Root problems of oil and gas

Here in Colorado there is a tremendous amount of anger, frustration, and finger-pointing going on over the risks and rights associated with oil and gas development. In part because of sloppy language, in part because of deliberate misrepresentation, in part because of financial gain, in part because of different assessments of risk, the controversy has people talking past one another. It reached something of a silly level when protesters in Boulder recently protested a performance of Beethoven’s Ninth Symphony because the symphony had accepted some money from an oil company. [GG isn’t sure what the message really amounted to: don’t let oil companies support the arts? Not like the symphony was investing in oil companies].

How did we end up in this mess?

Mineral laws and the split estate. For the first 70 years or so of the United States, there was no real issue about mineral laws.  If you owned land with minerals, you owned the minerals.  And if the federal government held title to the land, it wasn’t supposed to turn over title if there were minerals. The idea that these two might be separate rights–surface rights and mineral rights–first really surfaced in the California gold fields. The decision in a seminal case there, Biddle-Boggs v. Merced Mining Company, was written by California Supreme Court Justice Stephen Field in 1859:

There is something shocking to all our ideas of the rights of property in the proposition that one man may invade the possessions of another, dig up his fields and gardens, cut down his timber and occupy his land, under the pretense that he has reason to believe there is gold under the surface, or if existing, that he wishes to extract and remove it.

This case held that the surface rights owner had priority over any subsurface rights holder without really explicitly saying there were subsurface rights holders. Subsequent decisions determined that a U.S. land patent carried with it ownership of any subsurface minerals, which initially muted arguments between surface and sub-surface rights holders..

That was not really what Congress wanted, and eventually the federal government explicitly withheld mineral rights from land patents. By then, the idea of separating surface and mineral rights was established in law.  That the federal government retained some mineral rights made for a checkerboard of ownership of minerals.

Oil and gas are fluids. This means that they can move around in the subsurface. This has created problems in multiple ways.  First, it led to the rule of capture, which was basically finders-keepers, and so led to wildly overdrilled oil fields. To fight that off, unitization or forced pooling made for more efficient drilling but watered down the ability of some mineral rights holders to exploit their resource on their timetable.

Oil and gas and associated waters are nasty fluids. First off, oil and gas are, um, flammable.  So you want to try and keep them away from places that don’t belong, such as aquifers or house basements. Since they are relatively buoyant (especially gas), an improperly constructed well can provide a path for oil and gas to rise up and go where they don’t belong.  Then toss in the very saline water frequently associated with oil and you have materials that aren’t easily kept in place. This means it is easy to have spills and leaks of stuff that really shouldn’t be spilled or leaked. And some of the stuff that comes up from wells (e.g., produced water) isn’t desired by anybody, so there is a waste disposal problem.

Mineral rights priority. Read that 1859 decision and you’d think that surface rights holders would have the high cards in allowing anybody to drill or mine, but that is not how law evolved.  The California precedent lost traction when it was decided that the mineral rights were being carried with the surface rights. Most western states were mineral-friendly when formed and so tend to have laws giving miners (and oil drillers) priority. The logic in part was that most surface activities could move (for instance, some Gold Rush towns were moved when it was found that there was gold immediately under the town) but the minerals were stuck where they were.

Rural industry. All mining today is a pretty industrial process, and arguably strip mining is far more destructive than oil and gas development.  During initial drilling, there isn’t a huge difference: there is a lot of noise and surface disruption and diesel, but a lot of that abates once the well is completed. What is different is that oil and gas fields usually sprawl out over a large area. In some areas, oil and gas is collected at the wellhead, typically requiring pretty frequent truck traffic, but usually pipes are laid to connect produced oil and gas to a broader infrastructure.  It was this infrastructure that led to the Firestone explosion. Generally the layout of these feeder pipes and whatnot is to most convenience industry.

You may notice that “fracking” and “local control”–two current buzzwords–don’t appear. The kinds of impacts many suburban residents are now facing are identical to those faced for a very long time in places like the San Juan Basin and rural Wyoming; most folks really do not mean “fracking”–they mean “dense oil and gas development”. In Colorado, in fact, all that has happened has been a rejuvenation of an existing oil field; some of the problems seen may well be because of the deterioration of old wells as much as the creation of new ones. “Local control” is intrinsically no better or worse than state control or federal control.  Local officials might bend to the whims of industry (as, arguably, they did in Firestone with the 150′ setback from wells) as much or more than state or federal officials: certain localities might have stringent rules (for instance, Longmont has a 750′ building setback from wells) while others might not (some areas have no setback requirements).

Extracting oil and gas is a messy, risky business. It will never be risk-free, so the question becomes, how much risk is acceptable? Who gets to decide?

Had the government retained all subsurface rights in the West, maybe a comprehensive solution might have become apparent. Had the rule of capture never existed, or had mineral rights remained bound with surface rights, issues today would be quite different. All that is water under the bridge.

All rights are limited.  Free speech is limited to the degree you cannot yell “Fire” in a movie theater. Mineral rights are no different: if exploiting a mineral right endangers others, it is well within the purview of the government to restrict that exploitation. Oil and gas companies would be wise to recall this.  Right now they are fighting a very sensible proposal that they provide the state with maps of all their infrastructure. Oil and gas rights are not in the Constitution. As the industry accumulates more and more black eyes from events like Firestone, their voice in the Legislature will be drowned out.

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2 responses to “Root problems of oil and gas”

  1. Paul Braterman says :

    Why does fracking in particular attract fierce and at times irrational opposition? In Scotland, political parties that strongly support offshore oil drilling want fracking permanently banned.

    Like

    • cjonescu says :

      That’s a fascinating problem. My best guess for a rational basis is that, because there are additives to fracking compounds that are not always pleasant chemicals, folks view putting this into the earth as a form of pollution; some worry about those compounds reaching drinking water aquifers. This is not entirely an unreasonable worry, but it can only happen from (a) surface spills and (b) very badly built wells or (c) fracking just below surface aquifers (which happened in Wyoming but is not a common practice). Fracking fluids, when put where they are needed, are withdrawn from the subsurface once production starts and so are not going to be a big problem at those depths (indeed, the fracking fluids might be of better quality than the saline brines associated with petroleum). It is a hazardous waste when it comes up, but then so is the produced water. None of which makes a ton of sense in marine drilling.

      A secondary fear could be induced seismicity–not from the fracking (a very rare occurrence) but from the increased volume of produced water that would have to be disposed of, which is frequently through deep injection wells. Again, if out in the North Sea, induced seismicity not a big worry for folks on land.

      Neither of these are particularly high on the trouble scale, though, and pale in comparison to all the usual issues with any petroleum production (oil spills, noise, surface degradation for terrestrial wells, volatile organic compounds in the air, etc.). What has been the case here is that those who oppose fracking but say they are OK with traditional drilling typically have no experience with the latter (and don’t recognize that fracking has been used for some 50 years in traditional oil fields). The main objection is really to the density of drilling (along, often, with a failure to recognize how many wells were already out there). Unlike traditional fields, where oil will migrate, tight oil and gas deposits pretty much require that you drill right through them and the result is a density of wells that is breathtaking. I can’t speak for the logic of Scottish political parties, though, as it doesn’t seem any of the more rational arguments apply for North Sea operations.

      Liked by 1 person

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