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Oil and Gas
West Virginia University School of Law
Bowles, P. Nathan

OIL, Gas and Coal OUTLINE

Bowles – Fall 2014

I. Introduction

II. Basic Geology

A. William Smith, the First Geologist (England)

· 4004 B.C. Bishop calculated from Bible.

· The depth would change but the location in the layers didn’t change.

B. Coal

C. Oil and Gas

D. Salt Industry in the Kanawha Valley

· Salt is where the first mineral rights developed

· Used to preserve meat

III. The Title Report

A. Description

· Platting

Condry v. Pope 152 W. Va. 714 (1969)

· Original survey started with true north

· When line done with meets and bounds wells located on neighbors property

· If a willful trespasser than true owner gets everything, if innocent trespasser true owner only gets profit.

B. Severance of Estates

1. Minerals

List v. Cotts 4 W.Va. 543 (1871)

· Deed gives B blackacre in fee simple and “also the right of digging for coal under the adjoining land lying east of blackacre.

· Issue: who owns the coal under the land east of blackacre

· Held: Grantor owned coal east of blackacre and could convey it in deed for blackacre

· (1) Deeds are to be interpreted strongly against the grantor. Because the grantor didn’t make a reservation of coal, grantor conveyed everything

· (2) Courts are inclined to render decisions that end controversy

· (3) Grantor used

Burdette v. Bruen 118 W. Va. 624 (1937)

· Deed reservation clause: “Coal iron and minerals”

· Issue: Does “and minerals” include oil and gas?

· Held: yes, and minerals includes oil and gas and was reserved to the grantor.

· Argument that they wouldn’t have been talking about O & G in 1867 failed

Bruen v. Thaxton 126 W. Va. 330 (1943)

· Deed reservation clause: “Coal and iron minerals”

· Held: does not include the oil and gas

· “Minerals” – will be interpreted broadly absent limiting language

· Court will give language its normal ordinary meaning “Plain Language”

2. Surface

W.Va. Dept of Highways v. Farmer 159 W.Va. 823 (1976)

· WVDOH files eminent domain to get sand and gravel from surface owners, Mineral owners want compensation

· Issue: was sand and gravel included in reservation?

· Held: Sand and gravel is ordinarily included, but in this case ambiguity so look at extrinsic evidence.

· Sand was never taken for sale prior

· You don’t imply someone was going to give up there right to use the surface entirely

· When ambiguous look at circumstances, language construed against the grantor.

Dolen v. Dolen 70 W.Va. 76 (1911)

· Father’s will conveys “surface” to son, but have 4 other children

· Issue: do other 4 kids have share in mineral rights

· Held: son was given O & G rights, when you make a will presumption of disposing of entire estate, gave coal to daughter.

Ramage v. South Penn Oil Co. 94 W.Va. 81 (1923)

· Issue: who gets coal?

· Held: O & G had been deeded away, but coal was never assessed

· So it remained with the grantors.

3. Special Problems

a. Phantom Reservations

Moore v. Henderson 87 W.Va. 699 (1921)

· Grantor reserves minerals “as reserved by the land Co.” in deed to grantee, there was no previous reservation and once minerals are found Grantor tries to say he has title to minerals

· Held: because of the actual intent of Grantor to not reserve minerals through testimony, he never paid taxes on minerals etc. the court said he did not reserve minerals.

· He was only trying to limit liability in case he didn’t have minerals to convey.

Freudenberger Oil Co. v. Simmons 75 W.Va. 337 (1914)

· Issue: Grantor has 5 deeds: “excepting therein all coal and other minerals . . . to be held in common by all heirs” – can’t have heirs until you die

· The general rule is that you can’t make a grant to a stranger to the deed.

· Held: The conveyance to heirs not valid but the reservation still good.

b. Deed or lease? Royalty or mineral in place

Toothman v. Courtney 62 W.Va. 167 (1907)

· Deed of oil royalty from grantor to grantee, but prior was given a lease for 7 yrs. or as long thee was a paying quantity

· Grantor didn’t pay taxes after deed

· Issue: was first lease, lease or grant of oil and gas?

