Rule of capture

The law of capture or rule of capture is common law from England, adopted by a number of jurisdictions in the United States, that determines ownership of captured natural resources including groundwater, oil, gas, and game animals. The general rule is that the first person to "capture" the resources owns that resource. For example, the landowner who extracts or “captures” groundwater, oil or gas from a well that bottoms within the subsurface of his land acquires absolute ownership of the substance, even if it is drained from the subsurface of another’s land. ["See, e.g., Ohio Oil Co. v. Indiana," 177 U.S. 190, 203 (1900).] A corollary of this rule is that a person who drills for groundwater, oil or gas may not extract the substance from a well that bottoms within the subsurface estate of another by drilling on a slant. The Rule of Capture was established in tort law when one landowner sued a neighbor for damages caused by the neighbor's trespass by draining groundwater from beneath the plaintiff's land. The Court held: " [T] hat the person who owns the surface may dig therein, and apply all that is there found to his own purposes at his free will and pleasure; and that if, in the exercise of such right, he intercepts or drains off the water collected from underground springs in his neighbour’s well, this inconvenience to his neighbour falls within the description of damnum absque injuria [an injury without a remedy] , which cannot become the ground of an action." [" Acton v. Blundell", 12 Mees. & W. 324, 354, 152 Eng. Rep. 1223, 1235 (Ex. Ch. 1843).] By denying relief for draining the plaintiff's property, the Court essentially grants the neighbor unlimited rights to take (in this particular case) as much groundwater as they want. This led to various property-law theories of ownerhip and questions of whether there is a vested property right in subsurface groundwater, oil or gas (see below). If the surface owner can capture subsurface property without limit there is a good argument that he owns that property outright. The fact that a neighboring landowner may drain those subsurface resources with impunity, however, belies any claim to a vested property interest.

Theories of ownership

When presented with oil and gas cases, early common law jurists were somewhat reluctant to recognize a corporeal possessory interest in substances they considered to be fugacious or “wild and migratory,” and therefore subject to loss by drainage. ["See, e.g., Hammonds v. Central Kentucky Natural Gas Co.", 75 S.W.2d 204 (Ky.1934).] Among U.S. states, two different theories of ownership of oil and gas arose. Some states, such as Texas, have adopted the “ownership-in-place” theory for oil and gas: a landowner owns a corporeal possessory interest (similar to a fee simple) in the substances beneath his land, but his ownership is a determinable fee subject to the rule of capture. ["Michel T. Halbouty et al., v. Railroad Commission of Texas et al.", 357 S.W.2d 364 (Tex. 1962)] Other states, like Oklahoma, have adopted the “exclusive-right-to-take” theory: a landowner does not own the substances that underlie his land; he merely retains the exclusive right to capture the substances, a non-corporeal interest. ["See generally" E. Kuntz, A Treatise on the Law of Oil and Gas.] The difference between the two theories is primarily of import in determining remedies.

Boundary determination

Subsurface ownership boundaries are the same as those upon the surface, projected downward to the center of the earth. This concept is based upon the Roman legal principle of property law, "cuius est solum eius est usque ad coelum et ad inferos" (for whosoever owns the soil, it is theirs up to the sky and down to the depths).

Conservation acts

The rule of capture creates an incentive for an owner to drill as many wells as possible on his piece of land so as to extract the groundwater, oil or gas before his neighbor. Very dense drilling can lead to dissipation of the pressure within an oil or gas reservoir or an aquifer, and therefore, to incomplete extraction of the substance or overdrafting the aquifer. To mitigate this danger, many states have sought to supersede the rule of capture with conservation acts. ["See, e.g.," Arkansas Code Annotated § 15-72-101 et seq.] Such acts enforce prorationing, pooling, and limits on density of drilling to avoid physical waste and ensure maximum ultimate recovery.

References

Further reading

* Lowe, et al., Cases and Materials on Oil and Gas Law, 4th Ed. West Group (2002).