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12 Cards in this Set
- Front
- Back
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Rule of Capture |
An individual owns all the oil and gas extracted from a well on his land that is legally produced -The well bottoms on his land -O&G was produced in accordance with regulations |
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Justifications for Rule of Capture |
1. Self-help (don't like it, drill your own well) 2. Administrability (especially in the beginning, limitations in O&G measurment and technology made apportionment of damages difficult) |
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Problems with the Rule of Capture |
1. Little incentive for long term planning 2. Reservoir waste/damage 3. Negative short term incentives lead to requirement for intense regulation 4. Tragedy of the Commons (multipleindividuals, acting independently and in a rationally self-interested way, will deplete a shared limited resource, even when itis not in anyone's long-term interest to do so) |
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Kelly v. Ohio Oil Co. |
-D oil co. had wells along boundary of P's land, intentionally causing drainage -P alleged conversion but ct said no, exclusive right to take/qualified ownership -D owns all the oil and gas produced froma properly drilled well on D's land, even though a portion might be oildrained from P's land |
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Ownership in Place |
-Texas theory -Mineral estate ownership is in fee simple absolute -The landowner owns the O&G drained from under his land by a neighbor, but the rule of capture serves as a defenseagainst an action for conversion |
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Non-Ownership/Exclusive Right to Take/Qualified Ownership |
-Oklahoma theory (used in Kelly) -Analogous to Farea Naturae idea: exclusive right to hunt on your land, and once wildlife is within your dominion/control, you own it -Mineral ownership considered more like an easement |
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Correlative Rights - Explanation |
Each owner has right to take, but also owes duty not to harm/destroy other parties' rights or the reservoir/resource itself |
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Correlative Rights - Duties |
(a) Duty not to engage in unlawful production (b) Duty not to waste or unreasonably injure the reservoir (c) Duty to plug abandoned wells (d) Duty of care in the manner in which you drill |
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Tyner |
-D was using explosives to increase production -Neighbor sought to interfere based on damage to reservoir, correlative rights argument -Ct says not "damaging", just new technology. However, it is a nuisance. |
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Eliff v. Texon Drilling Co. |
-Damage to reservoir: blowout due to negligence -P's argument was that some of the oil that had been wasted was theirs -Ds said no, you hadn't taken it yet (ROC) -Ct: Ps entitled to compensation based on correlative rights (ROC does not protect intentional or negligent waste) |
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State Regulations |
-In TX, RRC -Allowed under the police power -Purpose is to prevent waste and protect correlative rights -Biggest limit on ROC |
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Wronski |
-Fair Share Doctrine -D's violation of RRC rules prevented P's from accessing the O&G they were entitled to |
