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An Irreverent Look at Pipelines

An Irreverent Look at Pipelines.

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An Irreverent Look at Pipelines

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  1. An Irreverent Look at Pipelines

  2. This presentation is made solely for educational purposes and contains opinions of the presenter which are provided pursuant to the First Amendment of the United States Constitution. Neither Rodney M Patterson, nor any other contributor to this presentation provides legal advice about oil and gas matters or pipeline issues within the content of this presentation. This information is not intended to create and its receipt does not constitute a lawyer-client relationship. Viewers of this presentation should not act upon this information without seeking professional legal counsel.

  3. Federal and State Regulations

  4. Federal Regulations • 49 United States Code § 60101 et seq • Title 49 Code of Federal Regulations • Office of Pipeline Safety (OPS) • US Department of Transportation • Pipeline and Hazardous Materials Administration • (PHMA)

  5. Federal Regulations • Interstate pipelines are regulated by Federal Law • regarding safety concerns which specifically includes location. • Under the legal theory of "regulatory preemption", regulation • on that issue by lower governments (state, county, city, municipal) • is prohibited.

  6. Dateline: July 22, 2001 “The OPS is one of the smallest agencies in the federal government. It has an operating budget of about $23 million and 107 full-time employees.” “Yet it is responsible for ensuring the safe and clean operation of more than 2 million miles of pipeline in the United States.”

  7. State Regulations • The Texas Railroad Commission regulates safety, but does • not approve location. • Texas law is unsettled as to what extent local governments • can regulate pipeline location.

  8. State Regulations • Through certification by OPS, the State of Texas regulates, • inspects and enforces all intrastate gas and liquid pipeline • safety requirements. • This work is performed by the Pipeline Safety Section, Gas • Services Division of the Texas Railroad Commission. • Texas RRC has primary jurisdiction of all persons owning or • operating pipelines in Texas.

  9. Types of Pipelines

  10. Where are the Pipelines?

  11. The Pipeline Easement

  12. “Look for words of grant.”

  13. “grant, sell and convey”

  14. “Look for words of grant.” What is Being Granted?

  15. What is Being Granted?

  16. Paragraph 15—Warranty of Title Lessor hereby warrants and agrees to defend title to Lessee hereunder . . . .

  17. Is ‘Paid Up’ a Good Thing?

  18. “Paid Up” Means No Delay Rental

  19. No Surface Use?

  20. Paragraph 10—Surface Use Clause . . . Lessee shall have the right of ingress and egress . . . . . . . Including . . . • Geophysical Operations • Drilling of Wells • Construction and use of • Roads • Canals • Pipelines • Tanks • Water wells • Construction and use of • Disposal Wells • Injection wells • Pits • Electric, Telephone Lines • Power Stations • Other Facilities

  21. The Granting Clause

  22. Paragraph 1—The Granting Clause --What is Being Leased

  23. . . . along with all hydrocarbon and non hydrocarbon substances produced in association therewith . . .

  24. The term “gas” as used herein includes helium, carbon dioxide and other commercial gases, as well as hydrocarbon gases.

  25. Habendum Clause

  26. Paragraph 2—The Habendum Clause This lease, which is a “paid up” lease requiring no rentals, shall be in force for a primary term of Three (3) years from the date hereof, and for as long thereafter as oil or gas or other substances covered hereby are produced in paying quantities from the leased premises or from lands pooled therewith or this lease is otherwise maintained in effect pursuant to the provisions hereof.

  27. Paragraph 2—The Habendum Clause This lease, which is a “paid up” lease requiring no rentals, shall be in force for a primary term of Three (3) years from the date hereof, and for as long thereafter as oil or gas or other substances covered hereby are produced in paying quantities from the leased premises or from lands pooled therewith or this lease is otherwise maintained in effect pursuant to the provisions hereof.

  28. primary term of Three (3) years

  29. and for so long thereafter as oil or gas or other substances covered hereby are produced in paying quantities

  30. Royalty Clause

  31. Paragraph 3—Royalty Clause A percentage share of production, or the value derived from production, paid from a producing well. Ways to Measure Royalty: • Fair Market Value Determined by looking at the market place. • Proceeds Realized Determined by looking at what price Lessee sells for.

  32. Paragraph 3—Royalty Clause When and Where Is Royalty Measured? • At the wellhead • From sale thereof

  33. For Oil Paragraph 3—Royalty Clause in Sample Lease For oil and other liquid hydrocarbons separated at Lessee’s separator facilities, the royalty shall be Twenty Five Percent (25%) of such production, to be delivered at Lessee’s option at the wellhead or to Lessor’s credit at the oil Purchaser’s transportation facilities . . .

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