As technologies change and the scale of human activity grows, so too does the law. The surge of oil and gas production in the United States, spurred by hydraulic fracturing in shale formations, has fomented a sea change in oil and gas law, substantially infusing this area with more complex environmental and property principles. Widespread demands for legal and policy-based solutions to the environmental and social impacts of oil production and hydraulic fracturing have transformed the field from one focused on maximizing fossil fuel production into one of environmental conservation. This is dramatically demonstrated by sweeping Colorado legislation in 2019, changes to the common law of oil and gas by local governments and landowners, and the extension of procedural environmental protections and state constitutional environmental rights to the oil and gas realm. Collectively, though not uniformly, a spectrum of changes to state statutes and common law has rendered an expansive reshaping of oil and gas law that amounts to a legal revolution.
The United States is now the world’s top producer of oil and gas, outpacing Saudi Arabia, Russia, and the other fossil fuel giants. This is a stark economic change, reversing decades of concerns about dependence on imports. But this trend has also wrought substantial changes in oil and gas governance, particularly as domestic fossil fuel development has expanded into populous areas. In one of the more dramatic examples of the collision between residential land use and oil and gas development, the area around Denver, Colorado, hosts both one of the fastest-growing human populations and a similarly fast-growing drilling operation, with more than 23,000 wells in Weld County alone. And Fort Worth, Texas, has more than 2,000 producing wells. In these and other areas, hydraulically fractured wells regularly appear in the middle of neighborhoods and the backyards of schools.
Urban and suburban drilling is by no means a new trend. As early as the 1930s, oil and gas wells were prominent fixtures in places such as Houston and Long Beach, California. But, as hydraulic fracturing enabled the drilling of thousands of new wells in the past decades, several of the largest drilling booms have caused major collisions of interests. Homeowners seeking the good life in places such as Colorado’s Front Range are increasingly standing in vocal opposition to domestic companies that pursue highly productive oil and gas reserves. And, in some cases, the homeowners have won. In 2019, Colorado enacted a new statute that empowers local governments to regulate numerous impacts of oil and gas development and requires broader state regulation of environmental externalities from oil and gas production.
The collision of human and fossil fuel interests has dragged oil and gas governance from a once-sleepy area of dusty books to the front lines of legal debates. For more than half a century, US oil and gas law focused almost exclusively on the conservation of oil and gas resources, ensuring that, when companies drilled wells, they would extract as much oil and gas from the ground as possible. The goal of legislatures and courts was to ensure efficient production of what was nearly universally viewed, at least in oil and gas states, as a positive and highly lucrative commodity. Doctrines such as the “rule of capture” provided that any entity that drilled a legal well could drain others’ oil and gas without paying them damages. This rewarded those who were most motivated to drill and thus incentivized production. And state courts universally declared the mineral estate (oil and gas and other resources) to be dominant over the surface, allowing mineral owners to use the surface in any reasonable way necessary to produce oil and gas without paying the surface owner any damages. In the most notorious cases, oil and gas producers drained off surface owners’ entire water supply, maintained waste pits that splashed pollution directly onto surface owners’ homes, and damaged crops without providing surface owners any compensation; courts have deemed all of these actions legal. States, in turn, moderated the potential waste caused by oil companies racing to drill and drain each other’s oil by requiring wells to be spaced apart by minimum distances and limiting production to avoid rapid drainage of formations that would leave valuable resources stuck underground.
In less than a decade, this field of governance has undergone a sea change. Despite oil and gas law being highly diffuse because of its locus in the states, national changes in attitudes toward oil and gas development and its impacts have filtered down to the state and local levels. Homeowners, parents of children who attend schools near oil and gas development sites, environmental groups, and other stakeholders have vocally and persuasively called for states to take a broader view of oil and gas conservation law to encompass environmental conservation. Many state oil and gas agencies now directly regulate the impacts of oil and gas development to prevent pollution of underground and surface water; reduce the noise, dust, light, and other impacts often complained of by neighbors to wells; and protect wildlife and other natural resources. This is not to say that the regulation is adequate from the perspective of some landowners and citizens’ groups, but it has changed substantially in response to concerns. Additionally, oil and gas law is a leading area of preemption debate.
Many local governments, worried that states are not doing enough to regulate oil and gas, have taken matters into their own hands. States have limited the areas in which wells are allowed, implemented detailed environmental regulations of their own, and often attempted to permanently ban or place moratoria on development. The response by most states has been to preempt this local revolution, but there are notable exceptions. The contrast in responses shows up most starkly in Texas and Colorado, which have both experienced some of the most substantial levels of urban and suburban drilling. The Colorado legislature has enabled strong local control over oil and gas development, whereas Texas has substantially limited it. And, finally, beyond preemption and local control issues, the recent oil and gas revolution has prompted courts to revisit the rule of capture that allows unlimited drainage of oil and gas from property around the oil or gas well, causing a doctrinal split to emerge among the states.
This essay explores the overall trend toward an oil and gas governance regime increasingly focused on development risks and analyzes the growing divergence of state responses. In doing so, it assesses the conditions that have challenged previously universal legal doctrines. Part I of this essay examines recent changes in oil and gas conservation law that provide avenues for states, and increasingly local governments, to prohibit rather than incentivize oil and gas production. Part II then compares conflicting state responses to local control over oil and gas, documenting the primary trend of intrastate preemption and the unusual case of local-government autonomy in Colorado. Part III turns to the courts and property law, exploring how the boom in domestic oil and gas development has forced courts to reconsider the age-old rule of capture and its associated production incentives. Finally, Part IV analyzes how citizens have used existing environmental statutes, including requirements for government entities to review the impacts of their regulatory action, to push states and the federal government to regulate rather than foster oil and gas development.
These changes represent, on the whole, a fundamental shift in oil and gas law and demonstrate the complex turns that it has taken. In an area of the law so dominated by state, not federal, control, the collective response has markedly shifted, but not universally so. As scholars of federalism would predict, courts and legislatures, facing disparate demands, histories, and political economic forces have created a spectrum of new policies. And states such as California are considering changes similar to Colorado’s while industry pushes back in the courts, thus promising further policy experimentation and litigation as the field continues to evolve.