Hefner on the Topic of Mineral Rights Ownership in America

(Hefner has been at the forefront of stressing that the ownership of mineral rights is a key difference – in terms of energy development – between  the U.S. and the rest of the world)

  • 1977, Autumn, Article, “The Energy Connection,” Property Journal: “I believe that our American free enterprise democracy is rooted in the ownership of private property. Within the world we are unique, for it is only in America that so many private citizens and institutions are rooted so deeply through the private ownership of property to the center of the earth (and all that can be produced from below the depth of a plough)…The private ownership of property and the energy resources produced from America’s private lands maintain the connection of our economic system with our resources; it is this relationship that nourishes the free enterprise portion of our free enterprise democracy.”
  • 2009, from Hefner’s book The Grand Energy Transition published by John Wiley & Sons: “In the United States, where the use of natgas first became a large part of an energy market, there were two related factors that played a large role in the politics of cheap natural gas. One was the private ownership of mineral rights, which over the past 100 years motivated thousands of individuals and companies to seek their fortune by taking risks to find oil. And lots of oil and gas was found.”
  • 2012, April 9, Harvard University Speech on U.S. Shale Gas Development: “The biggest thing that is going to make it more difficult for the rest of the world to have the same kind of shale gas potential that we have is not because the gas isn’t there, in many places, yes, indeed it is there, but the biggest difference is in the United States we own the mineral rights. The landowners own the mineral rights, and so American wildcatters can lease from the landowners and we’re all entrepreneurs and we’re all innovators, and that’s what makes America different, particularly in the gas and oil industry, than any other place in the world. And that’s what brought the shale gas revolution to the world. It wasn’t large international oil companies, not one of them did any of it. It was all of us that are in the independent sector innovating every day to try to make a buck, and you can’t do that in China.”
  • 2012, April 18, E Street Landmark Theatre, Washington, D.C.: “I’d like to say something about the United States a lot of people don’t usually think about all the time. The development of shale gas could have only happened in the United States. Why? Because the large international oil companies were never going to do this. That was not their business. Their business was supply the world with oil and although some of them are based here, they were overseas; we finished with our oil in this country starting in the late ‘50s and early ‘60s. They moved offshore; they’ve been at it ever since. That’s where the capital investments have gone. And so who would do it? It had to be a bunch of independents like George Mitchell and others who were ready to compete and figure out how to innovate. And why did they do it? Because the United States is really the only country in the world where landowners own their mineral rights and they can make deals and they can sell their leases and people will buy those leases and they’ll drill wells. So that could only come together in the United States and that’s what created the great innovation, which is shale gas and now oil, shale oil.”
  • 2012, September 6, Interview, KECO-FM, Elk City, Oklahoma”: Hefner speaking of the development of natural gas in the rest of the world: “But, it can’t happen as fast, even within a decade as fast, as it does in the United States. And, the biggest difference is that the U.S. is unique in the world, and this is what’s driven the innovation in our industry, because the United States landowners own the minerals.  All you landowners in western Oklahoma know that and you understand the significance of it. But, there’s even a bigger significance than just the economy it creates for you and individuals and landowners. It’s the significance of innovation. And, anybody in the United States can go out and put leases together and get a well drilled…And, that can’t happen anywhere else. Beginning in the 1960s, as the large international oil companies in America – the Phillips, Mobils and Exxons, Shells, got so large, they went offshore and they were in the global oil business. The large international oil companies were not in the U.S. natural gas business. And, they’ve only now started coming back, as you’ve read in the news recently. Exxon’s acquisition of XTO. So, they were not in it, but private ownership of minerals and the resulting free market in leases kept the independents going. As a result, independents like George Mitchell, of Fort Worth, who was drilling in the Barnett and kept at it and finally he was beginning to struggle along and Devon bought them and Devon kept at it. That will not happen in China. It won’t happen in Europe. It won’t happen in South America. In foreign countries, it will be big, big companies dealing with big, big bureaucratic governments and that’s just going to take decades longer.”
  • 2012, October 3, Interview, Naoatsu Aoyama, The Asahi Shimbun (Japan’s leading newspaper): “Because the international oil companies that were based in America left to go find their fortune elsewhere, that left the American independent, who struggled along, was very competitive, very entrepreneurial and very independent and throughout all those years, they struggled along and didn’t become very large, but made a good living. And the reason they could is what sets the United States apart from any other country in the world and that is in the United States the land owners own their mineral rights and so, if you own minerals and I come to you and want to make a transaction, we can do it. For these reasons we can always get wells drilled. So, anyone who wanted to seek their fortune as an entrepreneur and drill wells could do it. And that’s not true anywhere else in the world. Because in the rest of the world mineral resources are owned mostly by the public authority; mostly the government. So, that’s why all the independent operators in the world were here in the United States. And in order to survive they had to be innovators. And shale gas is not really new technology. It’s old technology and lots of innovation, with a large measure of IT – information technology – because that was also required in order for the independents to be able to do 3D seismic and so forth, which now we can do on a desktop. So, when you added the IT revolution to the innovation that was required for the independents to survive, out of that came horizontal drilling and fracturing as done today, which is monitored by 3D seismic, for instance, and done in real time. And all that was required in order for the shale gas revolution to come along. So, it required the ability of independents to survive, which meant the private ownership of mineral rights, and that mixed with the IT revolution is what brought it all about.”
  • 2012, October 23, Video comments, meeting of Singapore’s International Advisory Panel (IAP) on Energy: Hefner responding to the question: Will the North American shale gas production be replicated in other parts of the world, for example Europe and China and how will this development affect the global gas market? “I think it will be replicated. It’s going to be slower because there’s one thing that made the United States unique and that’s that private owners of land own their mineral rights in the United States. And, because of that, that kept the American independent companies innovating and competing and that caused the development of shale gas. It wasn’t the large international oil companies. It was the U.S. independent companies and they were able to do that because there are not negotiations between large government bureaucracies and international oil company bureaucracies; that just takes longer. I think China’s recognized now that they do, indeed, have sufficient natural gas and they’ll work hard to develop it. And, I think they will always be at least a decade behind the United States. In the mid 80’s when I did an analysis of Chinese natural gas resources I presented to them the idea that they had, in China, about as much natural gas as we did in the United States, and I think those predictions are now coming true.”