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Oil and Gas
West Virginia University School of Law
Lane, J. Thomas

Older than oil and gas
No oil and gas till 1860s
Here, it goes back centuries
Typical operation is a huge investment                                                                                   Different varieties of mine
“Pittsburgh Coal Seem”
long wall mining is the most efficient, but very expensive
slope mining: comes into side of hill
strip mining (surface mining)
coal has to go to a prep plant to separate impurities from coal
most coal operations are capital and labor intensive
demand for power has gone up 30% over the last 10 years
“room and pillar” mining
don’t take 100% of coal
you leave enough to make pillars to keep the roof up
at some point, it will come down
but it will come down in a predictable manner
Oil and Gas Operations
Its either liquid or gaseous, and found in open rock formations
Sandstone, lime, shale, et c.
Usually deeper than coal
Wells are usually drilled at 4000 feet
Costs about $250,000
Can last 50 to 60 years
If you invest, you want to get money back in about 4 years
Surface casing
12 inch pipe for safety reasons
goes through water bearing formations
and if you don’t seal the well, it can get in the coal
statutes require companies to set surface
then it was to be cemented in
frac- ing
helps facilitate long term production
gathering line to transmission line
sale prices is measured at transmission line

Concepts of Private Ownership
Most everything goes back to a basic principle:
COG has the same ownership rights as property
But certain limitations do apply
1.      no owner of land can use their property in way to injure another’s use of their property
2.      ownership is subject to eminent domain
3.      ownership is subject to regulation
a.       like environmental regulations
4.      protections afforded owners
a.       protections against damages
b.      injunctive relief

Ownership Theories
Surface and Hard Minerals
Where severed mineral title exists, the question presented in most cases is
whether there exists sufficient rights to conduct such mining since this method takes complete enjoyment of the surface during the mining operations and even with reclamation thee will be significant alteration of the affected land
Includes just about anything that can be taken out for profit

Waugh v. Thompson Land and Coal
One party granted land EXCEPT all veins of coal and minerals
Other party granted all mineral, iron, coal, etc.
Question is who owns the oil and gas
The deeds were executed in 1859, the year the first oil well was
Court held (in 1927) oil and gas as something as couldn’t
have been contemplated at the time of the deeds
Court held the word “minerals” as including sand and rock under the land
This is when its used at its broadest sense
Couldn’t have possibly been thinking about OG in 1859
When there’s ambiguity, court will look at the context involved
Still followed the Bundy Rule
Minerals does NOT include oil and gas
And it can depend on who drew up the agreement
Lawyers should know better
Rock House Fork Land Co.
Deed granted all coal (including mining rights) and other minerals
Issue is who owns the CLAY
To interpret what’s going on
Parties will often specify what rights go with stuff
And that will serve to clarify what they meant

Oil and Gas
Absolute Theory of Ownership (WV)
its real estate, and can be distributed like all other real estate
Qualified Theory of Ownership
have to be in the property
Non- ownership Theory
cannot own minerals that are capable of escaping till you produce them for possession
right to develop them

Significance of Different Ownership Theories
Corporeal v. Incorporeal Distinction
Real Property or Personal Property

Rule of Capture
Any landowner can drill on his own property
And has no liability to adjoining property for pulling oil and gas from it
So long as you operate on your own property
Your remedy to keep this from happening is to drill your own well

Barnard v. Monongahela Natural Gas Co.
There is NO LIABILITY to an adjoining land owner where a well is drilled and the gas was drained (where gas migrated across the property line)
Assertion was that fraud existed because lessee was controlling P
he didn’t own
But court said no
Because they had tried to drill on the other tract
This law has been adopted in nearly every state
Gain v. South Penn Oil (WV)
Adjoining owner has NO liability
People can drill as much as they want, even if it over the boundary
Off- setting wells occur, and there is NO liability if drainage occurs

Ellif v. Texon Drilling Co.
Producing well drilled
Neighboring owner came onto their property and drilled an off-
setting well
Drilled to take advantage of their wells
But it blew out in the course of drilling
Ended up making P well quit producing
Rule of capture exists
But immunity can’t extend to NEGLIGENT WASTE OR
DESTRUCTION of the oil and gas
Can’t injure your neighbor when you drill
This is just one way to limit rule of capture
Conservation statutes
Require spacing and unitization
State regulates how many, and where wells can be
but state will divide money up by drainage
area acres

Estates in Land and the Concept of Severance
Methods of Severance
The Mineral Deed
The Mineral Lease
Distinction: Deed, Lease, or License

Surface cases
Williams v. South Penn Oil
Grantor grants surface of land to grantee
Grantor reserves coal mining rights
Now the oil and gas is valuable, and we don’t know who
owns it
has a definite certain meaning                                   
portion of the land which may be used for agricultural
it is severed from strata beneath it

Dolan v. Dolan
Who owns the oil and gas?
Coal was devised individually
But not OG
Surface is equal to tract
Which means all the land except for the coal
Must be interpreted in the context of how it is used

around the country is that courts sought to interpret the INTENT of the parties
Dissent suggested:
If not EXPRESSLY mentioned, it should remain with the landowner

Container Spaces
Cavities underground
Who has the right to use those spaces, and who owns them?

Robinson v. Wheeling Steel and Iron
Land was subdivided
They had the “Cement Rock” formation
Ownership was split up
Basic principal
who ever owns the land owns the vacant space created when they
removed the land
So they have the right to use it
Only limitation is that they don’t injure their neighbor

Fisher v. WV Coal and Transp.
3 questions:
1. does D have the right to use the surface of the 1 acre tract for ingress/ egress of coal mining?
2. does D have right to use subterranean passageways underlying 16 acre tract for coal mining?
3. are the Ps estopped from maintaining this suit?
Land Owner:
We own everything left from the vacant space left from mining
And they wouldn’t have the right to use our land to aid in the development of other lands
Coal does NOT have the right to use land for other mining purposes (GENERAL RULE)
Coal Owner
Will at least have rights to the cavity for MINING COAL
Rule if peculiar to mining operations
Can use the cavity for the adjoining tract as well
1.      coal can’t be exhausted
2.      have to be mining diligently
and on the 16 acres, there was NO mining
Dissent questions whether these qualifications are legitimate
Just because mining stops, does that mean you should lose your ability to go back in the mine?
International Salt Co.
Involved largest salt mine in the world
Co. has the absolute right to use the cavity to get back to salt
Land owner has no right to use the cavity
Mineral owner has the right to get to the mineral

Tate v. United Fuel Gas
Can space underground be used for gas storage purposes?
Can you re- inject gas back into it for gas storage purposes?
Does NOT include sand, stone, clay, or surface minerals
Clearly excepted and reserved OG and right to produce it
But did not include SANDSTONE where it existed
D wanted to turn limestone formation into storage facility
Can they do it?
Language CLEARLY did not include sandstone
And limited to production rights
They have NO RIGHT for other purposes
Like storage rights

Misdescription of Interest Conveyed

Toothman v. Courtney
Problem was that the owner failed to pay taxes and was sold
Question was whether sale was valid, and whether OGM was real estate
P leased property in 1889