Oil & Gas: Interference W/oil & Gas Interests

Front 1

Trespass
1. Ordinary trespass: lease expires but lessee stays on tract
2. Slant well drilling: bottoming a well beneath someone else's tract

Damages: injunction, damages, possible punitive damages

Back 1

3) Drilling dry well (damage to speculative lease value) --> lost bonus
4) Geophysical or seismic trespass --> sue in assumpsit for market value of right to do seismic explo

Front 2

Geophysical Trespass

2 TX courts: vibrations through another's land do not constitute trespass when explorer never enters surface of tract

Back 2

Fracturing a well by cracking the underground formation w/massive fluid injections can result in cracks that extend across lease lines and cause drainage from another's tract.

SC held that oil drained through fracturing is protected under Rule of Capture. Not a trespass; no injunction to stop authorized secondary recovery operations.

Front 3

TX SC has held that repressuring operations approved by RPC do not constitute trespass. No injunction; public policy favors recovering more oil and gas.

Back 3

Possibility of suing for damages (especially nuisance suit).

Damages probably measured by lost value of any oil and gas that could have produced by his own efforts without benefitting from repressuring.

Front 4

Trespasser state of mind is relevant to damages.

If trespasser had honest/reasonable belief in superiority of title, he gets credit for production costs so long as costs benefited rightful owner.

* So, costs of drilling a dry well doesn't count.

Back 4

Bad faith trespasser liable for gross value of well production. In TX, trespasser is in bad faith as a matter of law if he drills during pendency of a lawsuit over title to land, UNLESS trepasser is a cotenant to an undisputed fractional interest of ME.

Front 5

Slander of Title: Tort CoA

P must prove:
1) Publication of false claim of property title;
2) w/malice; and
3) Resulting in Rightful Owner losing specific sale or leasing opportunity

Back 5

Damages are measured by difference between lease market value @time of slander and its value at trial w/o cloud on the title

Front 6

TX Adverse Possession Rules apply to O&G interests

1) If possession begins before severance, AP of surface gives AP title to SE and ME

2) If possession begins after severance, possession of SE will not give AP title to ME. AP must separately establish title to ME via separate act of possession

Back 6

AP of unsevered surface estate gets unsevered minerals also.

* If AP started on unsevered tract, T will probably gain title to minerals unless T is ousted by Rightful Owner before prescriptive period ends.