Oil and Gas Lawyer Blog

Published on: January 29, 2019

Eminent Domain and the Right to Survey

Tiffany Dowell, author of the Texas Agriculture Law Blog at Texas A&M, gave me permission to re-publish her excellent article on what landowners should consider when a pipeline company asks permission to survey. Here is her article. The only thing I would add is that the landowner should find out the tentative proposed route, and if it is not acceptable, try to negotiate an alternate route before the surveyors begin their work.

Thanks to Tiffany. You might want to subscribe to her blog.

Question: If a company with eminent domain power has contacted me about obtaining an easement across my property and now wants access to survey, can I keep them off of my land?

survey-1-e1545162613218-768x1024

Answer: No.

In Texas, courts have held that by granting condemning entities the right to condemn land, this includes the right to enter onto the property to conduct surveys to select lands to be acquired. Of course, this means that surveys may be conducted prior to the property actually being condemned. “Ancillary to the power of eminent domain is the authority to enter upon the land to make a preliminary survey.” I.P. Farms v. Exxon Pipeline Co., 646 S.W.2d 544 (Tex. Ct. App. – Houston (1st Dist.) 1982). Courts have issued injunctions against landowners attempting to interfere with this right.

There is a line of court cases that limit this right to visual inspections and lineal surveys only, refusing to allow more invasive procedures like core drilling or subsurface soil testing. See Coastal Marine Serv. v. City of Port Neches, 11 S.W.3d 509 (Tex. Ct. App. – Beaumont 2000).

Continue reading →

Published on: January 28, 2019

The Geopolitics of Oil

By John McFarland

I ran across an excellent article, “A Primer on the Geopolitics of Oil,” by Anand Toprani, assistant professor of Strategy & Policy at the U.S. Naval War College. He has a book in the works, Oil and the Great Powers: Britain and Germany, 1914-1945.

Oil has been a commodity different from all others in world politics since it became the principal source of energy in the early 20th century. And it will remain so as long as the world is dependent on hydrocarbons for its energy needs. Toprani’s article reminds us how oil supply, demand and price affect our relations with other nations as well as our environment and our personal lives.

Published on: January 18, 2019

EIA Working During Shutdown

By John McFarland

The Energy Information Administration appears to be at work during the government shutdown. Yesterday it released its regularly scheduled weekly reports. Among them:

You can sign up for an email from EIA to receive a link to all of its reports at https://www.eia.gov/tools/emailupdates/?src=email .

Published on: January 7, 2019

A Tsunami of Crude Exports?

By John McFarland

Morningstar has published a report analyzing oil pipeline and refining capacities along the Texas Gulf Coast – “Pipeline Plans Suggest Tsunami of Crude Exports – Midstream companies looking to double Gulf Coast shipments.” pipeline-plans-suggest-tsunami-of-crude-exports-FINAL If all planned pipelines are built and run to capacity, new lines “would carry as much as 7.7 mmb/d of new crude to the Gulf Coast, the majority of which would be light shale crude looking for a home in the export market.”

The result: a fourfold increase in crude exports to more than 8 mmb/d after 2021. Morningstar concludes:

Fortunately, current production forecasts don’t match the volume of pipeline projects, and crude growth over the next three years is likely to be closer to 3 mmb/d. The mismatch suggests an infrastructure overbuild is underway in the short term, and we expect consolidation of many of these projects before they’re built. Yet the history of shale expansion has taught us that the most optimistic forecasts frequently appear in the rearview mirror.

Continue reading →

Published on: January 2, 2019

Endeavor v. Discovery Operating on rehearing

By John McFarland

Last April the Texas Supreme Court issued its opinion in Endeavor Energy Resources, L.P. et al. v. Discovery Operating, Inc., et al., No. 16-0155, construing a retained acreage clause in an oil and gas lease. I commented that the opinion commented in dicta that, even if a lease allows the lessee to retain “tolerance acreage” as allowed by applicable field rules, the operator must “verify that additional acreage is actually necessary or required to achieve the maximum allowable,” quoting from a 2015 CLE paper by Phillip C. Mani. On rehearing, the Court revised the language I quoted, so that it now reads as follows (click to enlarge):

So the court watered down its language somewhat. The issue nevertheless remains an open one.

