Wednesday, February 20, 2008

Spindletop & drainage

One of my classes was cancelled for the day so I decided to use that time wisely and go to the Bob Bullock State History Museum. This is actually my fourth or fifth time there; then again, I’ve never walked the exhibits with the intention of writing about them!

Anyway, this time around I’m more aware of what I saw but at the same time more disappointed! A few people have already mentioned that they felt that the oil exhibit was underwhelming and didn’t really do justice to an industry that has, for the most part, truly transformed Texas.

I liked the short video they had which describes the history of the oil industry and I have to admit I like Walter Cronkite so that made it more enjoyable. However, I feel that they could have done so much more. Maybe more pictures from that era (1900 – 1940), more maps, locations of wells etc… Then again maybe I’m comparing too much to the energy exhibit at the Museum of Natural Science in Houston. I’m an engineer after all and I do like facts, figures and things that are presented in a scientific manner.

Anyway, one thing that really caught my attention at the exhibit today was the picture of the derricks in Spindletop and the statement about how oil transformed the landscape in Texas with boomtowns everywhere. They even said “…a worker could cross a field and never step on the ground” in reference to the density of the derricks.

This reminded me of the movie There Will Be Blood and the whole issue of drainage. Yesterday in class someone asked whether drainage still happens and the response given in class seemed to indicate that yes it can still happen. I figured I’d check with my legal sources on this because it seems somewhat unfair – at least in my mind. So here’s the legal aspect.

The foundation of US oil & gas law is the rule of capture. If you drill for it on your land (just like if you shoot a deer on your land) it is yours no matter where it came from. You protect yourself from being drained by your neighbor by drilling a well on your own land. This is the justification for the rule of capture which brings back images of derricks everywhere. This distinguishes US oil and gas law from other countries' because the US is unique (or nearly so) in having private ownership of oil and gas reservoirs.

As a result of Spindletop (derricks everywhere), regulations were enacted in every state to control the density and spacing of wells. With these regulations in place, if your neighbor’s well drains your land, you may not be able to legally drill a well to protect yourself from the drainage if your well would exceed the density/spacing requirements. However, you’re not totally screwed - there are legal recourses that you can take to protect yourself. Basically, you can sue for your fair share of the production but you may have to also pay your fair share of the costs of drilling and production of your neighbor’s well. So all is not lost if you can’t legally drill on your land. But if you can legally drill on your land, you'd better!

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