Implications of the Southland Royalty case

Journal Article · Tue Apr 01 04:00:00 EST 1980 · J. Pet. Technol.; (United States)

DOI:https://doi.org/10.2118/7712-PA· OSTI ID:5157349

Attwell, J E; May, H S

To ensure the continuity of gas already flowing in interstate commerce, the U.S. Supreme Court decided in California vs. Southland Royalty Co., 1978, that despite the termination of a producer's fixed-term lease on a gas field, the gas remained dedicated to interstate commerce under the new producer. Because fixed-term leases are very rare, the court's decision should have had limited implications, explains Vinson and Elkins. However, the Federal Energy Regulatory Commission extended this decision to unlimited leases that were terminated voluntarily or by court order and - more significantly - to leases terminated because of a cessation of production. In the latter case, a new lessee who drilled a new well and found new gas was ordered to resume service to the interstate pipeline. The U.S. Congress was quick to recognize the implications of the Southland decision in relation to the intrastate status of natural gas production and subsequently included in the Natural Gas Policy Act of 1978 a provision that limited the application of this decision. The NGPA precludes the extension of the Southland doctrine to cases in which gas had never been produced from the reverted acreage or in which production ceased before May 31, 1978. The legislation, however, does not completely overrule the Southland rationale in that this protection applies only after Dec.1, 1978.

• OSTI ID: 5157349
• Journal Information: J. Pet. Technol.; (United States), Journal Name: J. Pet. Technol.; (United States) Vol. 32; ISSN JPTJA
• Country of Publication: United States
• Language: English

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