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88 Cards in this Set

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TBE Oil and Gas #1

The __ __ __ __ limits the rule of capture and gives every oil & gas owner a right to __ __ __ __ oil & gas in a __ __ resevoir __ her property.
The DOCTRINE OF CORRELATIVE RIGHTS limits the rule of capture and gives every oil & gas owner a right to FAIR OPPORTUNITY TO PRODUCE oil & gas in a COMMON resevoir BENEATH her property.
TBE Oil and Gas #2

The three situtations where an oil & gas owner is protected by the doctrine of correlative rights are ...
(1) Negligently draining oil or gas---e.g., driller on adjacent tract negligently drills a blowout that drains the common resevoir;

(2) Illegally draining oil or gas---e.g., producer on adjacent tract produces in violaiton of Railroad Comm'n order or regulation;

(3) Draining stored gas---e.g., if producer on adjacent tract produces on gas resevoir that contains stored (reinjected) gas, then storer is entitled to compensation for drainage of stored gas after carrying burden of showing how much of the drained gas was stored and not native.
TBE Oil and Gas #3

Until __, a fee simple interest in property owns __ the surface interest __ the minerals beneath.
Until SEVERANCE, a fee simple interest in property owns BOTH the surface interest AND the minerals beneath.
TBE Oil and Gas #4

The mineral interest owner's rights are ...
(1) the right to development---the exclusive right to use the surface estate as reasonably necessary explore, produce, and develop minerals;

(2) the executive right---the right to lease the minerals interest;

(3) the traditional economic benefits of an oil and gas lease (unless otherwise agreed).
TBE Oil and Gas #5

The traditional economic benefits of an oil and gas lease include ...
(1) bonus---an upfront payment for sigining the lease, usually based on a certain amount per acre leased (e.g., $10/acre);

(2) royalty---a fractional share of any oil & gas produced that is free of production costs (usually 1/8);

(3) delay rentals---compensation for deferring drilling during the primary term of the lease;

and

(4) production payments---a fractional share of all oil & gas that may be produced that is free of production costs until lessor has received a sum certain.
TBE Oil and Gas #6

The dominant mineral estate doctrine means that ...
... the mineral estate is dominant over a surface estate and the owner of a mineral estate may use the surface estate as REASONABLY NECESSARY to develop oil & gas.
TBE Oil and Gas #7

According to the Accommodation Doctrine, a __ __ __ must accommodate __ of the __ __ __ if __ of the following conditions are met: ...
According to the Accommodation Doctrine, a MINERAL INTEREST OWNER must accommodate USES of the SURFACE ESTATE OWNER if BOTH of the following three conditions are met:

(1) PREEXISTING USE---the surface owner's use was preexisting; and

(2) REASONABLE ALTERNATIVE AVAILABLE ON THE SURFACE ESTATE---the mineral interest owner has a reasonable alternative (not unreasonably costly) that is available without having to take action on surface somewhere other than the surface estate.
TBE Oil and Gas #8

Unless agreed otherwise, the traditional lessee's interests created by an oil & gas lease are ...
(1) a FEE SIMPLE DETERMINABLE, which is determinable on the passing of the primary term without production and without the lessee paying delay rentals;

(2) a WORKING INTEREST, which is the exclusive right to explore, develop, and produce; and

(3) an OBLIGATION TO ALL COSTS, which applies to 100% of exploration, production, and development.

TBE Oil and Gas #9

Unless agreed otherwise, the traditional lessor's interests created by an oil & gas lease are ...
(1) a POSSIBILITY OF REVERTER, which is a future interest in the minerals possessory only on the passing of the primary term without lessee's production and without lessee paying delay rentals;

(2) a ROYALTY INTEREST, which is a share of production that is free of production costs.
TBE Oil and Gas #10

A nonparticipating royalty interest (NPRI) is ...
... is created when when a mineral estate owner conveys ONLY her royalty interest to a grantee or reserves ONLY her royalty interest to herself when conveying the mineral estate; their owners DO NOT PARTICIPATE in any LEASE, but they still retain a royalty interest.
TBE Oil and Gas #11

