Wednesday, May 27, 2015

Wiseman on the Oil and Gas Commons

HwisemanHannah Wiseman (Florida State) has posted Coordinating the Oil and Gas Commons (BYU Law Review) on SSRN.  Here's the abstract:

Oil and gas development involves many configurations of property rights and regulations that lead to commons-type challenges. Numerous mineral owners have rights to drain oil and gas from shared underground reservoirs, and mineral owners in many states may use the surface to access minerals without paying surface owners any damages. These mineral owners also use underground resources in a manner that precludes or enhances certain future subsurface uses, such as natural gas and carbon dioxide storage, geothermal development, or other mineral development. Drilling an oil or gas well can also prevent future surface use — for example, many municipalities in Texas prohibit building on top of or within a certain number of feet of an abandoned well. Yet potential future surface and subsurface users often have no voice in the decision to drill. Within the regulatory sphere, local, state, regional, and federal governments have some voice in oil and gas governance, yet none exercise full regulatory authority over the externalities caused by this development, leading to a type of regulatory commons in which numerous actors have partial control over a regulated activity but leave certain gaps.

This Article explores this complex array of rights and regulations from a commons-based perspective and suggests solutions. To allow oil and gas development while avoiding inefficient externalities, more types of property owners should have individually-defined rights to the subsurface resource and should be able to negotiate with mineral owners; surface owners should receive damages for mineral owners’ use of the subsurface; or the rule of capture, which allows for rapid extraction of oil and gas from a common pool and potential over-use of valuable land at the surface, should be modified. In the regulatory sphere, the Article suggests that local, state, regional, and federal actors all need a say in the regulatory process — thus pushing back against the trend to preempt local involvement — but that the federal government should play more of a coordinating role, identifying gaps that need filling.

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