Generally, a right to enter land to prospect for and to take oil and gas is considered an ownership right.  Mineral interest owners and lessees are entitled to conduct exploration. The authority to explore for oil and gas extends to the mineral interest owner’s lessee.  A mineral owner may sever and assign a surface easement for the limited purpose of conducting geophysical exploration[i].

It is to be noted that even in the absence of express language, the courts have implied the right to ingress and egress for purposes of exploring for and removing oil and gas, and the right to conduct geophysical explorations[ii].  A mineral owner has the right to enter the servient estate for exploration purposes, and may sever that right and assign it to a third party[iii].  However, the right to exploration according to the oil and gas is not an exclusive one between lessor and lessee generally.

Further, the jurisprudence has acknowledged the difficulty of laying down any comprehensive rules with respect to a mineral lessee’s obligation of further exploration.  Whether the lessee has sufficiently tested and explored the leased premises is a question of fact which must be resolved by a consideration of the facts and circumstances shown in a particular case[iv].  For example, under Louisiana law, a mineral lessee may fulfill its obligation of further exploration with conduct short of drilling a well.  The question presented in an action to cancel the mineral lease is whether the operations conducted by the lessee were sufficient to fulfill its obligation of further exploration[v].

It can be seen that the development and exploration are not carried out only by drilling operations.  They are also performed by such other activities as geophysical surveys and farm out operations, efforts to gather geological information, and participation in preliminary play to an eventual deep test in the area.  It is to be noted that a lessee must prosecute the work with due diligence and ordinary care when s/he starts the exploration.  The lessee has the sole discretion to drill wells at any point on the leased premises to operate the field in the most productive and efficient manner.

It is to be noted that there are certain implied covenants present in most oil and gas leases.  In the absence of express provisions to the contrary, the lease imposes upon the lessee several implied covenants, including the duty to protect against drainage[vi]. In order to recover for breach of the duty to protect from drainage, a lessor must present proof[vii]:

• of substantial drainage of the lessor’s land, and
• that a reasonably prudent operator would have acted to prevent the drainage.

Generally, a lessor can adopt different methods to protect the leasehold from drainage, depending upon the circumstances.  A common protective measure is for the lessee to exercise its contractual pooling authority and combine tracts from two or more leases into a single unit around an existing well.  Formation of such a unit is called pooling.  Pooling occurs when a lessee exercises its contractual pooling authority to combine tracts from two or more leases into a single unit around an existing well.

It is to be noted that pooling is considered a common protective measure employed to satisfy the duty to protect the leasehold from drainage.  The primary legal consequence of pooling is that production and operation anywhere on the pooled unit are treated as if they have taken place on each tract within the unit.  Hence, there can no longer be drainage of the individual leases by a unit well, only drainage of the unit by wells located outside the unit[viii].

[i] Enron Oil & Gas Co. V. Worth, 1997 Ok Civ App 60 (Okla. Civ. App. 1997).

[ii] Mustang Production Co. v. Texaco, Inc., 754 F.2d 892 (10th Cir. Kan. 1985).

[iii] Id.

[iv] Noel v. Amoco Prod. Co., 826 F. Supp. 1000 (W.D. La. 1993).

[v] Id.

[vi] Amoco Prod. Co. v. Alexander, 622 S.W.2d 563 (Tex. 1981).

[vii] Id.

[viii] Green v. Gemini Exploration Co., 2003 Tex. App. LEXIS 3703 (Tex. App. Austin May 1, 2003).