· Held: it was a lease, the buyer of O & G at tax sale has fee in O & G.

Paxton v. Benedum-Trees Oil Co. 80 W.Va. 187 (1917)

· Issue: does he get 1/16 of royalty or ½ of the royalty.

· Held: it was a case for rules of construction,

o He got half because the language said ½ of.

o Typical royalty was 1/8 for oil.

· When you convey half of the benefits, you are conveying half of the gas in place.

· A grant of the royalties, rents, and income arising from the production of the oil from land is a grant of the oil in such land

· The taking of minerals by one co-tenant, to the exclusion of the other co-tenant is waste and injunction.

· If a deed has two clauses that are repugnant and cannot stand together, effect will be given to the first

· Extrinsic evidence not allowed if the terms of lease are clear and unambiguous

· Where a writing is ambiguous upon its face, it must be given effect, if possible, by the application of the well-recognized canons of construction. If, after the application of such rules of construction, the meaning of the writing remains doubtful, it will be declared void for uncertainty.

Snodgrass v. Koen 82 W.Va. 337 (1918)

· 1894 – lease for O & G on blackacre

· 1895 – deed conveying 1/8 part of the O & G that may be conveyed

· Issue: by conveying the royalty interest did grantors give title to the O & G in place?

· Held: yes, the facts and circumstances of each case matter.

Manufacturers’ Light & Heat Co. v. Knapp 102 W.Va. 308 (1926)

· Deed was subject to the previous O & G lease

· Grantor assigns 1/16 in all oil and ½ of all gas underlying blackacre

· Issue: how much does driller pay lessor

· Held: grante

t is not free of costs of discovery and production.

· 2. The owner has the right to do any and all acts necessary to discover and produce oil and gas.

· 3. The owner has the right to grant leases.

· 4. The owner has the right to receive bonuses and delay rentals.

Davis v. Hardman 148 W.Va. 82 (1963)

· Issue: did reservation convey an interest in the minerals in place or did it convey a mere royalty interest? (license?)

· Held: minerals in place, Absent specific language a grant of the royalties gives an interest in the minerals in place

· Intent of the parties, grantee had right to get delay rentals etc.

Rastle v. Gamsjager 151 W.Va. 499 (1967)

· Will says interest of the children shall go to the other surviving children as each one dies

· Children are J/T with rights of survivorship.

· Issue: can cousins get gas when last child dies?

· Held: no it is for the spoils of the last surviving child’s heirs.

· It’s a cannon of construction that you give everything away in a will.

f. Stranger to the Deed

Erwin v. Bethlehem Steel Corp. 134 W. Va. 900 (1950)

· Erin owns surface, Bethlehem owns the underlying coal

· Def fails to provide adequate support

· Issue: was Def given right to subsidence through deed from Erin to 3rd party?

· Held: No, an exception in a deed cannot be made in favor of a stranger.

· If you are not a party to deed you can’t receive an interest through deed.

Freudenberger Oil Co. v. Simmons 75 W.Va. 337 (1914)

· See above, heirs not known at time, they were strangers to deed.

g. Coalbed Methane

Energy Development Corp. v. Moss 214 W.Va. 577 (2003)

· Lease conveys “all oil and gas and all of the constituents of either in and under the land . . . in all possible formations

· Issue: does lease cover CBM?

· Held: lease ambiguous, looking at extrinsic evidence parties didn’t intent lease to cover CBM

· No CBM being produced in are, Lessee never drilled for CBM before, etc.

· WV has no bright line rule, must look on a case by case basis.

CBC Holdings LLC v. Dynatec Corp. 224 W.Va. 25 (2009)

· Dispute over if lease included CBM?

· L/C said that issue not ripe because Pl had not exhausted rights under the review board

· Held: The statute and review board does not have authority to determine ownership of CBM

· This is why the state has courts and judges, it’s a court matter