An analysis of the efficacy of the Texas and Oklahoma unitization statutes

During the production of an oil or gas reservoir the common pool resource problem often presents itself. One operator is often able to impose the negative externality of uncompensated drainage on another operator in the field. The private contractual solution of unitization can eliminate the common pool resource problem and bring about the efficient operation of the reservoir. Varying different legal environments have attempted to encourage this type of private contracting. Of the states with significant oil and gas production, Texas and Oklahoma have chosen the two most different approaches. This research is an attempt to undertake an empirical analysis which will demonstrate which is the more effective method of dealing with the common pool resource problem presented in oil and gas production.