The Rule of Capture: Extracting Oil and Gas from Underground - dummies

The Rule of Capture: Extracting Oil and Gas from Underground

By Alan R. Romero

A landowner has property rights to the oil and gas under her land. Like percolating underground water, oil and gas move around in permeable layers of the earth. If one landowner drills a well on her land and extracts oil and gas, it may drain oil and gas from under her neighbors’ land, too.

The neighbors therefore may complain that she has taken their property right in the oil and gas. The traditional rule, however, is that a neighbor has no claim against one who has drilled a well and drained oil and gas from under her land. More recently, courts and state legislatures have modified this traditional rule to protect the interests of landowners in capturing oil and gas from underneath their surface.

The common law tradition is that the owner of land owns everything under the surface of her land to the center of the Earth. Many states say that includes the oil and gas under her surface.

The surface owner can sever ownership of the oil and gas from the surface ownership, however, by conveying the rights to oil and gas to someone else or by reserving them for herself when she conveys the surface to another. Either way, someone owns the oil and gas in a defined area underground.

However, the traditional rule of capture is that others may lawfully take that oil and gas if they drill a well on their own land and the well draws the oil and gas away. Everyone knows oil and gas can move around underground, and a well nearby can draw it out without physically invading one’s land.

So the common law recognized that fact by applying the rule of capture to allow every owner of land to freely drill down from the surface of her land and take whatever oil and gas she could get from the well, regardless of whether it came from under her surface or someone else’s surface.

If a landowner didn’t want to lose the oil and gas under her surface, the answer was to “go and do likewise”: Drill your own well and capture whatever you can get from it.