Unless otherwise specified by conveyance, NPRIs usually do not receive rights to ...
... delay rentals, bonuses, or production payments.
TBE Oil and Gas #12

A nonparticipating mineral interest (NPMI) is ...
... given to a grantee when a mineral estate owner conveys part of the mineral estate and RESERVES the EXECUTIVE RIGHT (right to lease); their owners DO NOT PARTICIPATE in any LEASE, but they still retain the economic benefits of the MINERAL INTEREST (bonuses, royalties, delay rentals, and production payments).
TBE Oil and Gas #13

If a deed reads O gives A "a 1/16 royalty" on Blackacre's mineral interest, O later leases Blackacre mineral interest to B and reserves a 1/8 royalty, and B produces, then A gets__ and O gets __.
A gets 1/16 OF ALL PRODUCTION and O gets 1/8 ROYALTY OF THE LEASE MINUS THE 1/16 OF ALL PRODUCTION HE PAYS TO A.
TBE Oil and Gas #14

If a deed reads O gives A "a 1/16 of royalty" on Blackacre's mineral interest, O later leases Blackacre mineral interest to B and reserves a 1/8 royalty, and B produces, then A gets__ and O gets __.
A gets 1/16 OF O'S ROYALTY (1/16*1/8 = 1/128 of all production) and O gets 1/8 ROYALTY OF THE LEASE MINUS THE 1/16 of that royalty (or 1/128 of all production) HE PAYS TO A.
TBE Oil and Gas #15

Every cotenant __ drill and produce or lease his undivided share __ consent of the other cotenants.
Every cotenant MAY drill and produce or lease his undivided share WITHOUT consent of the other cotenants.
TBE Oil and Gas #16

If a cotenant drills and produces or leases his undivided share, he must ...
... account to the others fro their RIGHTFUL SHARE OF THE PROFITS OF PRODUCTION.
TBE Oil and Gas #17

Profits of production are calculated as ...
... production revenues minus production costs.
TBE Oil and Gas #18

Production costs include __ __ and __ __ costs on __ __.
Production costs include REASONABLE DRILLING and REASONABLE OPERATING costs on PRODUCTIVE WELLS.
TBE Oil and Gas #19

When accounting to cotenants for their rightful share, a producing or leasing cotenant __ assess dry hole costs against unleasing cotenants.
When accounting to cotenants for their rightful share, a producing or leasing cotenant CANNOT assess dry hole costs against unleasing cotenants.
TBE Oil and Gas #20

An unleased cotenant may __ a lease that __ __ __ __, which will ...
An unleased cotenant may RATIFY a lease that PURPORTS TO COVER HIS INTEREST, which will convert his rightful share of profits of production to a rightful share of the lessor's interest.
TBE Oil and Gas #21

In Texas, a cotenant has an absolute right to __ property, which is a judicial proceeding and may be done either __ __ or by __ __, but __ __ is favored.
In Texas, a cotenant has an absolute right to PARTITION property, which is a judicial proceeding and may be done either IN KIND or by FORCED SALE, but IN KIND is favored.
TBE Oil and Gas #22

__ a life tenant __ a remainder man may grant a valid oil & gas lease without __ __ __ __.
NEITHER a life tenant NOR a remainder man may grant a valid oil & gas lease without JOINDER OF THE OTHER.
TBE Oil and Gas #23

Unless otherwise agreed, life tenant in a valid mineral lease gets ...
(1) CURRENT INCOME & INTEREST---including 100% of delay rentals plus INTEREST only on bonus and royalty;

and

(2) ALL BENEFITS OF PREEXISTING USE AND LEASES---per the OPEN MINES doctrine, the life tenant takes the benefits of the property as used when she received the life estate.
TBE Oil and Gas #24

When accounting for life tenants by trusts existing before 2004 and the trust is silent as to grantor's intent regarding distribution, ...
(1) life tenant gets delay rentals plus 72.5% of bonus & royalty plus interest on remaining bonus & royalty;

and

(2) remaining 27.5% of bonus and royalty is reserved for remaindermen to take upon life tenant's death.
TBE Oil and Gas #25

