1. Timothy C. Dowd Elias, Books, Brown and Nelson P.C. Oklahoma City, OK
TRESPASS IN THE AGE OF HORIZONTAL DRILLING UNDER STATE CONSERVATION STATUTES
Timothy C. Dowd
Elias, Books, Brown and Nelson P.C.
Oklahoma City, OK

2. INTRODUCTION
The primary focus of this paper is to examine trespass as it relates to tracts formed under state conservation laws.

3. RULE OF CAPTURE
The owner of a tract of land acquires title to the oil or gas which he produces from wells drilled thereon, though it may be proved that part of such oil or gas migrated from adjoining lands.

4. EXCEPTIONS to the rule of capture
When “a person commits a subsurface trespass by engaging in slant drilling that results in a well bottoming beneath his neighbor’s property”; and
when “the rule has been superseded by conservation statutes or regulations.”

5. POLICE POWER AND LIMITS ON POLICE POWER
The Rule of Capture has been modified by oil and gas conservation laws. Typically, the conservation laws authorize the respective state commissions to set spacing units and order compulsory pooling when necessary to prevent waste, to avoid the drilling of unnecessary wells, and to protect correlative rights.

6. DRILLING AND SPACING UNITS
The primary purpose for creating drilling and spacing units is to permit a more effective recovery of hydrocarbons from a common source of supply.

7. STATUTORY OR COMPULSORY POOLING
Two different uses of the word pooling
Voluntary Pooling - This type of pooling involves private arrangements to allow for the joint development of separately owned oil and gas interests within a unit. This is typically done pursuant to a lease provision that authorize a lessee to pool smaller leased tracts into a larger tract for development purposes.
Compulsory Pooling - This type of pooling allows lessees under applicable statutory law to resolve the problems of nonconsenting minerals owners or lessees who refuse to agree to joint development, to be pooled or “forced leasing” in a proceeding before the state conservation agency.

8. STATUTORY OR COMPULSORY POOLING
Statutory pooling addresses the scenario where an owner of an oil and gas interest, whether it be a mineral owner or a leasehold owner, wishes to develop the property, by pooling the tracts together for oil and gas development, but one or more owners within the drilling and spacing unit holds out against drilling operations.

9. STATUTORY OR COMPULSORY POOLING
The result of a compulsory pooling order is that nonconsenting owners are treated as set forth in the states’ compulsory pooling statutes. These statutes typically:
allow nonconsenting owners to participate in the drilling and development of the well;
are silent as to nonconsenting owners treatment;
impose a risk penalty on nonconsenting owners; or
provide nonconsenting owners with options in which they may elect.

10. POLICE POWER AND LIMITS ON POLICE POWER

11. POLICE POWER AND LIMITS ON POLICE POWER
The police power is commonly termed as the state’s regulatory authority and is, essentially, the power to govern.
Courts have widely held that all property is subject to the valid exercise of the police power.

12. POLICE POWER AND LIMITS ON POLICE POWER
Many leases provide for voluntary pooling clauses under which the lessee may voluntarily “pool” small or smaller leasehold tracts into a unit creating a voluntarily spacing unit.

13. POLICE POWER AND LIMITS ON POLICE POWER
Many leases provide for voluntary pooling clauses under which the lessee may voluntarily “pool” small or smaller leasehold tracts into a unit creating a voluntarily spacing unit.
A problem arises when a voluntary unit created by the pooling clause in oil and gas leases conflicts with a statutory drilling and spacing unit established by the state oil and gas commission. The courts have generally held that private contractual rights established by a lease must yield to the state commission’s authority to establish drilling and spacing units under the police power.

14. POLICE POWER AND LIMITS ON POLICE POWER
Compulsory pooling statutes have been held to be proper under the police power of the state. See Union Pacific Resources Company v. Texaco, Inc., 882 P.2d (Wyo. 1994).

15. TRESPASS
Issue:
When a state commission, pursuant to its police power, forms units to protect correlative rights, courts have dealt with the issue of whether the order allows trespass.

16. TRESPASS
A trespass occurs when a person intentionally and without authorization enters the land of another or causes a thing to do so.
A trespass can occur below the surface. If so, it is often described as a subsurface trespass.

17. TRESPASS
As a general rule, an oil and gas lease grants by implication, the right to the use of the surface of the leased tract.
Before there were conservation laws and before horizontal drilling, subsurface trespass consisted of drilling a well on a tract not leased by the operator, or the drilling of a well on a neighboring tract that bottoms beneath his neighbor’s property.

18. TRESPASS UNDER UNPOOLED TRACTS
TEXAS TRIO:
Humble Oil & Refinery Co. v. L & G. Oil Co., 259 S.W.2d 933 (Tex. Civ. App 1953).
Chevron Oil Co. v. Howell, 407 S.W.2d 525 (Tex. Civ. App. 1966).
Lightning Oil Co. v. Anadarko E&P Onshore, LLC, No , 2017 WL , (Tex. May 19, 2017)

19. YET ANOTHER TEXAS CASE
Browning Oil Co. v. Luecke, 38 S.W.3d 625 (Tex. Civ. App ).

20. TRESPASS UNDER POOLING STATUTES
Holt v. Southwest Antioch Sand Unit, Fifth Enlarged, OK 368, 292 P.2d 998.

21. TRESPASS UNDER POOLING STATUTES
Holt v. Southwest Antioch Sand Unit, Fifth Enlarged, OK 368, 292 P.2d 998.
Kysar v. Amoco Production Co., 93 P.3d 1272 (N.M ).

