Right of Minerals Estate Flashcards
Rights of the Mineral Estate (or Incidents of Ownership)
Right to sell and convey all or any part of the minerals
Right to explore and develop the minerals
The owner of the Mineral Estate has the right to the reasonable and necessary use of the surface.
State surface damage laws
Right to execute a lease for exploration and development – “the executive right”
Right to bonuses “Bonus” – Monetary payment made to the mineral owner or owners for the purpose of obtaining an Oil and Gas Lease.
Right to delay rentals
“Delay Rental” – A payment by the Lessee to Lessor for the purpose of maintaining the Oil and Gas Lease for a period of time (usually one year) during the primary term of the Lease. Payment of the Delay Rental temporarily excuses the Lessee’s need to conduct drilling operations under the Lease. Right to royalty
“Royalty” – A non-cost bearing share of the oil and/or gas production
The above rights (or incidents) of mineral ownership can be severed through a valid instrument of conveyance
Rights to bonuses and delay rentals are associated with and follow the executive right. [Majority position]
Rule of Capture
“Rule of Capture” – Each mineral owner is entitled to extract all the oil and gas from beneath his land no matter where it migrates from, so long as he stays within his vertical boundaries.
Limitations of the Rule
“Correlative Rights Doctrine” – The right to capture oil and gas from potentially producing formations underlying one’s property is subject to the concurrent duty to exercise the right without committing waste or negligence.
Prohibition against the waste of extracted substances.
Prohibition against spoilage of the common source of supply.
Law of Conservation – State statutes, rules, and regulations governing the extraction of oil and gas. The purpose of conservation laws is to avoid the economic and physical waste of oil and gas resources.
Common examples of conservation laws:
Well spacing
Well density
Well location
Well production allowable
Well unitization for enhanced recovery
Storage of Extracted (produced) Hydrocarbons
Extracted hydrocarbons become personal property.
State laws allow for the condemnation of depleted reservoirs for gas storage.
Subsurface Trespass
Drilling on the property without ownership rights in the Mineral Estate.
Legal surface location with downhole deviation traversing vertical boundaries.
Illegal surface location.
