Oil, Gas & Energy

Monday, June 24, 2019

Property Rights and Oil/Gas Exploration in Texas

Oil and gas exploration in Texas are guided by two kinds of property rights: the surface estate and the mineral estate. Often, the surface and mineral estate are owned by a single person. However, this isn’t always the case, as property owners sometimes choose to sell one estate and keep the other. However, when transferring property rights, a property owner must explicitly transfer ownership of only one of the two estates. Without this explicit transfer of one estate, both estates will automatically transfer to the new owner of the property.
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Friday, June 21, 2019

About the Rule of Capture and the Correlative Rights Doctrine

In the United States, the rule of capture and the correlative rights doctrine are the two primary laws that address oil and gas extraction. The rule of capture permits a producer to extract oil or gas from beneath its land without regard for adjacent properties. In other words, it doesn’t matter if some of the extracted oil or gas originated under a piece of property not owned by the producer. Thus, the rule of capture tends to incentivize the rapid extraction of oil and gas. The correlative rights doctrine, on the other hand, attempts to cure this issue by limiting the amount of oil or gas adjacent landowners may extract.
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Thursday, May 16, 2019

An Overview of CERCLA Enforcement and Penalties

The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) provides federal funds to clean up uncontrolled or abandoned hazardous waste sites, accidents, spills, and other emergency releases of pollutants and contaminants into the environment. Below is an overview of enforcement and penalties under CERCLA. 

Enforcement under CERCLA   

CERCLA provides the Environmental Protection Agency (EPA) with the authority to ensure the cleanup of the above pollutants. For example:

  • EPA can clean hazardous sites and later recover cleanup costs from responsible parties.
  • EPA can gather information, access a site, and seek penalties for non-compliance with agreements and orders.

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Thursday, March 28, 2019

The Timely Payment of Oil and Gas Royalties in Texas

In Texas, royalties for oil and gas production are due at least 120 days after the end of the month of first sale of production from a well. This timeline allows operators approximately four months after a well starts producing to complete required administrative tasks and begin paying royalties. After this, royalties are payable 60 days or 90 days after the end of the month in which subsequent production is sold. However, operators are not required to make timely royalty payments if the royalty owner’s interest is subject to a title defect or a royalty owner declines to sign a division order. Below is some additional information about the timely payment of oil and gas royalties in Texas.
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Thursday, March 14, 2019

About Oil and Gas Survey Permits in Texas

Oil and gas pipeline construction is rampant in Texas. And when oil or gas pipelines are constructed, landowners are typically contacted by builders for easements and survey permission. While some landowners give immediate permission to builders, it is usually advisable to use an appropriate survey permit to govern the pipeline company’s surveying activities, particularly for seismic or geophysical permits. Thus, both landowners and oil and gas companies should understand such permits, as they are a common legal component of oil and gas pipeline construction. Below is some additional information on oil and gas survey permits in Texas.
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Tuesday, February 26, 2019

Avoid These Common Oil and Gas Lease Mistakes

The negotiation of oil and gas leases can be extremely complicated. Attributes such as patience,  knowledge, and experience are all required to successfully negotiate such leases. And unfortunately, mineral owners who attempt to negotiate gas and oil leases alone often end up making mistakes. However, with the assistance of an experienced

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Tuesday, February 5, 2019

What is a Choice of Law Provision in a Texas Oil or Gas Contract?

Texas courts will generally enforce oil and gas contracts as they are written unless a violation of statutory law or public policy is present. This enforceability principle applies to choice of law provisions that are common in oil and gas contracts. Below is an overview of choice of law provisions in Texas oil and gas contracts.

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Monday, January 28, 2019

What is a Farmout Agreement?

Farmout agreements are common in the oil and gas industry.  A farmout agreement is a contract in which an interest owner (“farmor”) agrees to assign interest to another party (“farmee”) in exchange for certain services. Once these services have been rendered, the farmee has earned what is known as an assignment. The assignment, which is a royalty interest, is also called a convertible override, which means that the farmor can elect to convert this override into a portion of the working interest following payout. The decision of whether to convert or not is dependent upon whether the farmer wants to share production costs in exchange for a possible increased return.
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Friday, January 25, 2019

Recent Oil Contract Case Provides Important Lessons

A case that was recently filed in the Texas Supreme Court involves an issue familiar to those in the oil industry: farmout agreement interpretation. The case, Barrow-Shaver Res. Co v. Carrizo Oil & Gas, Inc., involves a question of whether one party to an agreement may arbitrarily withhold consent from the other to take certain actions or whether consent may only be withheld if reasonable.
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Thursday, December 27, 2018

About Joint Operating Agreements

A commonly used instrument in the oil and gas industry is the joint operating agreement. A joint operating agreement is a contract for the exploration, development, and production of gas and oil properties among cotenants. Below is an overview of joint operating agreements in Texas.

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Monday, December 10, 2018

The Unintended Consequences of the Shale Oil Boom

The shale revolution in the Permian Basin has helped trigger an energy production boom in the U.S. This development has far reaching, positive implications -- from mitigating the nation’s dependence on foreign oil to reducing the trade deficit to fostering economic growth. There is a downside, however, as the region has been saturated with oil production, which has driven up production costs and depressed the price of oil in the region.

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