Drilling companies most often lease the rights to drill for and produce oil. The law regulating oil and gas ownership in the US generally differs significantly from laws in Europe because oil and gas are often owned privately in the Oil and gas law pdf as opposed to being owned by the national government in many other countries. In the United States, oil and gas rights to a particular parcel may be owned by private individuals, corporations, Indian tribes, or by local, state, or federal governments.
Oil and gas rights extend vertically downward from the property line. Unless explicitly separated by a deed, oil and gas rights are owned by the surface landowner. Oil and gas rights offshore are owned by either the state or federal government and leased to oil companies for development. The tidelands controversy involve the limits of state ownership. Although oil and gas laws vary by state, the laws regarding ownership prior to, at, and after extraction are nearly universal. Because oil and gas are fluids, they may flow in the subsurface across property boundaries.
In this way, an operator may permissibly extract oil and gas from beneath the land of another, if the extraction is lawfully conducted on his own property. An operator may not angle a well to penetrate beneath property not owned by or leased to him. The two conflicting legal doctrines covering oil and gas extraction are the rule of capture, and the correlative rights doctrine. Which of the doctrines applies in a particular case depends on state law, which varies considerably from state to state, or in the case of the federal offshore zone, on U. The rule of capture provides that an oil producer with a wellbore on his property is allowed to drain oil out from underneath his land—even if some of that oil originated from a neighbor’s land, migrating to the oil producer’s land through geologic forces or drainage.
The rule of capture gives landowners an incentive to pump out oil as quickly as possible by accelerating operations or drilling multiple wells to capture the oil of their neighbors. Mineral rights may be severed by a deed from the surface rights. Such a condition is called a split estate. Once severed from surface ownership, oil and gas rights may be bought, sold, or transferred, like other real estate property. Ownership in the oil and gas rights for different horizontal layers, or strata, may be further divided and sold to different parties. In most states, unless otherwise specified by a deed, the owner of the oil and gas interest is presumed to have the right to occupy as much of the surface property as is reasonably needed to extract the oil and gas, subject to regulations for minimum distances from homes or buildings. Courts have generally held that, without this implied right of access and surface occupancy, ownership of the oil and gas rights would be meaningless.