Louisiana Law Review Volume 52 | Number 4 March 1992 Louisiana and Texas Oil & Gas Law: An Overview of the Differences Patrick H. Martin Louisiana State University Law Center J. Lanier Yeates Repository Citation Patrick H. Martin and J. Lanier Yeates, Louisiana and Texas Oil & Gas Law: An Overview of the Differences, 52 La. L. Rev. (1992) Available at: https://digitalcommons.law.lsu.edu/lalrev/vol52/iss4/3 This Article is brought to you for free and open access by the Law Reviews and Journals at LSU Law Digital Commons. It has been accepted for inclusion in Louisiana Law Review by an authorized editor of LSU Law Digital Commons. For more information, please contact [email protected]. Louisiana and Texas Oil & Gas Law: An Overview of the Differences* Patrick H. Martin** and J. Lanier Yeates*** I. INTRODUCTION-SCOPE OF ARTICLE There is more that separates Louisiana and Texas than the Sabine River. Our two states have followed different paths to the law, as is soon discovered by any attorney who attempts to practice across state lines. Such attorneys find they must confront new terminology. Louisiana lawyers new to Texas may think a remainder is an after-Christmas sales item at Neiman-Marcus. A Texas lawyer, when faced with reference to a naked owner in Louisiana law, perhaps will conjure up the sort of legal practice that William Hurt had in drafting a will for Kathleen Turner in Body Heat. The terms apply to types of interest which are virtually the same. Our purpose in this presentation is to highlight certain features of the legal systems of the two states that make them distinct from one another, and also to go over certain areas in which they are not terribly different. 11. BACKGROUND-ORIGIN OF LEGAL SYSTEMS Both Louisiana and Texas began their existence as colonies with their legal systems based on a civil code. Both developed oil and gas at about the same time. The same companies have developed petroleum in both states in similar types of geologic formations using similar contracts and financing arrangements. Yet there are fundamental dif- ferences in their basic premises regarding oil and gas law. * This paper has appeared in several forms in talks by the two authors at continuing legal education programs sponsored by the University of Houston Law Center, the Oil, Gas and Mineral Law Section of the Dallas Bar Assocation, and the Petroleum Landmen's Association of New Orleans. ** Campanile Professor of Mineral Law, Paul M. Hebert Law Center, Louisiana State University. *** J. Lanier Yeates is a partner in the Energy Section of Jackson & Walker and is resident in the Firm's Houston office. He is a member of the State Bar of Texas and the Louisiana State Bar Association. Mr. Yeates received his B.S. degree from Louisiana State University and his J.D. from Louisiana State University Law School, where he served as Associate Editor of the Louisiana Law Review. LOUISIANA LAW REVIEW [Vol. 52 A. Texas Because Mexico was a colony of Spain, the Spanish civil law was the first law of Texas. After the Mexican Revolution against Spain, the Spanish civil law continued in connection with the decrees and statutes of the government of Mexico. Texas declared its independence from Mexico in 1836, and for four years thereafter the Republic Texas retained the civil law as the rule of decision.' For a relatively brief period of time Texas law could be said to be an "odd mixture" of common law and Mexican civil law.' But Texas rejected the path followed by Louis- iana, which was to embrace the civilian tradition. Texas adopted the common law of England as the rule of decision in 1840.' By the time oil and gas development began in Texas early in this century, the common law was firmly entrenched. The civil law antecedents of Texas law have had very little influence on Texas oil and gas law. Lands in Texas have been granted by the Kingdom of Spain, the Republic of Mexico, the Republic of Texas, and the State of Texas. This fact has affected title to land but the effect has seemed to be more in the area of surface water rights and easement issues than oil and gas., Justice Daniel, dissenting in the well-known case of Sun Oil Co. v. Whitaker,' attributed the majority's decision favoring the mineral estate's dominance over the surface estate to the Spanish-Mexican legal heritage. He said: The rule in Texas that a severed mineral estate is dominant and the surface estate servient had its genesis in the Spanish law under which the King held separate ownership of all minerals under both private and public lands. As with all royal patri- I. The Constitution of the Republic of Texas provided: "The Congress shall, as early as practicable, introduce, by statute, the common law of England, with such mod- ifications as our circumstances, in their judgment, may require; and in all criminal cases, the common law shall be the rule of decision." Tex. Const. art, IV, § 13 (1836). 