Houston is considered the energy capital of the world. The oil and gas along with renewable energy industry accounts for about 30% of the Houston economy. Even with the threat of global warming, the U. S. is one of the biggest oil producing nations in the world with over 10 million barrels a day with Texas production alone at 3.5 million a day. Whatever the downside, the petrochemical industry will be an important part of the Houston and Texas economy, employing tens of thousands of persons for decades to come.
The industry has three broad classifications, upstream, midstream, and downstream. Upstream refers to the extraction of oil and gas from the ground. Midstream consists of the transportation and storage of petrochemicals. This includes pipelines, rail, truck, and sea transportation, as well as storage facilities. Downstream refers to converting the oil and gas into useable products. This would be the refinery production of fuel, plastics, fertilizers, and chemicals.
Texas has been the center of the oil and gas industry since the Spindletop gusher in Beaumont in 1901. That one well alone had an initial production of 100,000 barrels a day. Since then over 1.1 million oil and gas wells have been drilled in Texas, with over 180,000 wells currently producing. With deep roots in the industry, Texas has been a leader in the development of oil and gas law and regulation to manage this industry.
A basic tenant of Texas oil and gas law, is that real estate is divided into to parts. One part the surface, can be used for buildings, roads, farming, and ranching. The other part, the mineral estate, consists of oil, gas and other minerals (coal, iron ore, potash, quarry stone etc.) that lies beneath the surface. In Texas, the original land grants from Spain, Mexico, and the state of Texas prior to 1895 consisted of both the surface and mineral estates. However, the law allows that the surface estate can legally be separated from the mineral estate. Since the 1901 Spindletop gusher, many landowners realized there might be valuable oil and gas under their land. In order to preserve this asset, many owners, when deciding to sell, might sell just the surface and retain the ownership of the mineral, or underground estate. This would be reflected in deeds of record, with language would state that the seller reserves the ownership of all “oil, gas, and other minerals”. The advantage of this situation is that while surface owners must pay property taxes every year, the mineral owners pay no taxes till the oil, gas or other minerals are produced. The situation of different owners of the surface and mineral estate is common throughout the State. In East Texas much of the land was originally native forest. There was a huge timber industry cutting the original trees till about 1940. After the original timber was gone, many landowners would sell the surface, but keep the potentially valuable mineral estate. When the original owners died, their retained mineral interest would be passed on to their heirs. In the early 2000s fracking made formerly unprofitable oil and gas formations in East Texas accessible to production and there was a boom in drilling. In order for oil companies to drill, they had to acquire oil and gas leases from the mineral owners, who might well not be the current surface owners. In this endeavor hundreds of persons (including myself) were employed to search through the county courthouse real estate records to determine if the surface and mineral estates had been severed in the past, and if so, who the current heirs of the mineral rights were.
Mineral rights are a valuable asset, even if there is no current production, new technology may open up new geologic formations to production. If you have questions as to whether your family, in the past, had land with mineral rights, or you are approached by landmen that want to negotiate an oil and gas lease, contact the Law Firm of Elliott Klein, PLLC, for a consultation.