New Oil and Old Laws: Problems in Allocation of Production to Owners of Non-Participating Royalty Interests in the Era of Horizontal Drilling.

Authors

Benjamin Holliday

Abstract

Oil and gas exploration and production is not only a big business, it is also an expensive one. As with any business, when faced with competing alternatives, operators generally prefer to pursue exploration in areas with more stable and predictable legal environments. Efforts have previously been made to make Texas such an environment, but as technology advances, legal rules often become unclear in their application. The explosion in horizontal drilling activity is challenging the courts and the Texas Railroad Commission to apply and adapt traditional legal and regulatory concepts to horizontal wells. The growing dominance of horizontal well development is undeniable. Even though vertical well production remains the most commonly used method of hydrocarbon extraction in Texas, more than forty percent of all permitted wells in Texas in 2011 were planned horizontal completions. With this dramatic growth in the drilling of horizontal wells, legal practitioners, judges, and legislators must ensure that Texas oil and gas jurisprudence protects property rights in light of such technological progress. A narrow, yet significant issue in need of immediate legal attention is the uncertain status of the non-consenting, non-participating royalty interest (NPRI) within a horizontally pooled unit. The Texas Legislature has attempted to fix this problem by proposing legislation aimed at curbing the expansive NPRI power and encouraging drilling, but these proposals have been problematic. As it now stands, Texas oil and gas jurisprudence is in need of guidance on the issue of how to calculate NPRI amounts for non-consenting, non-executive owners. The best way to provide such guidance is by adopting the formula set forth in House Bill 2087. This formula meets all the tenets of Browning Oil Co. v. Luecke and is both efficient and provides re-dress to any royalty owner that can prove he or she should be paid more.

Publisher

St. Mary's University School of Law

Recommended Citation

Benjamin Holliday, New Oil and Old Laws: Problems in Allocation of Production to Owners of Non-Participating Royalty Interests in the Era of Horizontal Drilling., 44 St. Mary's L.J. (2013).
Available at: https://commons.stmarytx.edu/thestmaryslawjournal/vol44/iss4/3