When accounting for life tenants by trusts existing after 2004 and the trust is silent as to grantor's intent regarding distribution, ...
(1) life tenant gets nominal delay rentals plus an equitable share (85% presumed equitable) of all other proceeds;

and

(2) remaining equitable share of all other proceeds is reserved for remaindermen to take upon life tenant's death.
TBE Oil and Gas #26

If a mortgagee executes and records before a mineral lease is executed, ...
... any subsequent mineral lessor's interest will be subject (junior) to the mortgage lien.
TBE Oil and Gas #27

If a mineral lease is executed and recorded before a mortgage is executed, ...
... any subsequent mortgage will be will be junior to the mineral lease and the lease cannot be foreclosed upon because the mortgagee-lender is presumed to have knowledge of the lease.
TBE Oil and Gas #28

According to the doctrine of marshalling the assets, ...
... a foreclosing mortgagee must sell surface interests and assets of mortgaged property to satisfy a debt before selling the mineral interests of the mortgaged property.
TBE Oil and Gas #29

The fourt basic types of oil & gas trespass are ...
(1) ordinary trespass---e.g., the lease expires, but the lessee holds-over;

(2) slant-well drilling;

(3) wrongful dry well---e.g., when trespassing lessee enters and drills a dry hole, the trespasser is liable to the mineral interest holder for the value (bonus money) he would have received before the world found out the field was dry;

(4) geophysical or seismic trespass---e.g., the trespasser PHYSICALLY ENTERS and explores on the land.
TBE Oil and Gas #30

Respectively, remedies for the following are:

(1) ordinary trespass:__;

(2) slant-well drilling:__;

(3) wrongful dry well:__;

(4) geophysical or seismic trespass:__.
(1) ordinary trespass: INJUNCTION & DAMAGES (INCLUDING POSSIBLE PUNITIVES);

(2) slant-well drilling: INJUNCTION & DAMAGES (INCLUDING POSSIBLE PUNITIVES);

(3) wrongful dry well: DAMAGES FOR LOST BONUS ONLY;

(4) geophysical or seismic trespass: TORT IS WAIVED AND SUIT IS ON ASSUMPSIT FOR THE CONTRACT THAT WOULD HAVE BEEN ENTERED INTO FOR THE MARKET VALUE OF RIGHT TO EXPLORE.
TBE Oil and Gas #31

Drainage caused from fractures formed by siesmic exploration performed on the surface of an adjoining tract or repressuring beneath an adjoinging tract is __ __ because ...
NOT ACTIONABLE because DRAINAGE FROM MERE FRACTURING IS PROTECTED UNDER THE RULE OF CAPTURE.
TBE Oil and Gas #32

A __ __ trespasser has an __ & __ belief in the superiority of his title and damages against him will be reduced by ...
A GOOD FAITH trespasser has an HONEST & REASONABLE belief in the superiority of his title and damages against him will be reduced by HIS COSTS INCURRED IN ANY PRODUCTIONS BENEFITING THE RIGHTFUL OWNER.
TBE Oil and Gas #33

A bad faith producing trespasser is liable for ...
... the gross value of production from the well (all revenues without subtracting costs).
TBE Oil and Gas #34

In Texas, a trespasser drilling during the pendency of a lawsuit over the land is a __ __ __, unless ...
BAD FAITH TRESPASSER, unless he is also a COTENANT TO AN UNDISPUTED FRACTIONAL INTEREST OF THE MINERAL ESTATE.
TBE Oil and Gas #35

Slander of title is ...
... a cause of action in tort resulting from:

(1) publication of a false claim of title ot the property;

(2) done with malice;

and

(3) causing the rightful owner to lose a specific conveyance opportunity about the land.
TBE Oil and Gas #36

When possession begins before surface and mineral interests severance, adverse possession of the surface gives the adverse possessor ...
... title to BOTH interests.
TBE Oil and Gas #37

When adverse possession begins after surface and mineral severance, adverse possession of the surface gives the adverse possessor ...
... title to the surface estate only; the adverse possessor must separately establish title to the mineral estate.
TBE Oil and Gas #38

