The Burton Law Firm, P.C. has over 17 years of experience in this area
of the law. If you have questions about this subject please call us
at 713-222-6262; or email Randy Burton at randy@burton-lawfirm.com
or David Torok at david@burton-lawfirm.com.
Oil and Gas Law
- What is an abandoned well?
A well no longer in use, whether because it was drilled as a dry hole, or has ceased to produce or for some other reason cannot be operated.
- What is an abstract of title?
A collection of all the recorded instruments affecting the title
to a tract of land.
- What is meant by allowable?
The amount of oil or gas which a well, leasehold, field, or
state is permitted to produce under proration orders of a state
regulatory commission.
- What is apportionment?
Division of royalties, and sometimes of other lease proceeds,
among the owners of interests in the land subject to the lease.
- What is an assignment clause?
A standard clause in an oil and gas lease, allowing the
free transfer of a lessor's or lessee's interest, in whole
or in part.
- What is meant by balancing?
The process by which persons having an interest in
production from a well, unit or reservoir adjust their take
therefrom to insure that each such person receives his
proportionate part of the production.
- What kind of a tool is a bit?
A drilling tool that cuts the hole. They are two different kinds
and purposes. One is to pulverize. The other is to grind.
- What is a blow out?
A sudden and violent explosion of oil, gas, mud and sometimes water
from a drilling well, followed by an uncontrolled flow from the well.
- What is a Blue Sky law?
A statute which regulates the issuance and sale of securities.
- How is bonus defined?
Usually, the cash consideration paid by the lessee for the
execution of an oil and gas lease by a landowner.
- What is a carried cost?
A fractional interest in oil and gas property, usually a lease,
the holder of which has no personal obligation for operating
costs, which are to be paid by the owner or owners of the
remaining fraction, who reimburse theinselves therefor out of
production.
- What is a cessation of production class?
A lease clause providing that under certain
circumstances a lease may be preserved
despite cessation of production in the primary
or secondary terms.
- What is a compensatory royalty clause?
A clause providing for the payment of a
royalty on oil produced from other premises in
lieu of drilling an obligatory well.
- What is compulsory pooling?
The bringing together, as required by law or a valid
order or regulation, of separately owned, or separate
interests in, small tracts sufficient for the granting of
a well permit.
- What is a continuous drilling operations clause?
A lease clause providing that a lease may be kept alive after the expiration of the primary terms and without
production by drilling operations of the type specified in the clause continuously pursued.
- How is a corporeal estate relevant in Texas?
In Texas, minerals are capable of corporeal ownership separate from the ownership of the surface.
- What is a default clause?
A clause found in some leases providing that in the event the
lessee violates any of the terms or conditions of the lease and
fails to remedy the violation within a stipulated time after
written notice from the lessor, the lessor, at his option, may
terminate the lease.
- What is a delay rental clause?
The lease clause providing for the payment of delay
rentals to keep a lease alive during the primary term
despite failure to obtain production or to commence
drilling operations.
- What does a division order do?
The order directs the purchaser of oil or gas to make
payment for the value of the products taken in the
proportions set out in the division order.
- What is a drilling operations clause?
A clause which operates to keep the lease alive after
the expiration of the primary term despite the failure
to obtain production by that time if drilling operations
are then being pursued.
- What is a dry hole clause?
A lease clause specieing the means by which a lessee may
keep a lease alive after the drilling of a dry hole.
- What is an escalator clause?
A clause in a gas purchase contract providing for progressive
increases in the price to be paid for gas during the term of the
contract.
- What is a force majeure clause?
A lease clause providing that failure of production
shall not cause automatic termination of the leasehold
estate and that the performance of the lessee's
covenants shall be excused when such failure of
production or performance of covenants is due to
causes specified in such clause.
- What is the purpose of a gathering line?
It is used to transport oil or gas from the lease
to the main pipeline area.
- What is a good faith clause?
A lease clause providing that the judgment of the lessee, when
not fraudulently exercised, in carrying out the purpose of the
lease, shall be conclusive.
- Who is a grantee?
The person to whom a grant or conveyance is made.
- Who is a grantor?
The person by whom a grant is made; such as a transferor of property or other interest.
- What is an Habendurn clause?
The clause in a deed or lease setting forth the duration
of the grantee's or lessee's interest in the premises.
- What is a horizontal severance?
A conveyance of all or some portion of the minerals
above or below or between specified depths.
- What is hydrocarbon?
An organic chemical compound of hydrogen and carbon,
commonly called petroleum.
- What is an incorporeal interest?
A non-possessory interest in real property; such as an
easement.
- What is the effect of a judicial ascertainment clause?
A lease shall not be terminated, cancelled or forfeited for failure to perform implied covenants, conditions
or obligations until it is judicially determined that such failure exists.
- Who is a landman?
An employee of an oil company whose primary duties are the
management of the company's relations with its landowners.
- What is a lease?
The instrument by which a leasehold or working interest is created in
minerals.
- What is a leasehold interest?
A leasehold interest is the interest of one holding as a grantee
or lessee under an oil and gas lease or lease of oil, gas and
other minerals.
- Who is a lessee?
The person entitled under an oil and gas lease to drill and operate
wells, paying the lessor a royalty and retaining the remainder.
- Who is a lessor?
The owner of mineral rights who has executed a lease.
- What is a marginal well?
A well incapable of production except by artificial lift and
when so equipped, capable of producing only a limited amount of oil.
- What is market price?
The price at which oil or gas is purchased and sold.
- What is market value?
