Texas people, help me understand this:
Question ID: 675
Alex owned an 800-acre tract of land in Bell County, Texas, bounded on the north by the County Road and on the south by the State Highway. Alex sold and conveyed parts of the tract by properly executed and recorded deeds as follows:
• In 2004, he sold the north 400 acres to Carlos (the “North Tract”).
• In 2005, he sold to Bella the south 100 acres along the State Highway (the “South Tract”).
• To provide access to the otherwise landlocked 300-acre tract retained by Alex, Alex reserved in the warranty deed to Bella a perpetual nonexclusive easement 50 feet in width along the entire western boundary of the South Tract (the “Easement”). The reservation stated that the easement was for pedestrian and vehicular ingress and egress from the State Highway to and from the 300-acre tract retained by Alex.
• After these conveyances, Alex retained only the 300-acre tract and the Easement.
In 2007, Alex and Carlos each executed separate leases with Oil Co. for the lease of their respective mineral interests. The leases allowed for pooling because it was believed that drilling on Alex’s land might drain Carlos’ land and vice-versa. In 2008, Oil Co. drilled a producing oil well on Alex’s property. No well has been drilled on the land leased from Carlos, and Carlos’ land has not been pooled with Alex’s property. To facilitate transporting the oil, Oil Co. wants to construct a pipeline either within the Easement from Alex’s property to the State Highway or across the North Tract to the County Road.
1. Is Oil Co. entitled to construct the proposed pipeline on either the Easement or the North Tract? Explain fully as to each.
2. If Oil Co. does not drill a well on the land leased from Carlos, what obligations, if any, does it have to Carlos arising from the production on Alex’s land? Explain fully.
The answer to question 2 is:
2. Oil Co. may be liable to Carlos arising from the production on Alex’s land under the implied covenant to protect against drainage.
Texas courts impose duties upon lessees to ensure that leased properties are properly and fairly developed, maintained, and administered. Absent express provisions to the contrary, Texas courts impose an implied covenant to protect against drainage. Accordingly, Oil Co., as the lessee of both tracts of land, has the duty to prevent drainage or waste despite the absence of a duty to produce in the primary term. To maintain the action, Carlos would need to show (i) substantial drainage, (ii) that a reasonably prudent operator would drill to protect against drainage, and (iii) damages measured by the yield of production absent waste.
Here, Oil Co.’s drilling on Alex’s land clearly results in substantial drainage from the adjacent tract, owned by Carlos. A reasonably prudent operator would have exercised the pooling clause of the lease to ensure that Carlos’s rights were protected. If Carlos and Alex’s tracts are pooled together, Carlos and Alex would each receive royalties in proportion to the size of their respective tracts.
Further, Carlos could argue that Oil Co. could have protected against drainage by drilling an offset well that would have produced a definite quantity of oil and that would have resulted in profit to Carlos. Because pooling the tracts together would be an easier and less-expensive alternative to drilling an offset well, Oil Co. should pool the tracts together and pay royalty payments to Carlos and Alex.
What the fuck? Where did they get "clearly results in drainage?" Nothing in the facts says that there is drainage; only that it was maybe sort-of possible.