22. TRESPASS UNDER POOLING STATUTES
Kysar v. Amoco Production Co.
Under New Mexico law, does a mineral rights lessee, by virtue of a Communitization Agreement to which the mineral rights lessee is a party, gain a right of access over the surface estate of the unitized portion of the leased area in connection with operations on other premises or lands pooled or unitized therewith where the lease did not expressly grant this right?

23. TRESPASS UNDER POOLING STATUTES
Kysar v. Amoco Production Co.
Under New Mexico law, does a mineral rights lessee, by virtue of a Communitization Agreement to which the mineral rights lessee is a party, gain a right of access over the surface estate of the unitized portion of the leased area in connection with operations on other premises or lands pooled or unitized therewith where the lease did not expressly grant this right?
Under New Mexico law, does a mineral rights lessee, by virtue of a Communitization Agreement to which the mineral rights lessee is a party, gain a right of access over the surface estate of the non-unitized portion of the leased area in connection with the production and extraction of minerals on other premises or lands pooled or unitized therewith where the lease did not expressly grant this right.

24. TRESPASS UNDER POOLING STATUTES
Krenz v. XTO Energy, Inc., 890 N.W.2d 222, 239 (N.D ).
In Krenz, the North Dakota Supreme Court allowed XTO to use part of the leased premises in Sections 14 and 15 for operations in Sections 23 and 26 even though the well and surface operations were not located on the leased premises

25. TRESPASS UNDER POOLING STATUTES
Continental Resources, Inc. v. Farrar Oil Company, 559 N.W.2d 841 (N.D. 1997).
In Continental v. Farrar Oil, the trial court concluded the Industrial Commission’s pooling order was a proper exercise of the state’s police power that superseded the property law of trespass.
Supreme Court agreed with the trial court.

26. TRESPASS UNDER POOLING STATUTES
Texas Oil and Gas Corp. v. Rein, 534 P.2d. 1277, (Okla. 1974).
In Texas Oil and Gas Corp. v. Rein, the court held that the Oklahoma Statutes authorized the Corporation Commission to establish a well location and order pooling. As a result, any party pooled under an OCC order cannot raise the issue of damages from trespass.

27. SUBSURFACE TRESPASS
Nunez v. Wainoco Oil & Gas Co., 488 So. 2d 955, (La. 1986).
In Nunez v. Wainoco Oil & Gas Co., the drilling began on leased property near an unleased tract located in part of the unit.
A directional survey indicated that the drilling had deviated from a true vertical line and that the well had bottomed about four or five feet inside the subsurface of the unleased tract.

28. Nunez v. Wainoco Oil & Gas Co.
The Louisiana Supreme Court held that, traditionally, the drilling of a well on the land of another without his consent and the subsequent removal of hydrocarbons, has been considered to constitute subsurface trespass.
The Nunez court stated that the effect of forced pooling or compulsory unitization was found to convert separate interests within a drilling unit into a common interest for the development of the unit.
“Reasonable exercise of the police power”
“…[S]ince established private property law concepts, such as trespass, have been superseded in part by Louisiana’s Conservation Law when a unit has been created by order of the Commissioner, we do not find that a legally actionable trespass has occurred in this instance.”

29. Nunez v. Wainoco Oil & Gas Co.
It is important to note that the Plaintiff elected to pay his costs and participate in the development in return for receiving 8/8th of the production.

30. Kingwood Oil Co. v. Hall-Jones Oil Company
Kingwood Oil Co. v. Hall-Jones Oil Company, 396 P.2d (Okla. 1964).
In Kingwood Oil Co. v. Hall-Jones Oil Company, Hall- Jones, without consent and without commencing a statutory pooling proceeding drilled a well on Kingwood’s one-half of the section which was completed as a dry hole.
Kingwood brought suit asserting that it was damaged in the amount of the depreciation of the reasonable value of its leasehold in the west half.

31. COTENANCY
Any cotenant has the right to extract minerals from the common property without consent or participation of the other cotenants.
Duty to account to the other cotenants for their proportionate part of the value.

32. COTENANCY
Separately owned tracts within a spacing unit do not become cotenants with each other.
Come Big or Stay Home, LLC v. EOG Resources, Inc., 816 N.W.2d 80, 85 (N.D. 2012).
In Come Big or Stay Home v. EOG Resources, the court stated that North Dakota statutes make it clear that the pooling of separately owned tracts did not create a cotenancy.

33. COTENANCY
Tenneco Oil Co. v. District Court of Twentieth Judicial District, Carter County, 465 P.2d 468 (Okla. 1970).

34. PORE SPACE