Oil Rushes and Mineral Rights

Screen Shot 2015-04-05 at 10.02.53 PM

During a visit to the Allegheny National Forest this past August, I was shocked to see a large number of small old-fashioned crude oil wells. Pennsylvania’s oilfields are legendary— the western part of the state formed the backdrop for the United States’s very first oil rush in the mid 19th century. I had always assumed that the easily extractable crude oil was long gone, but apparently this is not the case.

Oil well, Allegheny National Forest
Oil well, Allegheny National Forest

The author, in "summer mode"
The author, in “summer mode,” riding an oil well

Screen Shot 2015-04-05 at 10.12.55 PM
Iconic products with origins in the Pennsylvania Oilfields
Screen Shot 2015-04-05 at 10.14.00 PM

The Pennsylvania oil rush began in the town of Titusville, a small town about 100 miles north of Pittsburgh. Western Pennsylvania quickly became inundated with oil, and the industry which sprang up became the basis for the modern oil economy.

Pennsylvania oilfields in the 1860’s. (public domain image via Wikimedia foundation)

The Pennsylvania oil rush had wound down significantly by the turn of the 20th century, due to competition from oilfields in Texas and elsewhere coupled with Standard Oil’s effective monopoly over petroleum production in the state of Pennsylvania. As you may remember, Standard Oil was an early mega-corporation; helmed by John D. Rockefeller, it mastered horizontal and vertical integration until it squeezed its competitors out of the market. It occupied enormous market shares of the oil exploration, drilling, refining, and distribution business. By the late 1890’s, Standard Oil had completely dominated the industry and was exploding in wealth, paying shareholders a dividend of over 30%— even after the 1890 passage of the Sherman Antitrust Act. But even Rockefeller was no match for the era of trust-busting ushered in by Teddy Roosevelt. In 1911, a New Jersey court ruled that Standard Oil must be split into a number of smaller corporations in order to ensure free competition in the oil market.

“Busting the trust” was a significant step forward at the time, but unsurprisingly the business re-coagulated: Exxon and Mobil are both descendants of Standard Oil spin-offs, and they merged back together in 1999 to create ExxonMobil.

But back to the wells in Allegheny National Forest. Somehow, the 20th century didn’t manage to run Pennsylvania’s crude oil resources completely dry. Although it’s no longer economical to pump crude there on a massive scale, there’s a fair amount left that small producers can access. So how do these small producers get permission to set up wells on federal property? When the land for the National Forest was purchased in 1923, the Government was unable to purchase the subsurface mineral rights. Private owners now control over 90% of the ground below the forest. It’s weird to think that an individual or corporation can own the roots of a tree while the Feds (and by extension the taxpayers) own the trunk and canopy.

Mineral rights have become increasingly important with the advent of new technologies for fossil fuel extraction such as hydraulic fracturing. In addition to the environmental devastation that fracking causes, it has also introduced a variety of ways for property owners to get screwed over. In many states, the seller of a property is not required to disclose to the buyer if the mineral rights underneath have been sold to a third party. This third party can come along at any point in the future and begin drilling without compensating or even asking permission from the surface landowner. I don’t think I need to belabor the significance of how troublesome this is. One does not need to look far to find stories of people who have been affected.