About the Rule of Capture and the Correlative Rights Doctrine

Originally published by Environmental and Energy Law Blog.

In the United States, the rule of capture and the correlative rights doctrine are the two primary laws that address oil and gas extraction. The rule of capture permits a producer to extract oil or gas from beneath its land without regard for adjacent properties. In other words, it doesn’t matter if some of the extracted oil or gas originated under a piece of property not owned by the producer. Thus, the rule of capture tends to incentivize the rapid extraction of oil and gas. The correlative rights doctrine, on the other hand, attempts to cure this issue by limiting the amount of oil or gas adjacent landowners may extract. Below is some additional information on the rule of capture and the correlative rights doctrine.

The rule of capture

Under the rule of capture, a producer acquires title to all of the oil or gas produced from a well on its land, regardless of whether some of that oil migrated from an adjoining tract. The purpose of this rule is to encourage exploration. Without this rule, producers would be much less willing to conduct oil and gas exploration, as the costs of paying adjoining landowners would likely outweigh the benefits of exploration. However, as noted above, the rule of capture tends to encourage overproduction and can result in damage to common reservoirs.

The correlative rights doctrine

Under the correlative rights doctrine, each owner of a common reservoir is entitled to his or her fair share of the oil or gas beneath his or her property. In other words, a property owner’s right to produce oil and gas is limited by an obligation to do so without affecting another property owner’s right to do the same. Therefore, under this doctrine, a property owner with the right to extract oil and gas from a common reservoir may do so as long as he or she doesn’t damage the common reservoir. The correlative rights doctrine is seen as a solution to some of the problems inherent to the rule of capture.

Texas Oil and Gas Attorney

Oil and gas laws are always changing. Therefore, it’s imperative that those involved in the energy industry have reliable, experienced, and knowledgeable legal representation to help guide them through the ever-changing energy landscape. In the areas of oil and gas, it’s particularly important to ensure that all contracts are properly drafted. Oil and gas contracts are sophisticated documents, and it’s important that they be drafted in a manner that ensures the rights and responsibilities of all parties involved. At the Law Office of C. William Smalling, P.C., we are highly experienced in the drafting and review of such contracts, including joint operating agreements, farm-out agreements, master service agreements, drilling contracts, licensing agreements for use of seismic or technical data, and nondisclosure agreements. If you are in need of a Texas oil and gas attorney, contact us today for a consultation.

Curated by Texas Bar Today. Follow us on Twitter @texasbartoday.

from Texas Bar Today http://bit.ly/2MYs20y
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