CHAPTER 12 RIGHTS AND WRONGS OF SEISMIC DATA: SEISMIC DATA TRANSFER AMONG OWNERS AND USERS
| Jurisdiction | United States |
(May 1989)
RIGHTS AND WRONGS OF SEISMIC DATA: SEISMIC DATA TRANSFER AMONG OWNERS AND USERS
Doyle & Savit
Washington, D.C.
This paper will address the issue of the transfer of proprietary seismic data and use rights in that data. It will explore not only the rights of the federal government to disclose or exploit data in their possession through regulatory requirements,1 but will also deal with topics of current interest regarding the transfer of data or rights granted under licenses to use proprietary data, among private purchasers of that data.
I. Background
Although seismic data form the backbone of virtually all initial oil and gas exploration efforts, neither the techniques of its collection, nor the business arrangements between seismic exploration contractors and their client oil companies are well understood.
Seismic exploration is among the first steps in the oil exploration process. Basically, marine seismic exploration is performed by introducing a sound wave into the water. Although this was done in the past through the use of explosives, that method has been abandoned in domestic waters since the mid-1960's. Since that time, the sound source is generated by releasing compressed air into the water.
The release of compressed air into the water creates a bubble. As the bubble expands and contracts, it generates a distinctive shock wave which passes through the water and penetrates the sea bottom. As it penetrates the earth, it is reflected and refracted by the various subsurface strata.
Extraordinarily weak 'echoes' of the original signal are received by sensitive microphones towed behind seismic boats and are recorded by sophisticated on-board computer
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equipment. The recorded signals are processed by more sophisticated computer equipment onshore. The result is a cross-sectional 'map' of the subsurface strata showing important structural features critical to the oil exploration process.2
The precise techniques available to generate the signal, to receive and record the 'echoes', and to process the recorded 'raw' data are almost endlessly variable. Each seismic contractor or oil company exploration department possesses a suite of proprietary data acquisition and processing techniques which they consider best suited to a particular geologic, stratigraphic or lithologic situation. These techniques are highly guarded by each company and their availability may constitute the primary reason for the retention of one contractor rather than another.
Generally, seismic contractors are not affiliated with other companies holding production interests.3 Their only source of revenue are the sale of seismic data acquisition and processing services, the sale of seismic data acquisition and processing equipment, and the non-exclusive licensing of seismic data collected and processed for their own account.
There are three basic business arrangements by which seismic data acquisition and processing services are sold or licensed: exclusive data, group data, and non-exclusive data (also known as speculative or "spec" data). Each of these three business arrangements is described below along with certain of their unique attributes.
'Proprietary' or 'exclusive' data are acquired for a single client (occasionally in conjunction with existing joint operations partners). In the case of exclusive data, the data are acquired pursuant to the specifications set out by the client in the precise locations designated by him. Any necessary permits are generally acquired in the name of the client. Exclusive data acquisition and processing contracts generally prohibit the contractor from disclosing any details regarding the data collected or the techniques employed in acquiring or processing it to anyone other than
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the client for whom the data were acquired. Most importantly, the client owns all rights in the data, virtually from the moment it is collected, and is free to dispose of it as he chooses.
Group data are acquired for groups of companies formed prior to the initiation of the acquisition of the data for the sole purpose of sharing the cost of seismic exploration. The groups may be formed in advance and solicit bids from competing contractors, or a contractor may solicit the formation of a group in order to support a survey in an area the contractor believes to be of high interest. In this case, the specifications under which the data are collected, as well as the area in which the survey is to take place are agreed upon by the group before acquisition is begun. The permits may be sought either in the name of the contractor or the group, as the group may desire. In some instances the contractor itself will purchase one or more shares in the group's data rights so that it may share in the profits of future disposition of the data by the group. Obviously, none of the individual group members may sell or transfer the data so acquired without the permission of the group. Generally, group contracts provide that the data are owned in common by the group and that any company not a member of the group at the time that the acquisition was commenced pay a premium or penalty should they later decide to acquire the data from the group.
Non-exclusive data are acquired by the contractor at his own cost. Data so collected remain the property of the contractor. Instead, the use of the data is licensed, for a set fee, to any company wishing to have access to it. These licenses are, with certain exceptions addressed in detail below, almost universally non-transferrable. Of course, in this case, permits are obtained in the name of the contractor and all costs of initial acquisition and processing are borne by him as well.
Both the nature of the data collected and the business arrangement under which it was collected must be kept in mind in order to analyze properly the legal issues discussed below.
Seismic data constitutes a unique commodity. Its value is totally independent of its content and entirely dependent on the number of people that have access to it. For example, data indicating that an area is not prospective may be very valuable if no one else is in possession of it. Conversely, data indicating that an area is very prospective is virtually worthless if it is in the public domain or has been widely distributed and its contents are generally known. Because of its unique nature, the sale, licensing and transfer of
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seismic data has become the focus of a great deal of attention both in the oil and gas community and the legal community serving that industry.
The recent treatment of seismic data during ever increasing merger and acquisition activity in the industry has heightened that interest. Not only are data being transferred among licensee companies at a greater rate than ever before, but, at the same time, the number of potential customer companies continues to shrink dramatically. Set against a backdrop of a long term depression in the price of crude oil and declining exploration and production budgets, it is easy to understand why this subject is generating an unprecedented level of controversy within the oil and gas community.
This is not the first time these issues have arisen. A similar controversy arose over ten years ago when the federal government first asserted: (1) that it could require that all seismic data acquired pursuant to a federal permit be made available to the Department of the Interior and (somewhat later), (2) that it could release to the general public all data in its possession 10 years after it was acquired.
II. Discussion
A. Data in the Possession of the Federal Government Pursuant to the Outer Continental Shelf Lands Act
All seismic exploration for oil and gas in federal waters is undertaken pursuant to the Outer Continental Shelf Lands Act, 43 U.S.C. § 1331 et seq. (1986) (as amended) ("OCSLA"). Section 26 of OCSLA provides:
Any lessee or permittee conducting any exploration for, or development or production of, oil or gas pursuant to this subchapter shall provide the Secretary access to all data and information (including processed, analyzed, and interpreted information) obtained from such activity and shall provide copies of such data and information as the Secretary may request. Such data and information shall be provided in accordance with regulations which the Secretary shall prescribe.4
Once the data are in possession of the Secretary, however, he must:
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...prescribe regulations to (1) assure that the confidentiality of privileged or proprietary information received by the Secretary under this section will be maintained, and (2) set forth the time periods and conditions which shall be applicable to the release of such information. Such regulations shall include a provision that no such information will be transmitted to any affected State unless the lessee, or the permittee and all persons to whom such permittee has sold such information under promise of confidentiality, agree to such transmittal.5
Pursuant to §1352 (d) of OCSLA, the Secretary must also make certain data available to affected coastal states under enumerated circumstances. But a state may receive it only if it has promulgated regulations similar to those required by section 1352(c).6 State governments receiving confidential data pursuant to section 1352(d) must also make themselves amenable to suit by the permittee7 , waive certain defenses (including sovereign immunity)8 and hold the federal government harmless from liability from any damages caused by their intentional or negligent release of confidential data in their possession.9 In addition, any person who reveals any information required to be kept confidential by the OCSLA is subject to imprisonment for up to ten years and fines of up to $10,000.10
In 1976, the Secretary of Interior promulgated regulations...
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