A core concept in natural resources law: the nexus between owner and operator

Abstract

The relationship between the owner of resources and the operator is identified as a core concept in natural resources law, giving the field conceptual cohesion. Owners commonly allocate rights to operator companies rather than developing the resources themselves. The main reasons appear to be access to expertise and risk management. This relationship or bargain can take various forms and its content varies. This article asks what legitimately constitutes a field of law, considers how the bargain nexus is a common and distinctive feature of natural resources law, and discusses its power to explain the nature of the field and its legal problems.

Keywords:

• natural resources law
• owner and operator
• natural resources bargain
• allocation of natural resources
• nature of natural resources law
• theory of natural resources law
• classification
• taxonomy of law

Acknowledgements

I thank the anonymous reviewers, and for useful and congenial discussions that prompted me to address these issues, I thank Phoebe Parson, a PhD student at the University of Waikato who is studying operators’ duties to supply resource information to owners.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1 Alfred Tennyson, ‘Aylmer’s Field’, where the young barrister ‘toil’d / Mastering the lawless science of our law, / That codeless myriad of precedent, / That wilderness of single instances’: Poetical Works, G Cumberlege (ed) (OUP 1953), 139. The mention of codes is a reminder to common lawyers, including the writer, that lawyers working in civil law systems are likely to have a very different approach to finding order in the body of law

2 In law, classification is important because asking the right questions in the right order reduces the risk of wrong decisions: Lord Steyn in Attorney General v Blake [2001] 1 AC 268 at 290

3 Jay M Feinman, ‘The Jurisprudence of Classification’ (1989) 41 Stan L Rev 661

4 Todd Aagaard, ‘Environmental Law as a Legal Field: An Inquiry in Legal Taxonomy’ (2010) 95 Cornell Law Review 221 at 225; Elizabeth Toomey (ed) New Zealand Land Law (3rd edn, Thomson Reuters, 2017), 624

5 Stephen A Smith, ‘Towards a Theory of Contract’ in J Horder (ed), Oxford Essays in Jurisprudence, Fourth Series (OUP 2000) 107

6 Peter Birks (ed) English Private Law (2 vols, OUP 2000); Charles Rickett and Ross Grantham, Structure and Justification in Private Law: Essays for Peter Birks (Hart 2008)

7 Hanoch Dagan, ‘Doctrinal Categories, Legal Realism, and the Rule of Law’ (2015) 163 U Pennsylvania L Rev 1889

8 The origins of the witticism are traced by Aagaard (n 4)

9 Lawrence Lessig, ‘The Law of the Horse: What Cyberlaw Might Teach’ (1999) 113 Harv L Rev 501; Micah L Berman, ‘Defining the Field of Public Health Law’ (2013) 15 DePaul J Health Care L 45; JB Ruhl and James Salzman, ‘Climate Change Meets the Law of the Horse’ (2013) 62 Duke LJ 975

10 Aagaard (n 4)

11 Aagaard (n 4) at 228, 233. The coherence of a theory suggests consistency, comprehensiveness, completeness and simplicity, but the concept is much debated: Ken Kress, ‘Coherence and Formalism’ (1993) 16 Harv J L & Pub Policy 639

12 Tom Ginsburg and Nicolas Stephanopoulos, ‘The Concepts of Law’ (2017) 84 U Chicago L Rev 147 at 152. Measurability is perhaps more important in social sciences than law. At 150 they comment that ‘“Concept” itself is a tricky concept’

13 Nicholas Aroney, ‘Explanatory Power, Theory Formation and Constitutional Interpretation: Some Preliminaries’ (2013) 38 Australian Journal of Legal Philosophy 1; Aagaard (n 4) 229

14 Aagaard (n 4) 240

15 Emily Sherwin, ‘Legal Positivism and the Taxonomy of Private Law’ 103 in Rickett and Grantham (n 6)

16 Dagan (n 7) pp 1905–1911

17 Robert L Fischman, ‘What Is Natural Resources Law?’ (2007) 78 U Colo L Rev 717

18 Michael C Blumm and David H Becker, ‘From Martz to the Twenty-First Century: A Half-Century of Natural Resources Law Casebooks and Pedagogy’ (2007) 78 U Colo L Rev 647

19 Charles Wilkinson, Crossing the Next Meridian: Land, Water and the Future of the West (Island Press 1992); Robert L Fischman, ‘Wringing Wonder from the Arid Landscape of Law’ (2017) 28 Colo Nat Resources Energy & Envtl L Rev 177 (on Wilkinson); and Robert L Glicksman, ‘A Tribute to George Cameron Coggins, Public Lands Maverick’ (2020) 68 U Kan L Rev 699

