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A Great Place to Hunt for Oil

Toby Shute
October 21, 2009

I don't need to tell you that the United States is a good place to do business in general. (We rank No. 4 in the World Bank's rankings, behind Singapore, New Zealand, and Hong Kong). What may be less well-known is what a fantastic place it is to be in the oil and gas business.

Given the antagonism the industry faces from certain political corners, that statement might surprise you. But one feature of the U.S. regulatory regime is so favorable that it trumps all of the bad will toward Big Oil.

The key is our country's treatment of mineral rights. To the best of my knowledge, the United States is unique in the world in that oil, gas, and other subsurface goodies belong to private individuals, rather than the state or sovereign. (There is a great short paper posted on the website of Swift Energy (NYSE: SFY  ) about the history of mineral rights ownership in this country, detailing Texas salt wars and the Fremont family's tussle with the courts in California). Hard as it may be for us Yanks to believe, Canada and Australia's mineral rights technically belong to Queen Elizabeth II. In reality, that means the rights are controlled by government bureaucrats.

Canada and Australia are fine places to do business, as ExxonMobil (NYSE: XOM