assignee would retain that portion of the lease included in a “proration unit” for the Allison-Britt field, and a proration unit for a given well in that field was 320 acres. Id. , at 15. The Court explained that Chesapeake’s fractional proration unit filings were irrelevant because the retained acreage did not contemplate fractional proration units. Id. Thus, Chesapeake was entitled to retain 320 acres for each of its wells despite that in its P-15 filings with the Railroad Commission Chesapeake designated fewer acres in its fractional proration units. The total acreage Chesapeake was entitled to retain under the retained acreage clause exceeded the total acreage covered by the leases and Chesapeake was entitled to retain the full 1,625 acres covered by the assignments. Id. , at 16. Both the XOG and ConocoPhillips illustrate that courts are willing to apply the field rules to retained acreage clauses if the contract provides (however loosely) that the field
rules are to control. In both cases, the retained acreage clause operated to more or less acreage than contemplated by the parties because the retained acreage clause was tied to field rules. Thus, it is critical to carefully define a retained acreage clause to avoid unintended consequences that may arise when parties rely on field rules to define the acreage subject to a retained acreage clause. ___________________________ 1 Field rules are used to regulate well spacing and density provisions to promote the development in a field in such a way that the wells are not clustered together and damage the reservoir. The Texas Railroad Commission regulates “field rules” under statewide rules, county rules, and/or special rules.
TEXAS || OFF-LEASE DRILLING LOCATIONS AND CLAIMS OF SUBSURFACE TRESPASS By: Eli Kiefaber and Zachary Oliva, Kiefaber & Oliva LLP
In Lightning Oil Co. v. Anadarko E&P Onshore , No. 04- 14-00152-CV, 2014 Tex. App. LEXIS 11844 (Oct. 29, 2014), the San Antonio Court of Appeals concluded that a mineral estate owner was not entitled to injunctive relief to prevent an adjacent mineral estate owner from drilling horizontal wells crossing through the other party’s mineral estate to access the adjacent mineral estate. This case is significant for operators that drill multiple horizontal wells from a single pad location and for operators that drill horizontal wells from off-lease surface locations. The dispute in Lightning Oil arose from Anadarko E&P Onshore’s (“Anadarko”) attempt to drill horizontal wells that would enter and cross through Lightning Oil Co.’s (“Lightning”) mineral estate. Lightning owned the mineral estate to a portion of land known as Cochina East Ranch. Id. , at *2. To the south of Cochina East Ranch lies the Chaparral Wildlife Management Area (“Chaparral WMA”), a wildlife sanctuary of approximately 15,200 acres, managed by the Texas Parks and Wildlife
Department. Id. In October 2009, Anadarko obtained an oil and gas lease giving it the right to develop the mineral estate underlying the Chaparral WMA. Id. , at *2-3. However, the terms of the lease required Anadarko to “utilize off-site drilling locations ‘when prudent and feasible.’” Id. Anadarko obtained permission from the surface owner of the Cochina East Ranch by entering into a written Surface Use and Subsurface Easement Agreement allowing it to “establish drill sites for horizontal wells that [would] enter and cross through Lightning’s Mineral Estate in order to reach Anadarko’s mineral estate on the adjacent Chaparral WMA.” Id. However, Lightning opposed Anadarko’s planned drilling operations and brought suit for trespass and sought injunctive relief to prevent Anadarko from drilling the proposed wells. Id. , at *4. In Lightning Oil , the San Antonio Court of Appeals evaluated whether Lightning satisfied the requirements to obtain injunctive relief and proved that it would
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