The Law of Oil and Gas, Cases and Materials

Patrick H. Martin, Louisiana State University Law Center

Bruce M. Kramer, Texas Tech University School of Law

Keith B. Hall, Louisiana State University Law Center

Tara K. Righetti, University of Wyoming College of Law

Joseph A. Schremmer, University of Oklahoma Law Center

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Table of Contents

Teacher's Manual

Although fundamental principles of contract and property law do not change very often, a new edition is needed to cover variations on existing themes in new cases and new topics that surely warrant attention in the Twenty-first Century. The last edition of Oil and Gas, Cases And Materials (10th edition) was published in 2016. The first eight chapters of this edition build upon the foundation of the ten prior editions. They retain most of the organizational structure of the prior works, but update the material to reflect recent developments and trends in oil and gas case law. This edition also continues and updates a significant amount of new material in chapters 9 and 10 on the environmental and land use regulation of the oil and gas industry.

Chapter 1 introduces the student to oil and gas geology and development. It has now incorporated discussion of new exploration, drilling and production techniques, including 3-D seismic, horizontal drilling, coal methane gas production, hydraulic fracturing, the locations of new shale gas and oil plays, and Outer Continental Shelf developments.

Chapter 2 in several earlier editions was on energy policy. The topic of energy policy remains very important to United States law, but the demise of price controls of earlier decades has rendered much of the materials dated, though the ghosts of natural gas regulation haunt the royalty materials of Chapter 3. Chapter 2 provides the foundation for understanding the role that basic property law, concepts and policy play in oil and gas law. It notes the different approaches taken to some fundamental questions about the ownership of oil and gas and how those approaches have led to different results to common questions among the oil and gas jurisdictions. It covers the challenges to traditional property theory and doctrine brought about by new technologies, including hydraulic fracturing and horizontal drilling.

Chapter 3, on oil and gas leases, has been modified with many of the cases contained in the earlier editions being retained. Throughout the chapter emphasis may be found on how courts characterize the property interests created by an oil and gas lease. These characterizations have important ramifications in dealing with such issues as payment of delay rentals, interpretation of leasehold savings provision, the availability of equitable defenses in actions seeking to terminate the lease and the application of the temporary cessation of production doctrine. Recent developments pertaining to lease termination for failure to produce in paying quantities, royalty calculation on post-production costs, and class actions, as well as cases focusing on calculation of overriding royalties, are reflected in this edition. New cases and materials have been added to reflect the modern trend in leasing where large bonus payments are regularly negotiated by lessors and lessees. A section on the indivisibility doctrine as applied to habendum clauses reflects the increased leasing and production activities in the Appalachian Basin where production and underground natural gas storage operations regularly occur. In the royalty clause section, case discussion of recent post-production cost rulings have been added.

The chapter on implied covenants, Chapter 4, includes a section on the effects that express clauses in an oil and gas lease can have on implied covenants. Also, a case has been added to the section on an implied covenant of surface restoration, and a case added to a section on the implied covenant to market. Most of the material in the prior edition has been retained, but some new notes have been added and a portion of the material has been somewhat reorganized.

Chapters 5 and 6 on conveyancing and transfers subsequent to a lease have incorporated new cases to reflect developments in the interpretation of the word “minerals,” the ownership of coalbed methane, the problems of fractional interests, the problem of determining whether a royalty fraction is a fixed fraction or a fraction of the royalty, the Mother Hubbard clause, the “two-grant” theory, and an effort to “wash-out” an overriding royalty. New materials have been added regarding the scope and extent of the duty owed by the owner of the executive rights to the non-executive owners. A section on selected problems relating to the application of the Rule Against Perpetuities to oil and gas transactions highlights the role that property law principles play in the field of oil and gas law. New discussion has been added on hedging in oil and gas markets and on recent cases on multi-grant interpretations and assignment controversies.

The chapter on pooling and unitization, Chapter 7, has been revised to omit older material on Texas’s small tract problems, with new materials added relating, in substantial part, to horizontal drilling. Texas’s Mineral Interest Pooling Act has been given more attention through incorporation of Railroad Commission materials. Older cases in the notes have been pared back and recent developments have been incorporated. New to this edition is a discussion of Horizontal-Fracking Technology Revolution and Legal Changes. Several recent cases have added on Pugh Clause litigation and on legislation known as “statutory Pugh clauses.” Some of the readings and case material on the effects of pooling on mineral interests has been reorganized for better continuity and clarity for the student.

Chapter 8, on public lands, has been revised to reflect important changes to the legal landscape that have occurred since the last edition. The chapter is focused on the unique system of oil and gas leasing and development on federal lands. The chapter retains much of the material on the leasing process after 1987 and material on the federal planning process under land management statutes, the authority of the federal government not to issue federal leases, surface access to explore, develop and produce federal minerals, the authority of federal land management agencies to regulate operations (including for environmental protection), and the calculation and enforcement of royalty obligations under federal leases. The chapter also includes new material to address recent regulatory changes, including litigation related to efforts to limit GHG emissions from oil and gas development on federal lands. As in the prior edition, the chapter also provides limited coverage on federalism issues and oil and gas leasing on Indian lands.

Chapters 9 and 10 were new to the last edition and have been updated for recent changes. They were added in recognition of the increasing interconnectedness of oil and gas law and environmental regulation. Similar to an introductory course on environmental law, Chapter 9 covers the basic federal regulatory programs under the Clean Air Act, the Clean Water Act, the Safe Drinking Water Act, the Comprehensive Environmental Response, Compensation, and Liability Act, the Resource, Conservation and Recovery Act, the Endangered Species Act, the Migratory Bird Treaty Act, and the National Environmental Policy Act, but with particular focus on the application of these federal environmental laws to oil and gas development and operations. Additional discussion has been added about the regulation of greenhouse gas emissions and the regulatory concept of the social cost of carbon.

Chapter 10 on state and local government regulation of oil and gas operations focuses on environmental and land use issues. The state materials address the authority of state oil and gas conservation agencies to consider climate and cumulative environmental impacts, as well as state regulation of groundwater testing, hydraulic fracturing, seismic activity, and waste management, among other regulated activities, as well as common law tort claims for environmental harms. The local government materials begin with a discussion of zoning and land use law as applied to oil and gas operations, continue with related due process clause and takings clause constitutional limitations on local authority, and end with materials on the extent to which state law might preempt such local regulations.

Two new co-authors have joined in this new edition: Tara K. Righetti, Professor of Law, University of Wyoming, and Joseph A. Schremmer, Professor of Law, University of New Mexico.

Learn more about this series.