Oil and Gas Law Basics
May 21, 2018
Oil and gas laws in the United States address issues involving the acquisition and ownership of oil and gas. These laws commonly affect those who lease the rights to drill for and produce these substances. Below is an overview of some of the legal issues affecting the acquisition and ownership of oil and gas in the United States.
Regulation and Ownership
The extraction of oil and gas in the United States is generally regulated by each individual state. And as opposed to some other countries, oil and gas rights in the United States may be owned by private individuals and corporations. Generally speaking, oil and gas rights extend downward from the property line, and such rights are owned by the surface landowner. Oil and gas rights offshore, however, are owned by federal or state governments. And as oil and gas sometimes flow across property boundaries, states generally permit operators to extract these fluids from beneath the property of other owners if such extractions are lawfully conducted. However, an operator is not permitted to angle a well to penetrate under the property of another.
Capture and Correlative Rights
There are two primary legal doctrines that address oil and gas extraction in the United States: the rule of capture and the correlative rights doctrine. State law dictates whether the rule of capture or correlative rights doctrine is applicable. The rule of capture allows oil producers to drain oil from underneath their land regardless of whether some of the oil originated from beneath the property of another. This rule provides incentive to landowners to pump oil as quickly as possible by drilling multiple wells or accelerating operations in order to capture the oil of neighboring properties. The correlative rights doctrine, on the other hand, limits the rights of landowners with underlying oil or gas to a reasonable share of the same, and what is considered reasonable is typically based on the amount of property owned by each party.
Texas Oil and Gas Attorney
Oil and gas laws are always changing. Therefore, it’s imperative that those involved in the energy industry have reliable, experienced, and knowledgeable legal representation to help guide them through the ever-changing energy landscape. In the areas of oil and gas, it’s particularly important to ensure that all contracts are properly drafted. Oil and gas contracts are sophisticated documents, and it’s important that they be drafted in a manner that ensures the rights and responsibilities of all parties involved. At the Law Office of C. William Smalling, P.C., we are highly experienced in the drafting and review of such contracts, including joint operating agreements, farm-out agreements, master service agreements, drilling contracts, licensing agreements for use of seismic or technical data, and nondisclosure agreements. If you are in need of expert oil and gas legal representation, contact us today for a consultation.