## Facts

- Kelly held contractual rights to drill for and produce oil and gas on John Hastings’s approximately 165-acre tract in Ohio.
- The Hastings tract and neighboring tracts owned by Ohio Oil sat over a common underground oil reservoir.
- Kelly drilled two wells on the Hastings tract and alleged he followed prevailing operator practice of placing wells at least about 200 feet from boundary lines to minimize interference with neighbors.
- Ohio Oil drilled wells on its own adjoining land about 25 feet from the Hastings boundary, despite having additional acreage where it could have located wells farther from the line.
- Kelly alleged Ohio Oil knew wells in the reservoir would drain oil from surrounding territory and placed boundary wells to drain oil underlying the Hastings tract.
- Kelly sought injunctive relief to stop boundary drilling on the theory that Ohio Oil was wrongfully extracting oil that had been beneath the Hastings land.

## Issues

1. Whether an operator who drills lawfully on its own land is liable, or may be enjoined, for oil drained from beneath neighboring land due to natural migration within a common reservoir.
2. Whether alleged bad motive and deviation from industry well-spacing custom can transform lawful drilling on one’s own land into an actionable wrong.

## Decision

- The Ohio Supreme Court affirmed dismissal of Kelly’s petition for failure to state a cause of action.
- The court refused to enjoin Ohio Oil’s wells located on its own land, even if they drained oil that had migrated from beneath the neighboring tract.
- The court applied the rule of capture: oil produced and reduced to possession becomes the property of the producer.

## Legal Principles

- Under the rule of capture, a landowner or mineral-rights holder may drill and produce from a common reservoir on its own land, and gains title to oil brought to the surface even if it migrated from adjacent land.
- Competitive drainage caused by lawful, on-tract drilling is not trespass, conversion, or nuisance absent physical subsurface entry onto the neighbor’s property.
- Industry custom and an alleged intent to drain a neighbor’s oil do not, without an independent legal duty, create liability or justify injunctive relief for boundary drilling.
- Limits on capture arise from duties to avoid negligence and waste; absent such conduct, equity will not restrain lawful drilling.

## Conclusion

The court held that drilling on one’s own land near a boundary, with resulting drainage from a shared reservoir, is not actionable under Ohio law without physical invasion of the neighbor’s property or conduct amounting to negligence or waste, because ownership is acquired by capture upon production.


Kelly v. Ohio Oil Co., 57 Ohio St. 317, 49 N.E. 399 (Ohio 1897)