2. James W. Paulsen, A Short History of the Supreme Court of the Republic of Texas, 65 Tex. L. Rev. 237, 271 (1986). 3. The Spanish civil law was abolished by the Texas legislature in 1840. Act of Jan. 20, 1840, 1840 Laws of Tex. 3, reprinted in 2 Laws of Tex. 177 (Gammel 1898). 4. The statutes in force in the Republic of Texas before the introduction of the common law are to be construed in the light of the Mexican civil law, and the validity and legal effect of contracts and of grants of land made before the adoption of the common law must be determined according to the civil law in effect at the time of the grants. Miller v. Letzerich, 121 Tex. 248, 49 S.W.2d 404 (1932); State v. Valmont Plantations, 346 S.W.2d 853 (Tex. Civ. App. 1961), aff'd, 163 Tex. 381, 355 S.W.2d 502 (1962) (adopting opinion of the Court of Civil Appeals); Kraft v. Langford, 565 S.W.2d 223 (Tex. 1978); In re the Adjudication Of Water Rights in the Medina River Watershed of the San Antonio River Basin, 670 S.W.2d 250 (Tex. 1984), rev'g 645 S.W.2d 596 (Tex. Civ. App. 1983). 5. 483 S.W.2d 808 (Tex. 1972). 19921 LOUISIANA AND TEXAS OIL & GAS LAW monies, the sovereign's separate and severed mineral ownership on private lands rendered the surface estate servient and subject to any use the King might find necessary to mine for and produce the minerals on or beneath the lands of his subjects.6 It is true that Texas, as a republic and in the period following its entry into the Union, followed the Spanish and Mexican civil law practice of reserving the minerals from all public lands that were sold or otherwise conveyed. However, minerals were released to the surface owners of the land by provisions included in the state's Constitutions of 1866, 1869, and 1876, and by statutes in 1879 and 1895.1 In the period 1895 through 1931, the state's reserved rights in minerals in lands conveyed to private parties were relinquished to the extent of fifteen-sixteenths, and the leasing of such minerals is governed by the Texas Relinquishment Act,' about which we need say no more. As indicated, the real development of Texas oil and gas law has been in this century. The first oil well in Texas was drilled near Oil Springs in Nacagdoches County in 1866. 9 There were small amounts of production of oil in Texas in the late 1880's and early 1890's. In 1894 oil was discovered near Corsicana and led to commercial production. The biggest increase in production came in 1901 with the Spindletop gusher near Beaumont. The early Texas cases did look to precedents in other states in which production had already taken place. B. Louisiana The Starting Point. The initial inquiry into developing an appreci- ation for differences in Louisiana law must begin with the origins of the Louisiana Civil Code.'0 The preference of Louisianians for a civil code arises from the historical forces associated with the conception of 6. Justice Daniel himself goes on to observe: "The same general doctrine applied at common law under crown ownership of all minerals." 483 S.W.2d 808, 816 n.4 (Tux. 1972), citing Cowan v. Hardeman, 26 Tex. 217 (1862). 7. H. Philip (Flip) Whitworth, Leasing and Operating State-owned Lands for Oil and Gas Development, XVI Tex. Tech L. Rev. 673 (1985); Tex. Const. of 1866 art. VII, § 39; Tex. Const. of 1869 art. X, § 9; Tex. Const. art. XIV, § 7. 8. Tex. Nat. Res. Code Ann. ch. 52, subch. F (§§ 52.171-.186) (Vernon 1978 & Supp. 1989). 9. Robert E. Hardwicke, Legal History of Conservation of Oil in Texas, ABA, Legal History of Conservation of Oil and Gas. 214, 217 (1939). 10. Shael Herman, David Combe, and Thomas Carbonneau prepared the pamphlet, The Louisiana Civil Code: A Humanistic Appraisal. The European antecedents of the Civil Law of Louisiana are provided as overviews of and are drawn in part from the pamphlet and from John H. Merryman, The Civil Law Tradition (1969). Louisiana property law in this paper derives in part from A Short Course on Louisiana Property Law and Mineral Law, a 1985 lecture series by Professor Thomas A. Harrell, Director of ihe Mineral Law Institute, Paul M. Hebert Law Center, Louisiana State University. LOUISIANA LAW REVIEW [Vol. 52 the Louisiana Civil Code. Among the developments important to the shaping of Louisiana Law are the following events: 1.