Petroleum Regulation in the Seventies
Authors: Byrd Richard C. 
Published: December 2007

Introduction

To forecast changes that might occur in the state regulation of the producing segment of the petroleum industry in the 1970's, one must first understand the purpose and objectives of state regulation in the past. Contrary to what some people contend, state conservation regulations and the state laws that are the authority for those regulations have as their purpose the prevention of waste and the protection of correlative rights of the mineral protection of correlative rights of the mineral interest owners. Every state statute, whether it be the statute in Texas permitting the Railroad Commission to limit production to market demand or whether it be the stature of New York granting its conservation director authority to space, pool, and unitize oil and gas reservoirs, the purpose of the stature is to prevent waste and/or co protect correlative rights. It is unfortunate that state oil and gas regulatory agencies have been subjected to criticism by those unfamiliar with their purpose and achievements. To those knowledgable about the functions of these agencies, the recent charges that market demand prorationing is merely to keep the price of oil at a high level are ridiculous. In the first place, the price of oil is not high as compared to other commodities, and in the second place, the actions of the state regulatory agencies place, the actions of the state regulatory agencies in limiting production to market demand can only be done, and is done, for the purpose of preventing waste and protecting correlative rights. In order to appreciate the accomplishments in the area of oil and gas conservation by the states during the past four decades, one must have some knowledge of the history of the first 70 years of oil and gas development in this country.

OVERVIEW OF STATE REGULATION

From Oil Creek in Pennsylvania by way of Spindletop in Texas, to Cushing in Oklahoma, the flagrant waste of oil and gas kept pace with the dissipation of topsoil and virgin timberlands during the same period. When we hear forecasts that energy requirements win double in 20 years or less we can only wish for the minions of barrels of oil that were allowed to flow down the rivers, or to evaporate in earthen reservoirs. The gas produced with the oil and blown to the air was often worth more than the oil it brought to the surface. Far greater waste was taking place under the ground as reservoir energy was being dissipated and untold millions of barrels of oil were being flooded out by water encroachment. Couple the waste of oil and gas with the incalculable economic waste in the frenzied scramble to protect one's property under the rule of capture. Consider the cost involved in the drilling of dozens of wells in countless instances where one well would have sufficed. Viewing this, one begins to see the magnitude of the challenge that faced the conservation-minded public officials and industry representatives 40 years ago. Firmly entrenched practices of whatever nature are not easily uprooted. Resistance to change, particularly when prospects for immediate profits are lessened, brought about the challenging and subsequent setting aside of many good laws and regulations during the early days of the state conservation effort. Regulations that would be invited by the industry today had to be enforced by state militia 40 years ago. State conservation programs have made possible the ultimate recovery and availability for use at least twice as much oil and gas as would have been recovered without the programs. Periods of feast and famine in supply programs. Periods of feast and famine in supply and gyrations in prices have been minimized Producers now, know that state regulations have Producers now, know that state regulations have made the producing of oil much less of a gamble than it was before those regulations were enacted and that subject to the necessity of preventing waste, each producer will be given an opportunity to produce or receive the value of the recoverable reserves under Its tract or tracts. Considering the distance traveled and the obstacles to overcome during the last 40 years, it can safely be concluded that state regulation of the development of our oil and gas resources has been successful.

FUTURE TRENDS IN STATE REGULATION

With this understanding of the history and purpose of state regulation of the producing purpose of state regulation of the producing segment of the petroleum industry, one can better anticipate the changes that will be forthcoming in the 1970's.

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