The value of a product in the relevant market.
- What is a market value lease?
A lease under which the royalty payment to the lessor
is based on market value of the gas produced rather than the proceeds of sale of gas produced.
- What is the doctrine of merger?
In the absence of fraud, mistake, etc., the stipulations of a contract for purchase and sale of real property are
presumed to be merged in a subsequently delivered and accepted deed made in pursuance of such contract.
- Does the term minerals include oil and gas?
In most of the producing states the term includes oil and gas unless the instrument creating the mineral interest by grant or
reservation reveals that the parties intended the term to have a more restrictive meaning.
- What is meant by non-apportionment?
Allocation of royalties to a royalty owner having an interest in the specific parcel on which a producing well is located rather than
dividing royalties among the owners of interests in the land subject to the lease.
- What is a notice and demand clause?
A provision in oil and gas leases requiring the giving of notice of breach of an express or
implied duty under the lease and the making of demand for performance as a prerequisite to any legal action of the breach.
- What is an offset royalty?
A royalty payable under the provisions of an occasional lease in lieu of the drilling of an offset well.
- What is an offset royalty clause?
An express lease clause permitting the lessee to pay royalty in lieu of drilling an offset well.
- What is an offset covenant?
A contractual duty, either expressed or implied in an oil and gas lease, to use due diligence to protect the leasehold from drainage.
- What is an operating interest?
The mineral interest minus the royalty interest.
- What is an overriding royalty?
An interest in oil and gas produced at the surface, free
of the expense of production, and in addition to the usual landowner's royalty reserved to the lessor in an oil and gas lease.
- What is a participating royalty?
A royalty interest of a subsisting lease, if any, which shares in some other lease benefits than gross production.
- What is pooling?
The bringing together of small tracts sufficient for the granting of a
well permit under applicable spacing rules.
- Why is pooling important?
It prevents the drilling of unnecessary and uneconomic wells,
which will result in physical and economic waste.
- What is meant by primary term?
The period of time during which a lease may be kept
alive by a lessee even though there is no production in
paying quantities by virtue of drilling operations on
the lease land or the payment of rentals.
- What is proven reserves?
Oil that is still in the ground but that has been located and
determined to be recoverable.
- What is a Pugh clause?
The type of pooling clause which provides that drilling
operations on or production from a pooled unit or units shall
maintain the lease in force only as to lands included in such
unit or units.
- What is a release of record clause?
A lease clause designed to facilitate the quieting of the
lessor's title after the expiration, forfeiture or
termination of a lease by requiring that the lessor
execute and record an instrument evidencing the
discharge of the lease.
- What is the purpose of areworking clause?
The lease may be kept alive without
production during the continuance of
designated reworking operations.
- What are reworking operations?
Work performed on a well after its completion, in an
effort to secure production where there has been none,
restore production that has ceased or increase
production.
- Who is a roustabout?
A common laborer around a drilling or producing well.
- What is a royalty?
The landowner's share of production, free of expenses of production.
It can be paid in money or in kind.
- What does a secondary primary term mean?
It is the period subsequent to the expiration of
the primary term during which the lease may
be preserved without production by reason of
the provisions of a drilling operations clause
or a continuous operations clause.
- What does a shut-in gas well clause allow?
It authorizes a lessee to pay a shut-in gas well
royalty and thereby keep a lease alive without
actual production when and if a well has been
drilled which is capable of producing gas in
paying quantities but which is shut-in, usually
by reason of lack of a market.
- What is a shut-in royalty?
A payment made when a gas well, capable of producing in
paying quantities, is shut-in for lack of a market for the gas.
- What is a shut-in gas well?
A producing well that has been closed down temporarily for
repairs, cleaning out, building up pressure, lack of a market, etc.
- What is a subrogation clause?
A lease clause subrogating or subordinating the lessee
to any lien upon the leased premises which the lessee
elects to discharge in whole or in part.
- What is a surrender clause?
A lease clause authorizing the lessee to surrender all or part
of the leased premises.
- Why is a surrender clause important?
This allows a lessee to retain that portion of leased acreage which appears most promising
while relieving himself of obligations as concerns payment of rentals, protection,
exploration or development of that portion of the leased premises which appears to him to be least promising.
- What is a take-and-pay clause?
A clause in a gas contract requiring the purchaser to
take a specified quantity of gas and to pay for the same.
- Does a temporary cessation of production cause the termination of the lessee's interest in the
leasehold after the expiration of the primary term of a lease?
No.
- What is the Texas Railroad Commission?
The administrative agency of the State of Texas charged with the duty of making and enforcing conservation rules in the state.
- What is a title opinion?
A statement of opinion by an attorney, often in the form of a
letter, as to the state of the title to land, mineral, royalty or working interests.
- What is unitization?
A term often interchangeably used with pooling but more properly
used to denominate the joint operation of all or some portion of a
producing reservoir, as distinguished from pooling.
- When is unitization important?
It is important where there is separate ownership of
portions of the rights in a common producing pool in
order that it may be made economically feasible to
engage in cycling, pressure maintenance or secondary
recovery operations and to explore for minerals at
considerable depths.
- What is a volume variation adjustment clause?
A gas tariff provision designed to
alleviate the erosion of revenues to
cover fixed costs, due to the
decreasing supply of natural gas to
pipelines.
- Is a warranty a covenant of title by a grantor, lessor or assignor?
Yes.
- What is a working interest?
The operating interest under an oil and gas lease. The owner
of the working interest has the exclusive right to exploit the
minerals on the land.
|
|