20 DE Fisher, Natural Resources Law in Australia: A Macro-Legal System in Operation (Law Book C, 1987)

21 Tracy-Lynn Field, State Governance of Mining, Development and Sustainability (Edward Elgar 2019) 52

22 Marie-Claire Cordonier Segger and Ashfaq Khalfan, Sustainable Development Law: Principles, Practices, and Prospects (OUP 2004), with a chapter ‘Sustainable International Natural Resources Law’ 295; Elena Blanco and Jona Razzaque, Globalisation and Natural Resources Law: Challenges, Key Issues and Perspectives (Edward Elgar 2011); Elisa Morgera and Kati Kulovesi (eds), Research Handbook on International Law and Natural Resources (Edward Elgar 2016); Shawkat Alam, Jahid Hossain Bhuiyan, Jona Razzaque (eds), International Natural Resources Law, Investment and Sustainability (Routledge 2017); Maximilian Oehl, ‘The Role of Sustainable Development in Natural Resources Law’ 3 in Marc Bungenberg and others (eds) European Yearbook of International Economic Law 2018 (Springer 2018). Kim Talus (ed), Research Handbook on International Energy Law (Edward Elgar, 2014) 3 suggested that while energy law is concerned with markets, energy security and security of supply, resources law is more concerned with sovereignty, development and security of demand

23 Ole W Pedersen, ‘The Limits of Interdisciplinarity and the Practice of Environmental Law Scholarship’ (2014) 26 J Env Law 423; JE Viñuales and J-F Mercure, ‘Pathway to Reframing Environmental Law’ (2020) 50 Env Policy & Law 509; Amanda Kennedy and others (eds) Teaching and Learning in Environmental Law: Pedagogy, Methodology and Best Practice (Edward Elgar 2021)

24 Ruhl and Salzman (n 9); in contrast see Jacqueline Peel, ‘Climate Change Law: The Emergence of a New Legal Discipline’ (2008) 32 Melbourne Univ L Rev 922 who plunged straight in to identify the field and map it out

25 Adrian Bradbrook, ‘Energy Law as an Academic Discipline’ (1996) 14 Journal of Energy and Natural Resources Law at 194; similarly RJ Heffron and K Talus, ‘The Evolution of Energy Law and Energy Jurisprudence: Insights for Energy Analysts and Researchers’ (2016) 19 Energy Research & Soc Sci 1

26 Terence Daintith, ‘A Mirror of Change? The Journal and the Development of Energy Law’ (2012) 30 Journal of Energy and Natural Resources Law 469. In relation to petroleum law, Daintith, ‘Against lex petrolea’ (2017) 10 Journal of World Energy Law and Business 1, asked that an effort to label and carve out a new legal subject should show a conceptual unity or at least a coherence in the relevant legal material. He believed that petroleum production presented a set of characteristics that were distinctive enough to give real conceptual cohesion to the body of legal rules associated with it

27 Raphael J Heffron, Anita Rønne, Joseph Tomain, Adrian Bradbrook and Kim Talus, ‘A Treatise for Energy Law’ (2018) 11 Journal of World Energy Law & Business 34

28 Iñigo del Guayo, ‘The Evolution of Principles of Energy Law (a Review of the Content of the Journal of Energy & Natural Resources Law, 1982–2022)’ (2022) 40 Journal of Energy and Natural Resources Law 43 at 45

29 Kaisa Huhta, ‘The Coming of Age of Energy Jurisprudence’ (2021) 39 Journal of Energy and Natural Resources Law 199

30 Soils have a claim to be natural resources but farming as a use of the resource is very distinct. Radio spectrum and the assimilative capacity of a body of water can be regarded as natural resources, although they are more exotic. Rights in other fields such as carbon emission rights in emissions trading schemes may not fit, but for them and other property rights created to harness market forces, natural resources law has useful insights into the allocation of rights, formulation of rights, enforcement and other legal questions

31 Eric T Freyfogle, Michael C Blumm, and Blake Hudson, Natural Resources Law: Private Rights and the Public Interest (West Publishing 2015), vi

32 Aileen McHarg, Barry Barton, Adrian Bradbrook and Lee Godden, (eds), Property and the Law in Energy and Natural Resources (OUP 2010)

33 Anthony Scott, The Evolution of Resource Property Rights (OUP 2008) who examines the subtleties of how rights in different resources are generated; and Richard Barnes, Property Rights in Natural Resources (Hart 2009)

34 Mineral and Petroleum Resources Development Act 2002, s 3 (South Africa); Agri South Africa v Minister for Minerals and Energy [2013] ZACC 9

35 J Otto and J Cordes, The Regulation of Mineral Enterprises: A Global Perspective on Economics, Law and Policy (Rocky Mountain Mineral Law Foundation, 2002), 2–5, 2.3.2

