Common Legal Terms in the Oil and Gas Industry
Royalty Interest:
A legal share of the gross production from an oil and gas lease that is paid to the mineral owner.
Lease:
An agreement between the mineral rights owner and a company that specifies the terms and conditions under which the company is allowed to explore and develop the land in exchange for a fee.
Lease Bonus:
An upfront cash payment made by the lessee to the lessor for the right to explore and produce oil and gas on the leased property.
Pooling:
The act of combining separate tracts of land into a single unit for the purpose of drilling and producing oil and gas.
Forced Pooling:
A legal process in which an operator can combine tracts of land into a single unit for the purpose of drilling and producing oil and gas without the consent of all of the mineral owners.
Unitization:
A legal process in which separate tracts of land are combined into a single unit for the purpose of sharing production and profits.
Seismic Testing:
A method of geophysical surveying using shock waves to measure the subsurface of the earth.
Surface Use Agreement:
An agreement between a surface owner and a mineral owner that addresses issues such as the right to access the surface of the property, surface damages caused by oil and gas operations, and compensation for the use of the surface.
Surface Damages:
Damage to the surface of the land caused by exploration or production activities, such as drilling or building of roads.
Pipeline Easement:
A legal agreement between a landowner and a pipeline owner that gives the pipeline owner the right to construct and maintain a pipeline on the landowner’s property.
Saltwater Disposal Well:
A well that is used to inject saltwater, a by-product of oil and gas production, into a deep subsurface formation.
More legal and technical terms from the Oil & Gas Industry
Drilling Rig:
A structure that houses all the necessary equipment for drilling a well, including the derrick, pumps, and other machinery.
Casing:
Heavy tubular steel pipes that are cemented into the wellbore to protect the well from contamination and prevent the sides of the wellbore from caving in.
Well Completion:
The process of preparing a well for production, which includes installing the production tubing and a downhole safety valve.
Hydraulic Fracturing:
The process commonly known as “fracking” or “frac’ing” consists of using high pressure fluids and granular elements to force open fissures in shale rock formations that will release oil and gas.
Production Platform:
A structure built over a producing oil and gas well to facilitate the production and storage of oil and gas.
Flaring:
The burning of natural gas at the wellsite to reduce the volume of gas that needs to be transported to a processing plant.
Blowout:
A sudden release of pressure in the wellbore that can cause an uncontrolled and violent release of oil and gas.
Force Majeure:
A provision in a contract that frees both parties from liability if a certain event occurs, such as a natural disaster, that prevents either party from performing its duties.
Vertical Integration:
The process by which a single entity controls every aspect of a particular operation, from exploration and production to transportation, refining, and marketing.
Regulation:
Governmental laws and regulations that govern the exploration and production of oil and gas, including environmental regulations and safety standards.