Quiz Explanations
Oil and Gas Leasing
By Judon Fambrough
January 1998

1. False. In Texas, the mineral estate is dominant over the surface for the exploration and production of minerals. Because of this rule, the mineral owner owes the surface owner no duty of protection.
2. False. Each owner with an executive interest is free to sign with any oil company of choice. Generally, it is recommended they all sign with the same company, but it is not mandatory.
3. True. An oil and gas lease conveys an estate to the oil company known as a Determinable Fee. It lasts so long as operation or production continues. Note: A deed is signed by the granter, not the grantee. This is the reason that only the mineral owner (grantor) signs the oil and gas lease.
4. False. Water is a "surface substance." As such, the oil company can use as much of the surface (and surface substances) as it reasonably needs to explore and produce the minerals without asking independent permission from surface owners or having to pay them for the use.
5. True. According to the Texas Supreme Court, the word "mineral" includes oil, gas and uranium as a matter of law. The lease gives the oil company the right to explore for and produce "oil, gas and all other minerals."
6. False. One of the few times an oil company must pay surface damages is when they negligently injure the surface. Case law holds that there is no negligence for failing to fence a drill site.
7. False. Again, each owner of an undivided executive interest is free to lease to any oil company of choice. There is no requirement that all cotenants sign before the lease is valid. The lease is effective as to the cotenant who signs.
8. True. The "accommodation-of-estate doctrine" pronounced by Texas Supreme Court in the 1970s states this rule. It makes the oil company give "due regards" to the surface estate.
9. False. Texas statutes provides that if the royalty owner is not paid within 120 days after the first date of first sale, they can collect interest by giving 30 days written notice. The lease never terminates for failing to pay royalties.
10. True. The pooling provisions in an oil and gas lease provides that any operations or production occurring on the pool is deemed operations or production on the entire lease tract regardless of the number of acres in the pool or in the lease. One well can hold considerable acreage.