

That's plenty to read for now.  Next time, I'll try to touch on Pressure Maintenance and Cycling Operations.

Thursday, January 17, 2013

Ownership of Production

The other day, we touched briefly on the Ownership in Place Doctrine.  This was extremely brief based on the amount of free time I had at the moment, and, as always, encourage you to review Texas Law of Oil and Gas, Second Edition for a thorough review of this and any other topics discussed herein with regard to oil and gas law in Texas.

Today, we're going to go over the concept of Ownership of Production.  We know from previous study that Oil and Gas underground are part of the realty - in other words, they can be conveyed like and other interest in land, and they can be severed, as well.

This changes, however, once the Oil and Gas resources are produced.  As a matter of law in Texas, once produced, oil and gas becomes personal property, and therefore out of the purview of the Rule of Capture.  This means that once you get minerals to the mouth of the well, if (as the book gives for example), a pipe breaks and the oil flows across the surface of the operator's land onto adjacent property, then the owner of that property's mineral estate does not automatically gain control of the oil.  With respect to gas, the authors cite Lone Star Gas Co. v. Murchison (353 S.W.2d 870 (Tex.Civ App. - Dallas 1962, writ ref'd n.r.e.)), where natural gas that is pumped into an underground reservoir for storage purposes by an injecting company, said natural gas retains its character as personal property. 

This seems to be the logical position - once you've take steps to retain the minerals, such as injecting the gas into a depleted reservoir, you are not "unproducing" the minerals, and as long as you retain control, then you aren't abandoning it.  As it stands, the authors note that the Underground Gas Storage and Conservation Act (Tex. Nat. Res. Code Ann. Sec. 91.171 - 91.184) actually outright states that natural gas is the personal property of the injector and not subject to the rule of capture.

This concept of classifying produced oil and gas as personal property does contain legal consequences, such as disposition on death, as well as what controls the sale - e.g. from the statute of frauds doctrine to the USS, as well as the type of security interest that can be acquired.

I will try to discuss the authors' section on Gas Storage in the next day or so.

Tuesday, January 15, 2013

Ownership in Place

The State of Texas adopted the Ownership-in-place theory in 1915.  The premise is that because oil and gas resources lie in the ground, by necessity, they are part of the realty.  The authors of Texas Law of Oil and Gas (see Previous Post) cite Texas Co. v. Daugherty (107 Tex. 226, 176 S.W. 717 (1915), which I won't re-state here. 

The same case addressed the issue of what the authors dub the "fugitive" nature of oil and gas by noting that the materials are as likely to flow from the ground just as one who purchases solid minerals (e.g. coal) runs the risk that the minerals are not there.  If the minerals are present, then they can be exploited. 

Texas uses the Correlative Rights doctrine and the fact that claims of injury from drainage from adjacent property is based on conjecture to address the drainage issues.

More later.

Monday, January 14, 2013

Mineral Ownership Principals

This post is probably going to be boring for anyone reading it, because I'm basically re-stating the Texas Law of Oil and Gas, Second Edition, by Ernest E. Smitha nd Jacqueline Lang Weaver (I'm reviewing my work right now, and hope that this will help the study sink in that much deeper).  Nothing I am writing is new, and while I am trying to re-state it, the ideas come from their research and writing.  If I'm misstating what they've said, then I welcome corrections, however, I will not be posting any other citations for their work beyond this paragraph. 

In Oil and Gas law, particularly here in Texas (which I single out due to the fact that my study materials are for Texas Oil and Gas Law), perhaps the first issue one encounters when dealing with Oil and Gas after locating it is the question, "Who owns it?"  over the years, the concept that has controlled has been the Rule of Capture. 

As the authors note, "the probable reason for the urle of capture was not so much the legal analogies but practical necessity."  The concept apparently was adopted earliest in Appalachia and here in Texas beginning in 1910. 

The basic notion of the Rule of Capture is, essentially, that a person owns all of the oil and gas produced by a well on his land, even if the well is draining oil and gas from underneath other properties.  Note that this applies to wells that are bottomed on their land, not a well that has begun on their property and angled into another person's property - that would be a trespass.

There are remedies for the owner whose minerals are being drained, such as an offset wel.  The landowners, in Texas, has this ability, as recognized by the Texas Supreme Court. 

There is a lot to go through in this book, and I'm going to be doing it relatively piecemeal, so bear with me.

Again, this is the "lite" version of the material - please read Texas Law of Oil and Gas, Second Edition for a thorough working of the law.

Saturday, January 12, 2013


I must say, I was kind of hoping that Peyton would fare a bit better than he did. While I think that pass was quite the mistake, I also think it's unfair to place the blame for the loss on his shoulders. He wasn't the one who gave up a 70 yard touchdown pass in the last two minutes of regulation to put the game in overtime. On another note - I am not necessarily a fan of how Alex Smith got jobbed in San Francisco, but I'm happy to see the 49ers win and bid good evening to Green Bay's playoff season.

Thursday, January 10, 2013


I'm watching 2 and a half men, and they just finished a musical number called "You're a douche." I don't think I've ever heard the word douche used so much in any one day, let alone 5 minutes. Now, I know the sow was never exactly high brow, but man, this is painful to watch anymore. I do hope this is it for the show.

Tuesday, January 08, 2013

Another New Year

I'm not convinced anybody is still reading this, and I'm definitely not convinced that I'll be posting any more regularly than I have the past couple of years, but to those who are still out there - Happy New Year!