In Texas, mother hubbard clauses will not be read to include ...
... large contiguous tracts of land.
TBE Oil and Gas #39

The __ clause sets for the rights given by lessor to the lessee and a description of the property.
The GRANTING clause sets for the rights given by lessor to the lessee and a description of the property.
TBE Oil and Gas #40

A mother hubbard clause in a lease provides that ...
... the lease covers all land owned by lessor adjacent to the land described.
TBE Oil and Gas #41

A habendum clause in a mineral lease generally ...
... has a PRIMARY TERM setting out a period during which the lessee has no obligation to drill and a SECONDARY TERM which has indefinite duration normally as long as minerals are produced from the estate.
TBE Oil and Gas #42

In Texas mineral leases, a well is "producing" when it is ...
... producing in paying quantities (PPQ), which occurs when REVENUE is more than ROYALTY PAYMENTS PLUS OPERATING COSTS; but drilling costs are sunk costs not factored into PPQ.
TBE Oil and Gas #43

If a well is PPQ, then the lessee's failure to produce __ __ __ UNLESS ...
... terminates the lease UNLESS the lessee may defend under (1) the TEMPORARY CESSATION DOCTINE, (2) the MARGINAL WELL DOCTRINE, (3) the REPUDIATION DOCTRINE, or (4) an EXPLICIT SAVINGS CLAUSE IN THE LEASE.
TBE Oil and Gas #44

According to the Temporary Cessation Doctrine,
... a sudden stoppage of the well will not terminate a lease if (1) the shutdown is short and temporary that is (2) from a mechanical breakdown or the like that (3) the lessee tries diligently to fix.
TBE Oil and Gas #45

According to the marginal well doctrine,
... as long as a lessee acts as a REASONABLY PRUDENT OPERATOR, he has a reasonable amount of time (as much as 17 months) to show that a low production well is capable of PPQ.
TBE Oil and Gas #46

According to the doctrine of repudiation, ...
... a lessee will not be required to PPQ during the period that the lessor obstructs the lessee from developing the lease.
TBE Oil and Gas #47

A __ __ clause authorizes a lessee to delay drilling or commencing production on during the primary term of the lease by ...
DELAY RENTAL CLAUSE ... paying a stipulated amount to the lessor.
TBE Oil and Gas #48

If a delay renatal clause reads "If opertions for drilling are not commenced by X , the lease shall terminate unless before X lessee pays" a sum certain to lessor and lessee neither commences nor pays, then ...
... the lease terminates.
TBE Oil and Gas #49

If a delay rental clause reads "Lessee agrees to either dill a well or pay delay rentals during the primary term" and lessee neither drills nor pays, then ...
... the lease remains alive and the lessor must sue for breech of contract.
TBE Oil and Gas #50

If a lessor accepts a late delay rental payment after a lease has terminated, then ...
... the lease is automatically revived because the lessor is estopped from denying its validity while accepting the late delay rental payment.
TBE Oil and Gas #51

If a lessor accepts a late royalty payment after a lease has terminated, then ...
... the lease is not revied, unless the lessee proves the formal requirements for estoppel, ratification, or revivor (including the statute of frauds).
TBE Oil and Gas #52

"Commencement of drilling" occurs when ...
... objective physical acts done on leased premises have been taken with the SUBJECTIVE INTENT to pursue the drilling operation to find oil and gas.
TBE Oil and Gas #53

The traditional savings clauses in a lease are ...
... clauses that keep a lease alive even though the lessee is not paying delay rentals or PPQ and include:

(1) Shut-in royalty clauses;

(2) dry hole clauses;

(3) continuous operations clauses;

(4) cessation of production clauses;

(5) force majeure clauses;

and

(6) a pooling clause.
TBE Oil and Gas #54

A shut-in royalty clause provides that ...
... the lessee can keep the lease alive by paying certain sums called shut-in royalties to lessor when a well capable of PPQ is shut-in for lack of a marketability (e.g., waiting for pipeline connection, waiting for better market).
TBE Oil and Gas #55