36 It was principally embodied in the United Nations Resolution on Permanent Sovereignty Over Natural Resources (UNGA Res. 1803, 1963). See Nico Schrijver, Sovereignty over Natural Resources (CUP 1997)

37 Field (n 21) 147 describes the owner state as the national landlord and concessioning authority

38 Paolo Galizzi and Emily Smith Ewing, ‘Regulatory Strategies, SCR and Resource Protection’ 183 in Shawkat Alam, Jahid Hossain Bhuiyan, Jona Razzaque (eds), International Natural Resources Law, Investment and Sustainability (Routledge 2017)

39 Daniel Yergin, The Quest: Energy, Security, and the Remaking of the Modern World (Penguin 2012) 254

40 Martin Lynch, Mining in World History (Reaktion Books, 2002) 320; Daniel Yergin, The Prize: The Epic Quest for Oil, Money & Power (Free Press, 1991, 2009)

41 S Tordo, B Tracy and N Arfaa, National Oil Companies and Value Creation (World Bank 2011). There are exceptions such as Petrobras, which discovered Brazil’s pre-salt resources: Daniel Yergin, The Quest: Energy, Security, and the Remaking of the Modern World (Penguin 2012) 254. In mining, there are few state-owned companies; and again, to be successful long term they would have to invest substantially in innovation and exploration: John Williams, ‘Global Trends and Tribulations in Mining Regulation’ (2012) 30 Journal of Energy and Natural Resources Law 391 at 420

42 In respect of mining, see David Humphreys, The Remaking of the Mining Industry (Palgrave Macmillan 2015) 129

43 Ana Elizabeth Bastida, The Law and Governance of Mining and Minerals (Hart 2020) 36, 39. She notes that for oil and gas the exploration costs are higher but so are the odds of finding economic resources after successful remote sensing

44 Williams (n 41) 392

45 Field (n 21) 173 analyses the forms it can take in the mining sector

46 For mining legislation, see Otto and Cordes (n 35), and John Southalan, Mining Law and Policy: International Perspectives (Federation Press 2012)

47 For example in the United Kingdom; Greg Gordon, ‘Petroleum Licensing’ 27 in Greg Gordon and John Paterson (eds), Oil and Gas Law: Current Practice and Emerging Trends (Dundee University Press 2007)

48 Barry Barton, Canadian Law of Mining (2nd edn, LexisNexis 2019)

49 Andrew R Thompson, ‘Legal Characteristics of Disposition Systems: An Overview’ 1 in Nigel Bankes and J Owen Saunders (eds), Public Disposition of Natural Resources (Canadian Institute of Resources Law, 1983); Barry Barton, ‘Property Rights Created under Statute in Common Law Legal Systems’ 80 in McHarg and others (n 32)

50 Blumm and Becker (n 18). Examples in particular fields are William Bainbridge, Treatise on the Law of Mines and Minerals, 2nd edn (Butterworths 1856), and John Ballem, The Oil and Gas Lease in Canada, 2nd edn (University of Toronto Press 1985)

51 Ernest E Smith and others, International Petroleum Transactions, 2nd edn (Rocky Mountain Mineral Law Foundation, 2000) 393, 411; Yergin, The Prize (n 40) 565. Sometimes the national oil company, holding a concession from the state, will negotiate such agreements with international companies. Service contracts are different in not conferring rights in the natural resource on the operator

52 Danièle Barberis, Negotiating Mining Agreements: Past, Present and Future Trends (Kluwer, 1998). Special agreements are now (at least) less common in Australia than Barberis suggests

53 On these issues in countries with weak governance capacity, see Paul Collier, The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done About It (OUP 2007) chapter 3; and Anthony J Venables, ‘Using Natural Resources for Development: Why Has It Proven So Difficult?’ (2016) 30 Journal of Economic Perspectives 161

54 Field (n 21) 64, 163

55 Daintith, ‘Against lex petrolea’ (n 26) in identifying six distinctive features of petroleum operations that give conceptual cohesion to the body of legal rules associated with it, at 2 gave the third as ‘Contrasting aims and incentives of owners of oil and gas rights and of those entrusted with exploitation: Owners want maximum recovery; exploiters, most profitable recovery. This shapes both the content of contracts and other instruments allocating exploitation rights, and the arrangements for awarding them’

56 Field (n 21) 156

57 Alam, Bhuiyan and Razzaque (n 22)

58 See a special edition on Acquisition of Natural Resource Interests by the State (1987 Supplement) Journal of Energy and Natural Resources Law, with articles by Michael Crommelin, 3 (Australia), Alastair Lucas, 27 (Canada), Richard Bentham, 49 (UK), Jan Laitos and Donald Zillman, 59 (USA), Ola Mestad, 82 and Arvid Frihagen, 96 (Norway)

