An Historical Perspective on Oil & Gas Leases and Extraction Damages

by S. Tom Bond on January 23, 2015

Rural Oil & Gas Industrialization

Why damages “never” occur in oil and gas extraction!

Commentary by S. Tom Bond, Retired Chemistry Professor & Resident Farmer, Lewis County, WV

The human animal is a creature of habit. Analysis of our behavior involves the expenditure of energy, which is abhorred by our animal nature; and so custom, precedent and habit, lag behind change. Occasionally the spirit soars when understanding comes on a higher level, but to change our society is very difficult.

Oil and gas extraction began a long time ago, very gradually. Little energy was required, in fact little was available. The return was great, and since little area was disturbed by extraction, damages could be ignored. Most of what was used, lumber and nails, most of the waste oil and gas were removed by natural microbiological processes, and the iron machinery was valuable enough to be removed for junk. The marks down the hillside caused by salt water are still there, but grassed over – I have worked over them all my farming life. The oil on the creeks has washed away. The drilling platform was made by pick and shovel and occasionally by horse drawn slip scraper, and you can still find them, but they are not conspicuous.

Another factor was that the West was still open, so land was cheap. Cash money was hard to come by – think of the inflation since then. Much of the time in those days the wage for farm workers was “a dollar a day and all you can eat” – one good meal!

So it didn’t occur to people who owned both land and petroleum to separate the total return from the minerals into two parts – damage and mineral payment – it looked like a lot of money, just take it and smile.

When their children decided to move to town, some clever lawyers figured out a way to allow them to continue receiving the “royalty” payment for the specified minerals, and allow some land hungry person to buy the “surface.” This is called “separation of estates.” Invariably the mineral owner retained the “right to remove the (specified) minerals,” by methods unspecified. The new surface owner doubtless thought of the methods then in use and land value then current. He could hardly have been expected to think of changes in technology that would occur in 100 years.

Those early wells were drilled by spudding. That is raising and dropping a weight of solid iron about 6 inches in diameter weighing about a ton. Water was pumped out of the well, not brought to it, and the road was only wide enough for the oxen to drag up the engine block and later one track to allow a standard truck to come up and go down the hill one way at a time. Little rock was used, because it had to be broken up to the preferred size by hand. Qualitatively it was a different technology.

Fracking up to the 1950′s was done by dropping a bottle of nitroglycerin “down the hole.” In the early years the bottle was brought to the site by a horse and buggy which everyone on the road very carefully avoided. The remains of this extraction method are not conspicuous in 2015.

Today fracking involves 1000 truck-loads of water, carrying 4,000,000 gallons of water, truck-loads of chemicals of known and unknown toxicity. This is for each well and each well produces an average of 1,000,000 gallons of toxic flow-back carrying not only the chemicals sent down the well, but chemicals dissolved in the 180 degree temperature below. Trucks must pass, so the roads are often wider than the public road they hook up to. Drill pads and roads use acres and acres of land covered with thick crushed limestone that will be readily identifiable 2000 years from now. And acres and acres of pipeline right of way that will not be producing timber for 70 or more years after the production is abandoned. The return on capital and energy expended in drilling has diminished from over 50 to 1 to something like 10 to 1. Environmental damage has increased as a consequence by a similar factor.

And still there is no damage in the gas field, they say. Technology has outpaced custom and law. The rules are the same as they were in the beginning – the damage can be ignored because the return is so large. The owner of the minerals is not the owner of the damage, however. With separation of the minerals from the surface estate, separation of the income from the damage also took place. The surface owner took the environmental damage, the risk to his/her family from contamination of air and water, the inconvenience of the operation on the farm with fences to be rebuilt, areas cut off from the rest of the farm, diversion of storm water from its original path, toxic effects on the crops and livestock, and inconvenience to living standards. He still pays the same property tax while drilling and extraction is going on and in spite of the reduced productivity afterwards.

No damage done in the gas field? Deep mendacity. Mental laziness. Conservatism in the worst sense of the word – no thought.

The notion that environmental damage is less with slick water horizontal drilling and fracture is the invention of those who look at maps, not people who look at the result. It is not what the parties had in mind with separation of estates 70 years ago. It can absolutely ruin the small owner. Continuation of this practice is the result of the difficulty of making mental and legal rearrangement with a gradual change which has now become a revolution.

There is a precedent for making such a change, however. When strip mining first came into use a similar severance claim was the rule with coal. The miner obtained the coal and striped it with no compensation to the land owner. This unfairness was so obvious it was soon changed. By the late 1940′s the usual division was half for the land owner and half for the coal owner.

The original notion that the minerals belong to the land owner is somewhat arbitrary. In many countries they do not. In Poland and Australia, for example, the government owns the minerals. In Australia they famously say, “The landowner owns post hole deep.” Probably the reason minerals belong to the landowner in the United States is three fold: because of the huge abundance of land when the country was taken from the Indians, the fact the land owner was likely to be the one who extracted mineral value as well as agricultural value, and the desire to keep the government (of the individual states) corruption free and sensitive to citizen interests. At that time the Federal Government was concerned with defense, currency and diplomacy, and little more.

Separate mineral ownership is somewhat of a two edge sword for the oil and gas people. Royalty is a very good deal for the remote owner, with only tax to pay, no loss such as the landowner bears, so they are likely to grab what is offered. On the other hand such royalty is often very fragmented. And, it is hard to get agreement on price and all necessary signatures. Still the convenient fiction continues “no great damage in the extraction of oil and gas.” Yes, sometimes a nominal sum is paid. But, as the company man says, “Well, we find that West Virginians are mostly docile.” So, payments for damages aren’t typically very much.

The truth is that if damages were fully accounted for, present and future loses to agriculture, fracking wouldn’t be economic. Corporations seldom try to look much beyond seven years in any but the most hazy way. (Think about global warming and the inexoriable rise of world temperature.) The era of burning hydrocarbons is just a blip on the scale of human time, now understood at least in general outline for some 12,000 to 14,000 years.

Yes, damage occurs on that time scale (in more than one way). But not in the minds that are doing fracking or deep ocean drilling or mountian top removal or in the minds of those regulating these.

Severe Road Damages are Widespread

Road damages shown here; see also: and

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