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Conservation Principles and Federal Onshore Pooling and Unitization: An Overview

Phillip Wm. Lear, Federal Onshore Oil and Gas Pooling and Unitization II (1990)

Federal onshore pooling and unitization have their origins in the oil and gas conservation movement of the 1930's. The golden age of oil dawned in the 1920's when new reservoirs were discovered, drilling methods and techniques developed, and new uses for petroleum1 products found.2 In 1920 crude sold for the staggering sum of $3.60 per barrel and then fell to $1.65 in 1925 when the market was flooded. The 1930's brought discovery of the East Texas Field with its highly fractionalized ownership and of vast reserves in California, New Mexico, and Wyoming on predominately federal lands.3 Production was controlled exclusively by the rule of capture and led to uncontrolled drilling, depletion of reservoir energies, and loss or recoverable reserves. Conservation concepts were spawned out of this complex historical cauldron, as federal and state governments sought ways to prevent waste. They were a calculated reaction to the excesses resulting from the rule of capture.

The rule of capture resulted from the application of common law property principles to an unusual mineral. Therefore, an understanding of the nature of oil and gas as a fugacious substance and the rule of capture are critical to making federal oil and gas conservation procedures useful tools to the lawyer and landman.

A. Nature of the Mineral

Professor Phil Dufford4 introduced this topic,