A dry hole clause provides that ...
... if lessee drills a dry hole, lessee can keep the lease alive by starting to drill another well on the estate within a stated period of time.
TBE Oil and Gas #56

A continuous operations clause provides that ...
... if the primary term ends before PPQ but while operations have commenced and were continuing, the lessee keeps the lease alive by continuing operations without cessation for a stated period.
TBE Oil and Gas #57

A cessation of production clause provides that ...
... if a well ceases production, the leseee can keep the lease alive by repairing and restoring production within a stated period.
TBE Oil and Gas #58

To keep a lease alive, lessees can __ their savings clauses so long as ...
... TACK; they do EXACTLY what each tacked savings clause requires (b/c they will be construed against the drafter).
TBE Oil and Gas #59

A force majeure clause provides that ...
... a lessee's performance is excused or postponed because of an unforeseeable event defined in the lease that actually prevents performance.
TBE Oil and Gas #60

A pooling clause provides that ...
... a lessee not PPQ on a tract may keep the lease alive by PPQ from a well on an adjoining tract it has leased and spliting the royalty from that well with the pooled lessors; lessees must exercise this right in good faith.
TBE Oil and Gas #61

A lessee who pools many leases into a gerrymandered unit with a very odd shape just days before one of the leases will expire will
... probably be found to have used his pooling rights in bad faith and the pooling will not save the lease from termination.
TBE Oil and Gas #62

A Pugh clause provides that ...
... when only part of an acreage has been pooled by the lessee, the lease will remain alive for the pooled unit and will terminate for the unpooled unit.
TBE Oil and Gas #63

NPRIs will be __ by a lessee exercising rights under a pooling clause, unless ...
UNAFFECTED ... unless the NPRI holder ratifies the pooling act.
TBE Oil and Gas #64

Unless otherwise agreed, a royalty based on production valued at the well gives the holder ...
... revenues free of production costs, but the holder must share in paying post-productions costs---i.e. dehydrating, pipeline compression, and transportation.
TBE Oil and Gas #65

Unless otherwise agreed, a royalty based on production valued by "market price at the well" gives the holder ...
... the price that similar product currently sells for in the spot market at the time the product is produced.
TBE Oil and Gas #66

A division order ...
... is a document written by a lessee informing a well's interest holders of their shares of the proceeds, which the interest holders will balance for themselves.
TBE Oil and Gas #67

Generally, division orders are __ __ __ , and interest holders paid under nonrevoked direct orders __ __ underpayments UNLESS the division order was executed before __ and __ the lease.
Generally, division orders are BINDING UNTIL REVOKED, and interest holders paid under nonrevoked direct orders CANNOT RECOVER underpayments UNLESS the division order was executed before AUGUST 26, 1991 and CONTRADICTS the lease.
TBE Oil and Gas #68

A payor on a division order can without payment only if...
(1) the payor has a reasonable doubt or dispute about title affecting distribution;

OR

(2) the payee refuses to sign the direct order, the direct order does not contradict the lease, and the direct order includes (a) an effective date, (b) a property description, (c) a fractional or decimal interest and type of interest claimed by payee, (d) authority to suspend payment for title disputes, and (e) provisions for valuation of settlements.
TBE Oil and Gas #69

The implied covenants in oil and gas leases are ...
(1) implied warranty of reasonably prudent operator standard of performance;

(2) implied covenenant to protect against drainage;

(3) implied covenant to market;

and

(4) implied covenant to develop.
TBE Oil and Gas #70

The implied covenant to protect against drainage requires ...
... that a lessee act as a REASONABLY PRUDENT OPERATOR to protect the leased premises from (1) substantial drainage that (2) the lessee could have offset by drilling a well profitable enough to PPQ and cover drilling costs (b/c lessee forced to drill).
TBE Oil and Gas #71

The implied covenant to market requires ...
... the lessee to market oil and gas as a reasonably prudent operator would (1) within a reasonable time at (2) the best price reasonable.
TBE Oil and Gas #72

The implied covenant to decelop requires ...
... the lessee to develop and drill where there is a REASONABLE EXPECTATION OF PROFIT; but it DOES NOT REQUIRE EXPLORATION.
TBE Oil and Gas #73

