A simplified version is that Central Kentucky leased some land and drilled to remove the natural gas under the property they leased. Hammonds also owned land above the natural gas reservoir that contained the gas that Central Kentucky tapped into. See the diagram..because gas moves around, it would be impossible to separate the gas under Hammonds land from the gas under Central Kentucky's land-as soon as the process of removing the gas begins, the gas will move around. (The blue line is not physical just a representation of the property line.) Hammonds sued Central Kentucky claiming that some of the gas CK extracted was theirs and wrongfully taken by the defendant.

Tied ownership

We could 'tie' the ownership of the fugitive property to the ownership of some other item. In this case, the owner of the surface property would have the rights to the gas found below their owned land.

So since first possession is simpler to apply but has an incentive to invest too much too early, what about tied ownership? Let's look at the incentive to invest early.....wi|| tied ownership avoid this problem? Let's say once again there was $100 worth of gas and the two companies could drill and extract it fast or slowly. If they drill slowly, it will cost them $5. If they drill fast it will cost $25. Let's look at the case of tied ownership: Since the ownership of the gas is tied to the surface ownership, each firm will get 50% of the gas regardless of the speed at which they extract it. This chart shows the payoffs: Firm 1, Firm 2 Firm two drills Slow Firm two drills Fast Firm one drills Slow 45, 45 45,25 Firm one drills Fast 25,45 25,25