Lone Star Gas Company v. Murchison
353 S.W.2d 870, 16 Oil & Gas Rep. 816, 94 A.L.R. 2d 529 (1962)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
An owner of natural gas does not lose title to that gas when it is injected into a well-defined, natural underground reservoir for storage purposes. The rule of capture, which applies to native gas, does not apply to previously captured gas that has been reduced to possession and subsequently stored.
Facts:
- Lone Star Gas Company (Lone Star), a public utility, stored natural gas to meet fluctuating consumer demand.
- Lone Star acquired rights to use the Tri-Cities Bacon Lime Field, an exhausted natural gas reservoir, for underground storage.
- Beginning in November 1956, Lone Star began injecting 'extraneous gas' (gas it produced elsewhere and owned) into the Bacon storage reservoir.
- J. W. Murchison and R. B. Sanders acquired an oil and gas lease on the 'Jackson tract,' which lay over a small portion of the Bacon storage reservoir.
- The owners of the Jackson tract were not parties to Lone Star's storage agreement.
- By late 1958, all 'native gas' in the reservoir was depleted, and it contained only extraneous gas injected by Lone Star.
- In May 1959, Murchison and Sanders perforated their well casing within the Bacon reservoir and began producing and selling the extraneous gas stored there by Lone Star.
Procedural Posture:
- Lone Star Gas Company sued J. W. Murchison and R. B. Sanders in the District Court of Henderson County, Texas (a trial court) for conversion of natural gas.
- Murchison and Sanders filed special exceptions, arguing that Lone Star's petition failed to state a valid cause of action because Lone Star lost title to the gas upon injecting it into the ground.
- The trial court sustained the special exceptions, holding that the rule of capture applied and that Lone Star had lost title to the gas.
- The trial court dismissed Lone Star's lawsuit.
- Lone Star Gas Company (as appellant) appealed the trial court's dismissal to the Court of Civil Appeals of Texas, Third Supreme Judicial District (an intermediate appellate court).
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a party lose title to natural gas that it has reduced to possession when it injects that gas into a natural underground reservoir for storage?
Opinions:
Majority - Williams, Justice.
No, a party does not lose title to natural gas that it has reduced to possession by injecting it into a natural underground reservoir for storage. Once natural gas is severed from the land and captured, it becomes personal property. The act of storing this personal property in a secure underground reservoir does not constitute an abandonment of title. The court rejected the analogy of stored gas to animals ferae naturae (wild animals) that regain their natural liberty, as established in the Kentucky case Hammonds v. Central Kentucky Natural Gas Co. The court found this analogy flawed because gas is an inanimate substance that moves due to pressure, not its own volition, and storing it demonstrates an intent to retain control and possession, not abandon it. Therefore, the common law rule of capture, which applies to the initial production of native gas, does not apply to gas that has already become personal property and is subsequently stored.
Analysis:
This decision established a foundational rule in Texas oil and gas law by distinguishing stored 'extraneous' gas from native gas in place. By rejecting the ferae naturae analogy and the application of the rule of capture to stored gas, the court provided critical legal protection for the burgeoning natural gas storage industry. This ruling ensures that companies can invest in underground storage facilities with the certainty that their stored gas remains their personal property, thereby promoting the stability of the gas supply chain. The case solidifies the principle that once a mineral is reduced to possession, it is treated as personal property, and its title is not lost merely by placing it in a different natural containment for safekeeping.
