Law of Oil and Gas

The questions heretofore considered are general in their scope, and were treated for the purpose of providing a background for the more intensive study upon which we must now enter. While commentators refer to this branch of jurisprudence as the “Law of Oil and Gas,” it is more exact to say that .we are dealing with the law pertaining to oil and gas leases. This is true because the oil and gas lease characterizes and distinguishes the subject throughout. For reasons which inhere in the very nature of the business a lease yielding the lessor a royalty on the quantity of oil or gas produced creates the relation between the landowner and the operator which is best adapted to the practical aspects of the enterprise. Accordingly, it is the almost universal custom to develop lands for oil and gas under leases rather than through the ownership of the fee. It’follows as a logical consequence that the subject-matter of nearly all of the oil and gas cases is the oil and gas lease. In these circumstances the problem of paramount importance to us is to determine the nature and legal effect of this instrument.