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Oil and Gas
South Texas College of Law Houston
Reed, Harry L.

Oil & Gas Outline

Accumulation, Ownership & Conservation
Accumulation
1.History
Colonel Drake drilled the first oil well in 1859 and used a chisel that dropped onto the ground from a cable.
The rotary drill came in after WWI and made Howard Hughes a rich man.
John D. Rockefeller Sr. Saw a future in oil and was worth 2 billion.
2.5 Phases of Oil Business
Exploration
Production
Transportation – key to oil business, Rockefeller built his business on this
Refining (manufacturing) – taking crude oil or gas and making it into marketable product
Marketing
3.This course is only concerned with exploration and production – “oil patch”
4.Terms
Christmas tree – valves sticking out of the ground
Horses neck – pump jack weight
Integrated Oil Company – large or small that does all 5 phases of the business
Porosity – amount of empty microscopic space in rocks; oil is found in rock not caverns
Sedimentary rock – type of rock oil is in
(1) Exoskeletons – dead cells of animals
(a) inside of dead animals turn into limestone or some other sedimentary rock
Permeability – the interconnectedness of the open spaces in the rock – if they are not interconnected there is no way to get it out
Lessor – landowner who signs the lease
Lessee – company that has the lease
Correlative Rights – different persons own same interests in the same property
Declaratory Judgment –
5.Oil will be here for at least 50 years
6.Other sources of energy
nuclear fission – difficult to dispose of waste
nuclear fusion – no waste but the only way to make this happen is h-bomb
wind power – becoming economic in some places
hybrid – 4 to 5 times efficient in city because of braking but same on highway
7.How much we improve efficiency determines how long the oil will last
hybrid
geothermal
drilling to much deeper depths
8.Horton’s Rule – I meant what I said and I said what I meant and that is what Horton means 100%
Assume what is in the document is what the parties meant and what they left off they meant to leave off
9.Types of Recovery
25% Primary recovery
(1) natural reservoir pressure
(2) mechan

perty interest in the oil itself until it is captured
Ownership is the right to determine who uses something it is not the right to do anything you want with the property.
The early courts said oil is like wild animals in the sense that there is no property interest in them until captured.
The oil that we are discussing does not migrate and has not for millions of years unless the trap is ruptured by a an oil well
If you assume a formation and water or gas under pressure oil moves until it is trapped by impervious rock
(1) If it had not found a trap it will keep moving until it comes to an ocean called natural seepage
(2) 80% of the oil that is in the ocean is pollution and 20% is natural seepage
Because of the migration some courts first said no property interests
Donkey Rule – Ownership concept – A man was going through a 3rd world