Texas American Energy Corp. v. Citizens Fidelity Bank & Trust Co.

736 S.W.2d 25 (Ky. 1987)

 

RULE:

Natural gas once converted to personal property by extraction remains personal property notwithstanding its subsequent storage in underground reservoirs with confinement integrity.

FACTS:

A dispute had arisen as to whether injected stored gas was personal property, susceptible of encumbrance merely by a security interest agreement as provided for in Article 9 of the Uniform Commercial Code (UCC), Ky. Rev. Stat. Ann. § 355.9-102 (1)(a), or whether such stored gas, upon injection, once again became in the eyes of the law an interest in real estate, the encumbrance of which could be accomplished only by a real estate mortgage. Respondent and movant, both parties to a lawsuit involving natural gas rights, filed a joint petition for a declaration of rights pursuant to Ky. Rev. Stat. Ann. § 418.020. The state supreme court adopted the opinion of the district court judge that the stored gas remained personal property.

ISSUE:

Was the title over natural gas lost when it was converted to personal property by extraction and was subsequently stored in underground reservoirs with confinement integrity?

ANSWER:

No.

CONCLUSION:

When previously extracted oil or gas was subsequently stored in underground reservoirs capable of being defined with certainty and the integrity of said reservoirs was capable of being maintained, title to such oil or gas was not lost and said minerals did not become subject to the rights of the owners of the surface above the storage fields.

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