Published on: December 27, 2018

Takeaway Capacity in the Permian and Reflections on Judicial Elections in light of Murphy v. Adams

By John McFarland

Wade Caldwell, San Antonio attorney and President of NARO-Texas, published the article below in the recent NARO newsletter. He has kindly allowed me to republish it here.

And Happy New Year.

The Take Away

Continue reading →

Published on: December 18, 2018

9th Circuit Court of Appeals holds that dinosaur fossils are “minerals” under Montana law

By John McFarland

In Murray v. BEJ Minerals, LLC, No. 1:14-cv-00106-SPW, a panel of the US 9th Circuit Court of Appeals ruled on a fight over fossils of two “dueling dinosaurs”, a 22-foot-long theropod and a 28-foot-long ceratopsian, “engaged in mortal combat” when “entombed under a pile of sandstone.”

The surface owner and mineral owners then became involved in a fight over the ownership of these fossils, as well as several other fossils (including a nearly intact Tyrannosaurus Rex skeleton) found on the property. Pointing out that “oil, gas and coal all derive from the remains of plants and animals,” the mineral owner argued that the fossils are “minerals.” The court agreed with the mineral owner, citing a Montana Supreme Court case, Farley v. Booth Brothers Land & Livestock Co.,, 890 P. 2d 377, 379 (Mont. 1995), which in turn adopted a definition from a Texas Supreme Court Case, Heinatz v. Allen, 217 S.W.2d 994 (Tex. 1949):

[S]ubstances such as sand, gravel and limestone are not minerals within the ordinary and natural meaning of the word unless they are rare and exceptional in character or possess a peculiar property giving them special value, as for example sand that is valuable for making glass and limestone of such quality that it may be profitably manufactured into cement. Such substances, when they are useful only for building and road-making purposes, are not regarded as minerals in the ordinary and generally accepted meaning of the word.

Continue reading →

Published on: December 12, 2018

The cost of electricity

By John McFarland

From an article in the Dallas Morning News, “Texas power costs: What’s the cheapest way to generate electricity?”

Published on: December 10, 2018

Miller on Negotiating Oil and Gas Leases

By John McFarland

My partner Nicholas Miller recently appeared on Tiffany Dowell’s podcast “Ag Law in the Field,” one of the programs offered by Texas A&M Agrilife Extension Service. A great discussion on how to approach negotiating an oil and gas lease. You can listen to it here.

Check out Tiffany’s other podcasts here.

Published on: December 3, 2018

Murphy v. Adams – What is an “offset well”?

By John McFarland

The Texas Supreme Court denied the landowners’ motion for rehearing last Friday in Murphy v. Adams, rejecting their claim that Murphy Exploration had breached their oil and gas lease by failing to drill an offset well or pay liquidated damages. The Court was divided 5-4 on the issue when it issued its original opinion, and the court remained divided 5-4 on rehearing, but both the majority and the dissent issued corrected opinions.

Our firm represented the landowners in the case, so I must admit that it is difficult for me to be objective in reporting on this case. I wrote about the case when the Court of Appeals ruled in favor of the landowners, reversing a summary judgment in Murphy’s favor issued by the trial court.

The landowners’ lease contains the following provision:

It is hereby specifically agreed and stipulated that in the event a well is completed as a producer of oil and/or gas on land adjacent and contiguous to the leased premises, and within 467 feet of the premises covered by this lease, that Lessee herein is hereby obligated to, within 120 days after the completion date of the well or wells on the adjacent acreage, as follows:

(1) to commence drilling operations on the leased acreage and thereafter continue the drilling of such off-set well or wells with due diligence to a depth adequate to test the same formation from which the well or wells are producing from on the adjacent acreage; or

(2) pay the Lessor royalties as provided for in this lease as if an equivalent amount of production of oil and/or gas were being obtained from the off-set location on these leased premises as that which is being produced from the adjacent well or wells; or

(3) release an amount of acreage sufficient to constitute a spacing unit equivalent in size to the spacing unit that would be allocated under the lease to such well or wells on the adjacent lands, as to the zones or strata producing in such adjacent well.

Continue reading →