Oil And Gas Law Ou

Front 1

A "pugh" clause in a partial termination clause commonly associated with a process that combined mineral acres to create a drilling and spacing unit. THis process is known as _________

Back 1

Pooling

Front 2

Which estate is dominant? Mineral or surface?

Back 2

Mineral

Front 3

Oil and gas law combines several different disciplines of civil law. List them

Back 3

tax law, tort law, real property law, environmental law, contract law

Front 4

Which states use metes and bounds to describe land?

Back 4

original 13 states and kentucky, tennessee, and ohio

Front 5

How does metes and bounds describe land?

Back 5

by reference to exterior boundary lines and monuments

Front 6

what is the most common type of legal description used in an oil and gags conveyance?

Back 6

reference to a governmental survey - rectangular survey system

Front 7

which survey lines run N - S?

Back 7

Range or Meridian lines

Front 8

Which survey lines run E - W

Back 8

Base or Township lines

Front 9

how many acres are in a section

Back 9

640 acres

Front 10

How many miles are in a section?

Back 10

1 square mile

Front 11

How many sections are in a township?

Back 11

36

Front 12

Identify the correction sections in each township

Back 12

1-6, 7, 18, 19, 30, 31

Front 13

what are Oklahoma's 2 meridian lines called?

Back 13

Indian and Cimmaron

Front 14

The use of correction sections is one situation where lots are used in land descriptions. name 2 others:

Back 14

indian reservations, national parks

Front 15

Describe race (minority) that governs the recordation of conveyances and transfers of title

Back 15

the first person to file the deed has priority

Front 16

Describe race notice (majority) that governs the recordation of conveyances and transfers of title

Back 16

the first person who files the deed without notice of prior unrecorded claims was priority

Front 17

Describe race statute (50%) that governs the recordation of conveyances and transfers of title

Back 17

person with most recent claim who purchased without notice has priority

Front 18

name and describe the 3 types of notice

Back 18

actual - directly conveyed
inquiry - when info would have lead to further investigation
constructive - what person should know

Front 19

what are the 6 requirements for a valid instrument of conveyance?

Back 19

a writing
a signature
an accurate description of the land
words of grant
a grantor and grantee
delivery and acceptance of the instrument

Front 20

What is a quitclaim deed?

Back 20

conveys all grantor's rights without covenants of title (due diligence is important)

Front 21

What is a warranty deed?

Back 21

conveys rights described and includes covenants of title

Front 22

What are 2 instruments of conveyance used to sever minerals from the surface estate?

Back 22

warranty deed and mineral deed

Front 23

For a horizontal severance of minerals, what are 3 ways to create a lesser interest in the mineral estate?

Back 23

-by depth/footage
-by horizon/formation
-by stratigraphic equivalent

Front 24

when a cotenancy is created in the mineral estate, do all owners have same and independent rights to the mineral estate?

Back 24

yes

Front 25

what is a bonus?

Back 25

monetary payment made to mineral owner for the purpose of obtaining an oil and gas lease

Front 26

what is delay rental?

Back 26

payment made by lessee to lessor for the purpose of maintaining the o&g lease for a period of time during the primary term of the lease

Front 27

what is royalty?

Back 27

a non-cost bearing share in the oil and/or gas production

Front 28

what is the rule of capture?

Back 28

mineral owners can extract all o&g from beneath their land no matter where it migrates from, so long as they stay within their vertical boundaries

Front 29

correlative rights doctrine

Back 29

the right to produce oil and gas is subject to the duty not to commit waste or negligence

Front 30

Name 4 conservation laws

Back 30

well density
well location
well spacing
well production allowances

Front 31

what does a good faith trespasser recover?

Back 31

reasonable costs of drilling, completing, equipping, and producing the well

Front 32

what does a bad faith trespasser recover

Back 32

nothing. also may pay damages

Front 33

what are the lessee's objectives

Back 33

obtain the right to drill, produce, and market without obligation to develop

Front 34

discuss royalty interest

Back 34

it is the lessor's interest
the mineral owner gets the royalty
no costs are associated with it

Front 35

discuss leasehold interest and working interests

Back 35

cost-bearing interest
lessee's interest
pay for the development and production for a percentage of the profit

Front 36

discuss overriding royalty interest

Back 36

often given to geologists for putting together project
no costs associated with it
carved out of the working interest

Front 37

Identify the clause in an o&g lease:
"if lessee shall commence operations for drilling...operations are prosecuted with no cessation of more than 90 days..."

Back 37

Continuous operations clause

Front 38

Identify the clause in an o&g lease:
"should the first well be drilled...be a dry hole..."

Back 38

dry hole clause

Front 39

what 3 questions should be answered in a granting clause?

Back 39

what rights/uses are covered by grant?
what lands are described?
what substances are covered?

Front 40

Identify the clause:
"intention of lessor to include..all other land owned in lands adjacent or contiguous to lands described"

Back 40

Mother Hubbard Clause

Front 41

identify the clause:
"lease covers addition interest that he may acquire in the future"

Back 41

After acquired title clause

Front 42

What are the three rules that define production?

