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Law School Case Brief

Humble Oil & Ref. Co. v. West - 508 S.W.2d 812 (Tex. 1974)

Rule:

Once severed from the realty, gas and oil, like other minerals, become personal property. Title to natural gas once having been reduced to possession is not lost by the injection of such gas into a natural reservoir for storage purposes.

Facts:

Petitioner fee owner appealed a judgment of the Court of Civil Appeals, Harris County, 10th District (Texas), which ordered the trial court to enter a permanent injunction restraining petitioner from injecting extraneous gas into petitioner's gas field until all native gas, which was subject to the royalty interests of respondent royalty owners, was produced from the field.

Respondent royalty owners brought an action against petitioner fee owner seeking to enjoin petitioner from injecting extraneous gas into a subsurface reservoir, which held native gas that was subject to respondents' royalty interests, or alternatively to order petitioner to account to respondents in royalty payments for all gas produced from the reservoir, whether native or stored. 

Issue:

Under the confusion of goods theory, would respondents be entitled to royalties on all gas produced if petitioner could not establish with reasonable certainty the parties' shares of the commingled gas?

Answer:

Yes.

Conclusion:

The court reversed the appellate court's grant of injunctive relief and remanded the case for a determination of whether petitioner could establish the parties' shares of the gas in the reservoir. Injunctive relief did not reasonably accommodate the parties' conflicting rights because it would render illusory petitioner's storage rights. Petitioner did not have a contractual duty to pay royalties on the extraneous gas because respondents reserved interests in only the native gas and petitioner's ownership of the extraneous gas as personal property was not altered by injecting it into the reservoir. Under the confusion of goods theory, respondents would be entitled to royalties on all gas produced only if petitioner could not establish with reasonable certainty the parties' shares of the commingled gas.

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