Drained Away: Oil Lost from First Nations Reserves

Inefficiences in common pool resources are well-known, but in this paper we show how the common pool can also generate stark inequities. In Western Canada many oil pools underlie land straddling the borders of First Nations reserves. We find that the shared resources were disproportionately extracted by wells drilled off reserves but in close proximity to reserve borders. Evidence suggests oil was drained from First Nations reserves, contributing to a large drop in production on reserve between 1985 and 2005. We explore the avenues through which First Nations could have been compensated for the lost production and find none were pursued. These results provide further evidence that the current regulatory environment of the oil industry does not adequately address the dual problem of equity and efficiency in the common pool.