Back 42

actual production - marketing of oil or gas in paying quantities
discovery - discovery of oil or gas in paying quantifies
oil production and gas discovery - oil must be produced or gas discovered in paying quantities

Front 43

List and discuss the 2 tests to determine whether a well is producing in paying quantities

Back 43

objective - if the operating revenue exceeds the operating cost over a reasonable period of time resulting in a profit to the lessee
subjective - if the lack of production in paying quantities is reasonable and justified considering all circumstances

Front 44

identify the clause:
"if lessee commence to drill a well...the lessee shall have the right to drill such well to completion"

Back 44

continuous drilling clause

Front 45

What are the 2 types of drilling-delay rentals clauses?

Back 45

OR
Unless

Front 46

Does the lessee always have the right to pool even if there is no pooling clause, voluntary pooling agreement, or state statute?

Back 46

no

Front 47

what constitutes commencement of drilling operations?

Back 47

operations are conducted
good faith preparation for drilling
operations continued in good faith and due diligence
intention of completing the well

Front 48

what is pooling?

Back 48

bringing together leased and/or unleased tracts for purpose of drilling a well for joint benefit of all owners in pooled tract

Front 49

what is forced pooling?

Back 49

after meeting 4 prerequisites (attempted agreement, spacing order, notice, and forced pooling hearing), mineral owners may be ordered by a government administrative agency to pool their land under a single lessee

Front 50

What is required for pooling or unitization of federal and tribal indian lands?

Back 50

communitization agreement

Front 51

what is unitization

Back 51

bringing together well spacing units over a producing reservoir for the purpose of conducting joint operations for secondary or tertiary recovery

Front 52

What effect does pooling have on the oil and gas lease?

Back 52

one well satisfies the savings clauses (habendum, drilling) in each lease
royalty is shared proportionately

Front 53

Identify the clause:
"during any period when gas is not being sold...lessee must pay to lessor a royalty of $2/year"

Back 53

shut in gas well royalty clause

Front 54

Identify the clause:
"if production from land or poolage ceases from any cause after expiration of the primary term, lease shall not terminate provided..."

Back 54

cessation of production clause

Front 55

Discuss the Doctrine of Temporary Cessation

Back 55

it is considered when a specific well is not producing due to mechanical issues, injury, or loss of market. It allows the lease to remain in effect for a reasonable amount of time until the well can produce again in paying quantities

Front 56

For the OR type of drilling delay rentals clause, what is the consequence of non-payment

Back 56

not automatic termination

Front 57

For the UNLESS type of drilling delay rentals clause, what is the consequence of non-payment

Back 57

automatic termination of lease

Front 58

In addition to the cessation of production clause, what other condition is necessary for the lease to be saved?

Back 58

well must be capable of producing in paying quantities

Front 59

What are the 3 types of gas royalty clauses?

Back 59

market price
market value
gross proceeds

Front 60

why would an overriding royalty interest (ORRA) have to pay post-production costs?

Back 60

because he doesn't actually own the leased land and it is carved out of the working interest

Front 61

What post-production costs would be payed by the lessor/RI?

Back 61

gas compression, artificial lift, transportation, marketing, and taxes

Front 62

Is the covenant to reasonable develop the leased premises implied in the oil and gas lease?

Back 62

yes

Front 63

What is a top lease?

Back 63

when a lessor leases land to a leasee which has already been leased
a warranty clause can protect the top leasee so that he is guaranteed to receive the land

Front 64

What are the 3 types of drilling contracts?

Back 64

turnkey
footage
day work

Front 65

What are the 5 general requirements for a contract?

Back 65

-offer and acceptance of agreed upon terms and conditions
-2 or more parties with capacity to contract
-legal subject matter
-supported by consideration
-writing required if the contract can't be fully performed within 1 year or if it involves the transfer of an interest in a real property

Front 66

Name the 3 common support agreements

Back 66

dry hole agreement
bottom hole agreement
acreage contribution agreement

Front 67

what is a support agreement?

Back 67

a contract whereby a non-drilling party contributes money or acreage to the drilling party in return for geological, engineering, and other information from the well

Front 68

What conditions must be satisfied to earn a support agreement contribution?

Back 68

drill to certain depth
complete well with necessary tests

Front 69

What information is received for the contribution in a support agreement?

Back 69

daily drilling reports
seismic information
geologic maps

Front 70

Define and discuss a farmout agreement

Back 70

a contract to assign oil and gas lease rights in certain acreage upon the completion of drilling obligations and the performance of other covenants and conditions therein

Front 71

What are the benefits to the farmor in a farmout agreement?

Back 71

-well provides geological and engineering data for offset drilling
-well satisfies clauses and convenants in underlying o&g lease to extend life of lease
-farmor may obtain share of production without incurring costs of drilling, completing, and equipping well

Front 72

what are the benefits to the farmee in a farmout agreement?

Back 72

-acquires right to drill on a leasehold not otherwise available
-acquires right to drill without paying initial leasehold costs

Front 73

What is the difference between a covenant and a condition?

