Student Post: Rule of Capture v. Correlative Rights

The rule of capture, as laid out in the chapter for Tuesday’s reading, basically stands for the proposition that whatever you can pump out of the ground is yours whether it’s coming from your land or draining off adjacent property. The chapter then goes on to describe the doctrine of correlative rights which, put simply, stands for the proposition that a resource (oil and gas) on your property and other properties held in a common pool cannot be wasted by one property owner to the detriment of other land owners with a stake in the common pool. The cases in the case book show that courts have seemingly grafted the idea of correlative rights onto the rule of capture to limit waste in an oil field.

It seems to me that the two doctrines are the antithesis of one another and the attempt to graft one onto the other creates an unwieldy and virtually incomprehensible legal mess. The rule of capture creates a situation like was seen on Spindletop with overproduction and waste with each owner drilling to get their piece of the pie. Correlative rights if taken to its logical conclusion would allow no one in the formation to drill without paying all other owners of the formation a share of the proceeds because any removal of oil or gas from a finite pool is to the detriment of all other owners.

It seems the case of efficiency and logic (admittedly not a strong suit of the court system or political process) would be to take one path or the other and build a regulatory structure around that rule. It seems to me that in today’s world the rule of capture is essentially nothing more than a fiction, with spacing units, pooling, and drilling regulations in oil fields limiting where can be drilled. Therefore, the correlative rights doctrine seems to have prevailed. Then it seems logical to build a regulatory structure based on that theory if any regulation is to be implemented at all. If correlative rights were to be the basis, one would imagine that every oil field would be unitized and monopolized but clearly this is not the current situation.

Obviously the argument can be made that changing the regulatory structure after the industry is this developed would be detrimental. However, a structure that is more logically consistent and uniform would be a benefit to the industry in the long run. Also, abandoning this fiction of being able to have it both ways would make the legal rights much more clear.