1. Oil rights owner (P) v. Adjacent drilling company (D)
OIL AND GAS
Kelly v. Ohio Co.
Oil rights owner (P) v. Adjacent drilling company (D)
Dr. John Wallace
Saeed Alawami

2. Outline: Nature of Case and fact summary Rule of Law Facts Issue
Holding and Decision
Analysis
Cause of action
Overview
Reasoning
Conclusion

3. Nature of Case and fact summary:
Appeal from dismissal of action to enjoin oil drilling.
Kelly (P) sought a temporary restraining order, a permanent injunction, and damages for Ohio Oil Co.’s (D) drilling of oil along its property lines in an effort to extract the oil there from.

4. Rule of Law:
A landowner may permissibly extract oil or gas from beneath the land of another, where all operations for the extraction are lawfully conducted on his property.
The derrick structure is assembled over the drill site. The drill bit is screwed into the bottom of a thirty-foot length of pipe which passes through the rotary table
The rule of capture is an unusual rule of law because it is a rule of nonliability.

5. Fact: Hastings was free simple owner of 165 acres of oil land.
Ohio Oil CO. (D) was control of property to the east and west of Hastings land.
Kelly (P) sought a temporary restraining order to prevent further drilling of oil from within 200 feet of Hastings' property line.
concluding the Kelly's (P) petition failed to state a cause of action. Kelly (P) appealed.

6. Issue:
May a landowner permissibly extract oil or gas from beneath the land of another where all operations for the extraction are lawfully conducted on his property?

7. Holding & Decision:
A landowner may permissibly extract oil or gas from beneath the land of another.
Kelly (P) could have protected himself against by extraction by establishing his own oil wells along the property lines. Affirmed.
It is immaterial where the oil came from initially as long as it was naturally drained into the owner’s well.

8. Analysis: The ''ownership in place'' theory holds that the landowner.
Lawfully conducted on his own property is the rightful owner of such matter though it may in fact originate beneath someone else's property.

9. Cause of action:
A fact or set of facts the occurrence of which entitles a party to seek judicial relief.

10. Overview:
The law regulating oil and gas ownership in the U.S. generally differs significantly from laws in Europe.

11. Reasoning
The obligation to explore is such an essential part of the contract, through implied, as must be.

12. Treated as a condition which, if not performed within a reasonable time, entitled appeal

13. Forfeiture under the agreement that, “in default of complete compliance on the part of the second
Part, or his assigns, renders this lease null and void.

14. Conclusion: That Kelly’s (P) petition failed to state.
An estate in land characterized by ownership of the entire property for an unlimited duration and by absolute power over distribution.

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