TEXAS OIL AND GAS LAW EXAM 2025
STUDYGUIDE QUESTIONS AND 100%
CORRECT ANSWERS | A+ GRADE
GUARANTEED PASS
Warranty Clause (3 types) Correct Answer 1. General
Warranty Deed (GWD) - Warrants against defects in title.
2. Special Warranty Deed (SWD) - You warrant that you
haven't individually done anything to harm title "by,
through, or under" covers only THAT conveyance.
3. No warranty/Quitclaim deed - take at your own risk
Proportionate Reduction Clause Correct Answer If you
own less than 100% you will receive proportionately less.
This is not implied and MUST be in the lease.
Subrogation Clause Correct Answer 1. Lessee has right to
pay or reduce the mortgage or lien and step in the shoes
of the lein holder and to deduct royalties to pay off money I
paid
2. Bank takes lien on land and minerals oil and gas co can
lose lease
i. Oil and gas co will try and get a subordination
agreement from bank
ii. If mortgagee stops paying then oil and gas co has to
pay royalties to bank
3. Foreclosure can extinguish lease
,Habendum Clause Correct Answer starts the term - first
clash between l'or and l'ee. "as long there after" "so long
as" determinable language. Once lease terminates,
minerals revert to MEO. Secondary term.
Primary Term Correct Answer This is the number of years
leased. Can drill at any point during this.
Secondary Term Correct Answer "So long thereafter"
Immediately starts when production begins.
FSD based on production in paying quantities or savings
clause.
Delay Rentals ("Unless" Clause) Correct Answer Payment
in lieu of production, delays Oil & Gas Co's obligation to
drill. Lease terminates "unless" payment is made.
"Or" Clause Correct Answer Pay delay rentals, or drill, or
let lease expire.
Savings Clause Correct Answer Secondary term, saving
event that saves lease from termination when not
producing.
1. Shut in clause
2. Operations clause
i. Dry Hole
ii. TCOP
iii. Engaged in operations
3. Force Majeure
, Rental Division Orders Correct Answer Order showing
how the payment from the well will be divided. Drafted in
accordance with the title opinion.
It is:
1. Binding K
2. Can modify the term of lease
3. Is revocable by owner - but binding until that event.
Exceptions:
Unjust Enrichment: If error causes oil co to be unjustly
enriched then they have to pay it back
Lease Surrender Clause Correct Answer Without this
provision, company can't release and pay you on the
remainder
Paid up lease clause [Paid in full] Correct Answer Need to
have expressed provision, all rentals have been paid up -
no obligations to pay or drill, without this lease still subject
to implied covenant to test.
Most common type of leases (now).
Secondary term (Production "in paying quantities" PPQ)
[two step test] Correct Answer 1. Does profit cover
operating costs (how much cash did you make, vs. spend?
- fact question) If yes, done, lessee wins, considered
producing.
2. If no, RPO Test (Reasonable Prudent Operator Test) -
would an RPO continue to operate this well for purposes
other than mere speculation? If yes, then PPQ. (In Texas,
production is not enough, must have PPQ)
STUDYGUIDE QUESTIONS AND 100%
CORRECT ANSWERS | A+ GRADE
GUARANTEED PASS
Warranty Clause (3 types) Correct Answer 1. General
Warranty Deed (GWD) - Warrants against defects in title.
2. Special Warranty Deed (SWD) - You warrant that you
haven't individually done anything to harm title "by,
through, or under" covers only THAT conveyance.
3. No warranty/Quitclaim deed - take at your own risk
Proportionate Reduction Clause Correct Answer If you
own less than 100% you will receive proportionately less.
This is not implied and MUST be in the lease.
Subrogation Clause Correct Answer 1. Lessee has right to
pay or reduce the mortgage or lien and step in the shoes
of the lein holder and to deduct royalties to pay off money I
paid
2. Bank takes lien on land and minerals oil and gas co can
lose lease
i. Oil and gas co will try and get a subordination
agreement from bank
ii. If mortgagee stops paying then oil and gas co has to
pay royalties to bank
3. Foreclosure can extinguish lease
,Habendum Clause Correct Answer starts the term - first
clash between l'or and l'ee. "as long there after" "so long
as" determinable language. Once lease terminates,
minerals revert to MEO. Secondary term.
Primary Term Correct Answer This is the number of years
leased. Can drill at any point during this.
Secondary Term Correct Answer "So long thereafter"
Immediately starts when production begins.
FSD based on production in paying quantities or savings
clause.
Delay Rentals ("Unless" Clause) Correct Answer Payment
in lieu of production, delays Oil & Gas Co's obligation to
drill. Lease terminates "unless" payment is made.
"Or" Clause Correct Answer Pay delay rentals, or drill, or
let lease expire.
Savings Clause Correct Answer Secondary term, saving
event that saves lease from termination when not
producing.
1. Shut in clause
2. Operations clause
i. Dry Hole
ii. TCOP
iii. Engaged in operations
3. Force Majeure
, Rental Division Orders Correct Answer Order showing
how the payment from the well will be divided. Drafted in
accordance with the title opinion.
It is:
1. Binding K
2. Can modify the term of lease
3. Is revocable by owner - but binding until that event.
Exceptions:
Unjust Enrichment: If error causes oil co to be unjustly
enriched then they have to pay it back
Lease Surrender Clause Correct Answer Without this
provision, company can't release and pay you on the
remainder
Paid up lease clause [Paid in full] Correct Answer Need to
have expressed provision, all rentals have been paid up -
no obligations to pay or drill, without this lease still subject
to implied covenant to test.
Most common type of leases (now).
Secondary term (Production "in paying quantities" PPQ)
[two step test] Correct Answer 1. Does profit cover
operating costs (how much cash did you make, vs. spend?
- fact question) If yes, done, lessee wins, considered
producing.
2. If no, RPO Test (Reasonable Prudent Operator Test) -
would an RPO continue to operate this well for purposes
other than mere speculation? If yes, then PPQ. (In Texas,
production is not enough, must have PPQ)
