Money Damages in a lawsuit involving oil and gas interests generally consist of contract damages. That is, a landowner’s damages generally are calculated by a judge or jury determining what should have been paid to that land owner under the terms of that landowner’s contract (oil and gas lease) with an oil company.
Oil, Gas and Mineral Lease
In Texas, the typical oil and gas lease between a landowner and an oil company is a contract. However, it is also a conveyance (sale) of the minerals under the landowner’s land for a definite term. Usually, the oil and gas lease has a primary term and then lasts as long as certain conditions are met for example, as long as oil, gas or other minerals is produced. Because of the conveyance nature of the oil and gas lease the landowner usually has rights only to receive royalty on oil and gas actually produced from the premises. Of course, all oil and gas leases are subject to negotiation and the landowner may have other rights such as restoration of his surface because of damages from drilling or production.
The law in Texas implies certain agreements (covenants) in every oil and gas lease covering lands in the State. One of these implied covenants is the covenant to protect the leasehold. The covenant to protect the leasehold is sometimes referred to as the covenant to protect against drainage. The landowner’s complaint is usually based on the oil company’s failure to drill an offset well on the landowner’s tract. If no well is ever drilled to prevent drainage from an adjacent tract the general measure of damages is the landowner’s royalty on the production that would have been produced from the well that was never drilled.
Pooling occurs when tracts from two or more leases are combined for the purpose of drilling a single well. The principal effect of pooling on the oil and gas lease is that production and operations anywhere on the pooled unit are treated as if they have taken place on each tract within the unit. Also, production from the unit well is deemed to have taken place on all leases pooled under the unit and will maintain them past the primary term. An oil company has no power to pool an oil and gas lease unless that lease contains express terms allowing the oil company to pool. Pooling clauses vary in details, such as the permissible size of the units and the express right to exercise the pooling authority more than once. To be binding on an oil and gas lease, pooling must be done strictly in accordance with the terms of the lease and in good faith by the oil company. Before a pooled unit if formed, royalties belong to the landowner upon whose land the well is drilled. After the pooled unit if formed, royalties are allocated and paid to a landowner based on the number of acres the landowner has in the unit.
Not to produce a nearby well as such a high rate that it damages oil and gas reserves under your land
One of the duties which is owed to land owners in Texas is to not produce oil and gas wells at such high rates so that the method of production damages the oil and gas reservoir or reserves under another land owner’s tract. This may constitute negligence under the law of the State of Texas, and the measure of damages for the negligence will be different from the contract damages that are generally available for the breach of an oil and gas lease. If an oil company produces a well at rates that damage oil and gas reserves under a landowner’s tract, in addition to the actual damages which might occur, the oil company may also be liable for punitive damages.
All modern oil and gas leases provide for a payment to the Lessor based on production. From the inception of oil and gas leases until the 1970’s this payment was usually set at 1/8 th and was free of all costs of drilling and production. Since the 1970s, the sizes of lease royalties have varied. One-eighth is no longer a common fractional interest for Lessors to reserve. The amount of royalty reserved in an oil and gas lease is subject to negotiation and market forces. In the absence of specific language to the contrary, non-payment of royalty does not usually terminate an oil and gas lease.
The price paid for the land owner’s royalty share of production is usually determined by the terms of the oil and gas lease. The royalty due on oil production is generally the market value at the wellhead. The royalty on gas production can depend, under Texas law, on whether the gas is sold on the lease premises or off the lease premises. There are also certain deductions that can be made from the landowner’s royalty share of production. The subject of the appropriate price that is owed the landowner either under the market value test, the price received test or after deductions for certain expenses has been the subject of much litigation in Texas. The general measure of damages for “pricing” cases is the difference between that which was paid to the landowner and that which should have been paid to the landowner.
A properly executed will ensures that your directions are made clear and promotes harmony among your loved ones in otherwise difficult circumstances. An improperly drafted will can result in unnecessary conflicts, confusion and years of litigation.
Like other business tools, it is important to have the right business entity for the job and circumstances. The entity selected can affect everything the profits you earn, the taxes you pay, the liability you bear and the operations of your company.
When you reach the point where you are losing everything and there seems to be no way out, bankruptcy may be a solution. A well planned bankruptcy proceeding can ensure that certain essential assets are protected, that your creditors are fairly compensated and that you get a fresh start.
Divorce has consequences on characterization and disposition of your assets, property and debts. The custody and welfare of your children will be decided. Spousal support may be an issue as well as division of retirement and pension plan assets.
We’ve had many potential clients call us and say they are in pain long after an accident occurred. After getting the details, we often find that they have settled the case on their own. They’ve either executed a settlement agreement or they endorsed a check that had a release of claims statement on it.