Note: This is excerpted from my speaker notes of Pooling and Unitization in Texas given at a landman’s conference in November. I have broken the notes into sections and this section is the first in a series. Each section will build on the preceding one. My talk is specific to Texas by design, but has applications to other common law states.
Common Law states, like Texas, have their roots in the common law of England, which is straight from the Magna Carta. The early Texas courts, not completely understanding the physics of petroleum oil & gas reservoirs, applied the Common Law theory of the Rule of Capture as it applies to the ownership of wild animals. Oil and Gas, like wild animals, was described by the early courts as being of a “wild and fugacious” nature and existed in great underground rivers of oil and caverns full of natural gas. As a result, the early Texas courts treated the ownership of hydrocarbons similarly to the ownership of wild animals.
Initially, wild animals were treated as the property of no one.
Ownership of wild animals could only be accomplished through the actual possession of the animal. The animal had to be captured – killed, caught, or mortally wounded – in order to establish ownership. This is called reducing to possession. If it was caught and later released, it was once again considered ferae naturae and would belong to whoever captured it next.
This doctrine is known as the “Rule of Capture”. You have all heard that “Possession is 9/10ths of the law” and in this case, it may even be more than that.
The Rule of Capture is tempered by the Doctrine of Ratione Soli. This Doctrine states that the landowner has constructive possession of the wild animals as long as they remain on his property. If a trespasser comes upon the landowners property and reduces the animals to his possession, he has NO rights to the animal against the landowner. It makes no difference as to actual possession by the trespasser because the constructive possession by the landowner trumps the actual possession by the trespasser.
The Rule of Capture has a serious conceptual flaw. The application of the Rule of Capture encourages the taking of excessive numbers (i.e. excess oil or gas production rates) of animals on one’s property, otherwise they become lost as they migrate or move across his fence line (i.e. or, get produced by my neighbor). This flaw has serious consequences to the rights of other landowners and even so far as to the elimination of the species.
The solution to the inherent conceptual flaw in the Rule of Capture is the Police Powers of the State. Through police powers, the State has gathered dominion and control over wild animals and as a result has set bag limits, seasons, and so forth.
We are not here to talk about wild animals, but this background will aid immensely in the understanding of the ownership of oil and gas and the rights of mineral owners
Section 2 to follow…