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					         Oil and Gas

               Class 4
   Trespass and Related Actions
Intro Discussion Conservation Regs
                Trespass Claims
• Underlying cause of action
  – When parties want determination of contested
    property rights
  – Although O&G is an agreement between the
    parties, not a pure contract based theory
  – Examples:
     • Lessor thinks the lease has expired, lessee thinks it’s
       alive
     • Lessee thinks lease gives broader rights
     • Either party’s interference with rights
         Other Related Claims
• Conversion: When resources have been taken
  and title is found to be lacking
• Damages to property claims: seismic and frac
  examples or classic surface damage example
• Accounting: details the profits owed to
  parties (unjust enrichment also)
              Problem Page 79
• Seeking right to conduct geophysical work on Blackacre
• 2005 – O (FSA)  A all the oil, gas and other minerals
  in and under and that may be produced from Blackacre
• 2006 – A  ½ of the mineral interest to B
• 2007 – B leases to X company
• Who can give permission for seismic work?
• What are potential liabilities if permission not
  obtained?
• What if you can’t get permission?
                  Permission
• What about the surface owner?
• What about the mineral owner?
• What mineral is the object of the geo work?
  – What if it’s uranium?
• What about rights of co-tenants?
                  Liabilities
• Tort = geophysical trespass
  – Maybe unlawful appropriation of trade secret
• Potential remedies:
  – Reasonable value of the geophysical right
  – Damages to the speculative value of property due
    to defendant’s actions
        What if no permission?
• Where else could the test be performed
  except the land in question?
  – Example of stepping v. shouting from classic
    trespass case
          Enron v. Worth p. 79
• Worth owns land
• Enron wants to conduct seismic operations
  – Acquire oil & gas lease and seismic permits from
    unleased mineral interests (attempted to acquire
    from Worth also)
• Enron initiates suit to enjoin interference
• Worth counterclaim
       Problem 1 – page 114
• A, B and C oil companies each hold
  leases to contiguous tracts
• Each drilled a producing well
• A decides to drill additional wells close to
  the boundaries of B and C’s tracts
  – Legal and practical consequences of A’s
    decision?
  Regulations Based on Reservoir
          Characteristics
• Common law rule of capture = encourages
  excessive drilling
• Modified and limited capture by statutes
  and regulations – “conservation laws”
        Conservation Goals
• Control the market
• Avoid waste
  – By producers
  – By government intervention
• Environmental concerns
         Administrative Law
      Impacts Field Significantly
• State legislature creates admin body
  – Delegated powers to make and enforce
    regulations and adjudicatory functions
     • Delegation doctrine issues arise
          Admin Jurisdiction
• Primary = as defined in express statutory
  authorization
  – Notice and comment requirements
• Continuing jurisdiction for modifications
• Final decision threshold
  – Then Administrative Procedures Act govern
    challenges
              Chevron Rule
• Deference to administrative agencies,
  particularly where highly technical
  expertise is involved
• Arbitrary and capricious standard
  – Look for state specific variations on federal
    standard of review
    Preemption Local v. State
• Local v. state government tensions
• See Model Code language p 128 making
  state conservations laws subject to local
  zoning and land-use regs
• Look for intent to preempt local police
  powers
  – But see state constitutional provisions and CO
    example
         Federal Preemption
• When can feds set minimum standards
  that exceed state standards
  – Comprehensive schemes
  – Statutes of general applicability
         Regulatory Takings
• Deprivation of property interest where govt
  (at any level) deprives economic value by
  regulation
  – If total taking, compensation required to avoid
    5th amendment problem
  – Balancing test of property interest v. govt
    protection of health and welfare
           Eminent Domain
• If surface is taken under public use
  doctrine, and severed estate would be
  impacted
  – Inverse condemnation claims from mineral
    estate holder
  – Showing that use and enjoyment is
    impossible required for compensation
    Exploration & Well Permits
• Govt issues permit to conduct the activity
  – Notice to surface owner
  – Clean up requirements
• Limitation on capture rules
  – Govt permission to drill
  – Well location and posting of bond
  – Compliance with envtl requirements
     Additional Regs to Address
         Capture Concerns
• Special permit to deviate from vertical
  wells
• On-going survey requirements
• Plug and abandon rules
            Spacing/Density
• Min distances b/t wells
  – Statewide defaults
  – Within a given field
• Spacing from boundary lines
• See Model Conservation Act excerpt p.
  134
              Spacing Unit
• Single well in particular place within
  reservoir
  – May include production allowable within
    spacing unit
  – But deviations can be permitted for economic
    or recovery reasons

				
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posted:8/10/2012
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