Also known as: property concepts · property
Written by attorneys · grounded in primary & secondary sources — see below
A tax accounting unit in oil and gas law that treats each separate legal interest owned by a taxpayer in each geological deposit on a distinct tract or parcel of land as an independent property. The unit carries legal, geological, and geographical dimensions that control allocation of depletion deductions and other tax attributes.
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Pulse Media contracts to purchase two adjoining parcels containing distinct geological formations. After the contract forms but before closing, a fire destroys surface improvements on one parcel. Under equitable conversion the buyer bears the risk of loss on that parcel while the property concept requires Pulse Media to treat each formation as a separate tax property for depletion purposes once title passes.
Premier Manufacturing holds multiple mineral interests across state lines. When a state seeks to tax one interest as part of a larger unit, the company invokes the Fifth Amendment to argue that each geological deposit must remain a distinct property under the property concept, preventing aggregation that would deprive it of property without due process.
Paragon Construction receives advance payments from an oil and gas client for work on two separate leases. The firm must place those funds in a client trust account under Rule 1.15 while simultaneously tracking each lease as an independent property under the property concept for the client's future depletion calculations.
Prime Logistics leases two noncontiguous parcels for drilling operations. When one parcel becomes unsuitable for residential use by workers, the tenant may terminate only that lease under the Restatement while the property concept continues to require the company to treat each geological deposit on the remaining parcel as a separate tax property.
Piper Patel operates wells on two separate geological formations. A neighboring activity causes significant harm to only one formation. Liability for nuisance arises solely with respect to the affected property because the property concept treats each deposit as an independent unit for measuring harm and allocating tax consequences.
Pierre Poulin owns mineral interests in two states. A plaintiff attempts to assert jurisdiction in one state based solely on the presence of the second interest. The court rejects the claim because the property concept defines each interest as a separate property, and unrelated property in the forum does not create minimum contacts.
Each separate legal interest in a distinct geological deposit on a separate tract constitutes an independent property. A taxpayer must therefore compute depletion separately for each such unit rather than aggregating interests across tracts or formations.
The concept is defined for oil and gas tax purposes but rests on the same principle that each distinct legal interest in a geological deposit on a separate tract forms its own property unit.
…without any fault of his own; and it seems but reasonable and just that the neighbour who has brought something on his own property (which was not naturally there), harmless to others so long as it is confined to his own property, but which he knows will be mischievous if it gets on his neighbour's, should be obliged to…