Back 73

breach of covenant does not result in termination of a lease, but breaching party is liable for monetary damages
breach of condition results in automatic termination of the lease upon happening of event

Front 74

Identify this farmout condition:
"the farmout acreage is earned and the leasehold interest is assigned when the test well is drilled to the target depth and tests the target formation"

Back 74

Drill to earn

Front 75

identify this farmout condition:
"the farmout acreage is earned and the leasehold interest is assigned when the test well is drilled, completes, and produces in paying quantities"

Back 75

produce to earn

Front 76

What is a JOA?

Back 76

a contract between working interest/leashold owners to jointly develop a designated area (contract area). It designates an operator and provides directives and conditions for drilling, producing, and reworking one or more wells in the contract area

Front 77

Why have there been 4 versions of the AAPL model form operating agreement?

Back 77

large changes in industry, technology, financial schemes (taxes), and businesses

Front 78

What 4 items must be agreed upon prior to entering into a JOA?

Back 78

operator
contract area
target formation/depth for the initial well
percentage interest for operating and non-operatinf parties in the contract area

Front 79

Is the 1989 AAPL Model Form Operating Agreement a standard JOA?

Back 79

no

Front 80

Define AFE

Back 80

authority for expenditure is put together as an estimate and summary of costs for a planned operation

Front 81

Define Contract Area

Back 81

the lands, oil and gas leases, and/or oil and gas interests that are to be developed and produced according to the agreement

Front 82

Define "drilling party" / "consenting party"

Back 82

the party that chooses to operate and pay its share of the costs for an agreed upon operation

Front 83

Define "non-drilling party" / "non-consenting party"

Back 83

the party that opts not to participate in an operation in the contract area

Front 84

What is contained in Article III: Interests of Parties in the 1989 JOA?

Back 84

division of costs and production
subsequently created interests

Front 85

Can the well be drilled prior to the title being examined? (Article IV: Titles)

Back 85

no

Front 86

All parties to the JOA are responsible for providing curative. What is curative?

Back 86

the parties must check the title for errors/bad info in agreement in order to make the title marketable

Front 87

How should an operator conduct operations in the JOA? (Article V)

Back 87

as a reasonable and prudent operator
in good and workmanlike manner
with due diligence and dispatch
in accordance with good oilfield practice
in compliance with applicable law and regulation

Front 88

What is the legal difference between a contractor and an agent?

Back 88

an operator isn't liable

Front 89

what does the "reasonable and prudent" standard mean for operators?

Back 89

won't knowingly break the law

Front 90

How is the relationship between operators and non-operators governed by state law?

Back 90

in express (not implied) terms of JOA

Front 91

What happens if a contract goes against a state law?

Back 91

it is void

Front 92

What does JIB stand for?

Back 92

joint interest billing

Front 93

What control does operator have in the contract area? (Article V)

Back 93

full control of contract area as controlled or permitted by JOA

Front 94

Do non-operators have access to the contract area and records?

Back 94

no

Front 95

What are 4 criteria under which an operator is deemed to have resigned without any action by the non-operators?

Back 95

termination of legal existence
no longer owns interest in contract area
no longer capable of being an operator
becomes insolvent, bankrupt, or in a receivership

Front 96

What are 4 transgressions that can cause the operator to be removed for good cause?

Back 96

gross negligence
material breach
material failure
obvious willful misconduct

Front 97

Where is a lien agreement most commonly filed?

Back 97

county clerk's office

Front 98

What is force majeure?

Back 98

it protects operators from forces of God/nature
e.g. if a hurricane or tornado causes a delay, the operator is protected from loss of lease

Front 99

How long is the election period given to a party deciding whether to participate in subsequent operations on a well?

Back 99

30 days after proper notice
48 hours in special cases such as when a rig is on location

Front 100

Is the gas balancing agreement always a separate agreement between the parties to the JOA?

Back 100

no

Front 101

What are 3 reasons why a non-sellng / non-marketing owner might not take its share of the gas?

Back 101

purchaser is not able to take the gas
owner has elected not to sell the gas
no gas purchase contract

Front 102

What are 3 alternative methods of gas balancing without a Gas Balance Agreement?

Back 102

balancing in kind
interim or periodic cash balancing
cash balancing upon depletion

Front 103

What is a Gas Balancing Agreement and what is it for?

Back 103

a contract between working interest owners that governs the taking and selling of gas and the case where there is an imbalance

Front 104

What is a balancing area?

Back 104

can be defined 3 ways (subject to the operating agreement):
a single well
separate formations
the entire acreage in a contract area

Front 105

What does MCF stand for?

Back 105

1000 cubic feet

Front 106

What does MMBTU stand for?

Back 106

1 million british thermal units

Front 107

Define underproduction

Back 107

the amount of gas not marketed by the under-producing party according to its working interest

Front 108

What are the organizations that put out the 2 most commonly used gas balance agreements?

Back 108

american association of professional landmen
rocky mountain mineral law foundation

Front 109

What is balancing in kind?

Back 109

occurs when overproduced party gives a portion of its own production to the underproducing party until such time as the imbalance is corrected