59 Andrés Jana, ‘Current Issues in International Dispute Resolution for Mining Investments’ (2017) 63 Rocky Mountain Mineral Law Institute 19B-1; Henry G Burnett and Louis-Alexis Bret, Arbitration of International Mining Disputes: Law and Practice (OUP 2017)

60 Lila Barrera-Hernández, Barry Barton, Lee Godden, Alastair Lucas and Anita Rønne (eds), Sharing the Costs and Benefits of Energy and Resource Activity: Legal Change and Impact on Communities (OUP 2016)

61 Williams (n 41)

62 Lorenzo Cotula, Human Rights, Natural Resource and Investment Law in a Globalised World: Shades of Grey in the Shadow of the Law (Routledge, 2012); Abdullah Al Faruque, ‘Sustainable Mining, Human Rights and Foreign Investment: Nexus and Challenges’ 287 in Alam, Bhuiyan and Razzaque (eds) (n 22); Jane Ezirigwe, ‘Human Rights and Property Rights in Natural Resources Development’ (2017) 35 Journal of Energy and Natural Resources Law 201

63 Wilkinson emphasised this purpose: Fischman, ‘What Is Natural Resources Law?’ (n 17) and Fischman, ‘Wringing Wonder from the Arid Landscape of Law’ (n 19)

64 Barrera-Hernández and others (n 60); Field (n 21) 42

65 International Institute for Environment and Development, Breaking New Ground: Mining, Minerals and Sustainable Development (Earthscan 2002); J Prno and D Slocombe, ‘Exploring the Origins of “Social License to Operate” in the Mining Sector: Perspectives from Governance and Sustainability Theories’ (2012) 37 Resources Policy 346; Humphreys (n 42) 30; J Cooney, ‘Reflections on the 20th Anniversary of the Term “Social Licence”’ (2017) 35 Journal of Energy and Natural Resources Law 197

66 Sara Seck, ‘Business, Human Rights, and Canadian Mining Lawyers’ (2015) 56 Canadian Business Law Journal 208

67 An example of one industry’s effort to improve is the Mining, Minerals and Sustainable Development Initiative: International Institute for the Environment and Development (n 65)

68 Canada-Newfoundland and Labrador Atlantic Accord Implementation Act, SC 1987 c 3, Canada-Nova Scotia Offshore Petroleum Resources Accord Implementation Act, SC 1988 c 28, and accompanying provincial legislation; and in Australia, Offshore Petroleum and Greenhouse Gas Storage Act 2006 (Cth) and accompanying state legislation

69 Again Canada provides examples, in the declaration of aboriginal ownership of land and resources in Tsilhqot’in Nation v British Columbia [2014] 2 SCR 257, and in land claim settlements such as that ratified by the Nunavut Land Claims Agreement Act, SC 1993 c 29

70 For example under British Columbia’s Declaration on the Rights of Indigenous Peoples Act, SBC 2019 c 44, intended to give effect to art 32 of the Declaration and provide free prior informed consent to projects concerning indigenous resources

71 Kate Raworth, Doughnut Economics: Seven Ways to Think Like a 21st Century Economist (Random House 2017)

72 As Fischman (n 17) 733 cautioned, the ‘resource-ist’ utilitarian approach should not exclude a more naturalistic intrinsic approach

73 In the sense explained by Ginsburg and Stephanopoulos (n 12)

74 Thus it addresses the concern of Cordonier Segger and Khalfan (n 22) 308 that a much understudied aspect of transparency is the relationship between government, armed groups, private companies and investors

75 But compare Aagaard (n 4) 263

76 Heffron and others (n 27) 35 describe legal areas for oil and gas and mining as being a splintering of energy law, but do not explain their apparent assumed starting point that the a priori unity is energy law. They rely on Daintith, ‘Against lex petrolea’ (n 26), but he was not arguing against an energy law area of petroleum law or mining law, rather, he was defending petroleum law or transnational petroleum law against ‘lex petrolea’ a locution that was either superfluous as not adding anything or dangerous as an assertion of a body of rules that prevails over national and international law

77 G Agricola, De Re Metallica (1556) HC Hoover and LH Hoover (tr) (Mining Magazine, 1912, reprinted by Dover Publications, 1950)

78 In the sense discussed by Aroney (n 13)

79 Estair Van Wagner, ‘Placing Natural Resources Law: Preliminary Thoughts on Decolonizing Teaching and Learning about People, Places, and Law’ 49 in A Kennedy and others (eds), Teaching and Learning in Environmental Law: Pedagogy, Methodology and Best Practice (Edward Elgar, 2021)

80 Richard Sutton, ‘Restitution and the Discourse of System’ 127 in Rickett and Grantham (n 6); Ruhl and Salzman (n 9)