The duty owed to nonexecutive interest holders is one of __ __ __ __ __ __, and requires the executive interest holder to ...
UTMOST GOOD FAITH AND FAIR DEALING, and requires the executive interest holder to ACT WITH DUE REGARD FOR THE NONEXECUTIVE INTEREST & WILLINGLY EXECUTE LEASES A REASONABLY PRUDENT LANDOWNER WOULD.
TBE Oil and Gas #74

If an executive interest holder engages in egregious self-dealing that harms the nonexecutive interest, the executive interest will be held to ...
... a fiduciary duty to subordinate his own interests to that of the nonexecutive's.
TBE Oil and Gas #75

The nine substances that are minerals as matter of Texas law are ...
(1) building stone; (2) limestone; (3) caliche; (4) surface shale; (5) sand; (6) gravel; (7) any water; (8) near surface lignite (coal); and (8) iron ore.
TBE Oil and Gas #76

For mineral conveyances before __, minerals are ...
BEFORE JUNE 8, 1983 ...

(1) any of the nine substances defined by law;

AND

(2) any substance that ANY REASONABLE METHOD OF PRODUCTION would destroy the surface estate.
TBE Oil and Gas #77

For mineral conveyances AFTER __, minerals are ...
AFTER JUNE 8, 1983

(1) any of the nine substances defined by law;

AND

(2) any substance that is a mineral by its ORDINARY AND NATURAL MEANING.
TBE Oil and Gas #78

According to the nonapportionment rule, when property is divided after an oil & gas lease has been executed, ...
... the owners of the subdived interest are not entitled to an apportioned lease royalty payment, but they are entitled to an apportioned delay rental, and the implied covenant to protect against drainage will not apply for drainage from the former cotenants.
TBE Oil and Gas #79

If more than one estate owner enters into a lease with the lessee, then the lease will have a ...
... an IMPLIED POOLING effect because it is a COMMUNITY LEASE.
TBE Oil and Gas #80

The __ __ __ __ permits compulsory pooling if ...
MINERAL INTEREST POOLING ACT (MIPA);

(1) the field is discovered after March 8, 1961;

and

(2) the claimant makes a fair and reasonable offer to pool voluntarily.
TBE Oil and Gas #81

The Duhig doctrine applies to ...
... any chain of three or more conveyances where a grantor has overconveyed his interest; because deeds are construed against grantors, the overconveying grantor bears any loss for overconveyances (including loosing title).
TBE Oil and Gas #82

Classic language creating a royalty is ...
... minerals produced and saved.
TBE Oil and Gas #83

Classic language creating a mineral interest is ...
... minerals in and under.
TBE Oil and Gas #84

Texas Railroad Commission Rule 37 requires ...
(1) PERMITS---a permit to be obtained before any well is drilled;

(2) DIVISION---applicants for permits have at least 40 acres unless smaller tract owner can prove confiscation drainage and tract was subdivided before the land was leased or the oil was discovered.
TBE Oil and Gas #85

Texas Railroad Commission may issue rules limiting production so long as ...
... they prorate the limitation by the surface area acreage of the affected tract holders---e.g., owner of 40 acres surface will be able to produce four times what an owner of 10 acres surface could produce.
TBE Oil and Gas #86

The Relinquishment Act states that ...
... owners of land purchased from the state between 1895 and 1931 do not own the mineral interests to that land and may only exercise their executive rights to lease the minerals interests as agents and fiduciaries of the state; they may share equally with the state for all economic benefits of production, but they may not convey mineral interests (because they don't own them).
TBE Oil and Gas #87

The duty to plug wells is imposed on ...
(1st) operators---persons physically responsible for controlling the well immediately before abandonment or at cessation;

and

(2nd) nonoperators with working interests---e.g., lessees.

BUT, landowners and royalty interest holders are NOT responsible for plugging.
TBE Oil and Gas #88

The Texas Railroad Commission may order well plugging upon a finding of ...
... POTENTIAL POLLUTION, and does not have to wait for actual pollution to occur.