In Japan the production is negligible and every phase of the domestic oil industry is under stringent Government control.
In Bolivia the (1939) fundamental law relating to petroleum, and the agency administering it known as the Yacimientos Petroliferos Fiscales Bolivianos, controls both exploration and exploitation. Governmental supervision and control are strong.
In Argentina the Government has set up a petroleum agency, and has acquired a number of privately-owned properties from companies engaged in all phases of the industry.
Mexico, under its Government program, has nationalized its pe troleum resources and is directly engaged in the oil business under its national agency, Petromex.
While not involving governmental control in the strictest sense, there has evolved in the United States a remarkable procedure combining enforced and voluntary oil production control. What ever may be said on the side of its not being regimented, the petroleum industry—the thousands of small producers and the great corporations which constitute the second largest industry in the United States—is not the free agent it formerly was. No basic change has been made. No State monopoly or operation has come. There is no nationalization of oil such as has occurred in Russia and Mexico. The principle of State ownership of the sub soil and the minerals that lie beneath the surface of the earth, which is an old one in law, has no part in the new order. There has been no change in the basic law of the country giving the surface owner title to the sub-soil, and the ruling of an obscure Pennsylvania judge in the early days of the industry that oil was like wild game, belonging to the person reducing it to possession, still prevails. In other words, whatever the landowner could withdraw from the common reservoir he could take and keep irre spective of the fact that he might be draining oil from under his neighbour's land.
This is called the "rule of capture." Undoubtedly it furnished the incentive by which private enterprise in the United States created a major business. It gave to the world products the use of which has become essential to modern civilization. It also provided an incentive that was not economic at all, imposing upon each operator the necessity to capture his oil before it was drained by his neighbour. Thus, fields were overdrilled and produced too
rapidly, without regard to good engineering practice and to whether the oil was needed at the time. The "rule of capture" persists, but it has been greatly prescribed through threefold necessity—(I ) public demand for the conservation of a valuable and exhaustible natural resource, (2) production instability of oversupply or shortage, descriptively termed "feast or famine," and (3) application of scientific knowledge of oil and gas occur rence and function in an oil pool with improved production methods.
The procedure received its start in 1926 with voluntary prora tion by producers in Oklahoma. They agreed to restrict their pro duction on a pro rata basis because of overproduction brought about by competitive over-drilling. The term proration is now used more broadly to describe the entire process by which the production of crude oil in the United States is regulated. Ac companying and following the action of the operators in Okla homa there came an ever-increasing body of sentiment supporting the principles of oil conservation in the interest of sound public policy. This was reflected in the appointment and deliberations of the Federal Oil Conservation Board and, in many oil-producing States, by the subsequent enactment of comprehensive conserva tion statutes. Arkansas, Kansas, Louisiana, New Mexico, Okla homa, and Texas passed such laws. The same States enacted eco nomic waste or market-demand statutes. The conservation move ment also was furthered by the orders of regulatory bodies in these States, and then, on Aug. 27, 1935, the Federal Congress ap proved a treaty between the compacting States, creating the Interstate Oil Compact Commission.
Under the compact the States may agree among themselves to apportion to each State its equitable share of the total production needed to supply the national demand. Thereafter the State regu latory bodies having the police power under conservation laws can apportion the production allotment among the fields, pools, and even wells of the State.