Wait, Who Owns What? Oseberg’s Digitalization of America’s Land Records
Oil and gas companies deal with a land recording system that is hundreds of years old, startup company Oseberg is here to digitalize and modernize that system.
“The meek shall inherit the earth, but not its mineral rights”.
-J. Paul Getty, founder of Getty Oil[1]
When Americans say a person “owns land” they really mean they own it all. They own the air above, the surface itself, and the ground below. This principle of Americans owning from “hades to heaven” dates back to before the founding of America itself [2]. It differs significantly from most other countries where the central government owns 100% of the ground beneath the surface [3]. While we should feel fortunate to have such a great liberty, keeping track of who owns what is a task of gigantic proportions. Believe it or not, Thomas Jefferson himself proposed the way in which most of the country is divided up into millions of 1 square mile sections (Figure 1) [4]. This system was implemented in the 1700’s and remains largely unchanged to this day. It requires all transactions of real estate property to be painstakingly documented at the local county courthouse for the public to be notified [5].
Figure 1[6]
This system, while functional, is cumbersome and inefficient. The documentation system is incredibly costly to corporations trying to acquire land or mineral rights, usually oil and gas corporations. These corporations spend significant amounts of money trying to identify who owns certain pieces of land instead of using that money to just pay the landowners themselves. The system is so complex that it makes information that should be accessible by anyone the sole possession of those able to afford the long and expensive process. It takes a large budget to afford the man hours needed to research who owns a certain piece of land. This results in many individuals and smaller oil and gas companies not able to afford “title runs” to maintain their own proprietary records, making what should be a level playing field very uneven. If the system is so inefficient, shouldn’t a 21st century company be up to the task of modernizing it? Oklahoma-based startup Oseberg is attempting to do just that.
Oseberg utilizes information extraction technology to comb through publicly available data and format it to be instantly accessible through user-friendly software [7]. Founded in 2011, the company has grown to offer services in both Oklahoma and Texas. They now offer four main products each targeting a different need for the many segments within their oil and gas client base, thus somewhat leveling the playing field by offering smaller companies the ability to only purchase what they need. Oseberg founder Evan Henderson lays out his company’s vision below [8].
While Oseberg’s technology is certainly on the cutting edge, they are not the first ones to attempt to do something like this. Similar ventures Drillinginfo and IHS Markit have been around for a longer period of time and have wider client bases. What sets Oseberg apart is that these other companies simply reprint this publicly available data online, making it more accessible but not necessarily more intuitive. A distinction between Oseberg and its competitors is that with Drillinginfo or IHS you need to know what you are looking for before you use their products. Oseberg operates more like a search tool. With Oseberg’s proprietary software, you are able to figure out what exactly is going on in an area without needing significant amounts of previous knowledge [9].
Up to this point it’s been a great beginning for the company and Oseberg has more than enough business in Oklahoma and Texas for them to thrive in the short term. When looking out on a 3-10 year horizon the most likely opportunities for growth are to enter more petroleum producing states like Colorado, Ohio, Pennsylvania, etc. In addition to geographical growth, it is imperative that Oseberg maintains its technological advantage over its competitors. It also needs to maintain a superior product through R&D and innovation to provide continuous value for its growing client base.
I’ve described, to the best of my extent in 800 words, the problems with America’s land recording system and its effect on oil companies and landowners. Oseberg leverages 21st century technology to make this inefficient data more palatable for their end consumer. With geographical and technological growth, Oseberg is perfectly positioned to provide unbelievable value to the oil and gas industry through digitalization. A few questions I’m left wondering is, “If Oseberg provides easier access to publicly available data, will they eventually reach a limit on how efficient they can make the current system? Perfect world scenario: they reach all 50 states and are able to efficiently digitalize 100% of all incoming information, where does the company go from there? What other systems of data outside of publicly available land records could this technology be used for? (787 Words)
[1] Zuckerman, George, The Frackers: The Outrageous Inside Story of the New Billionaire Wildcatters. (New York, NY, Penguin Group, 2013), pg 1.
[2] Blackstone, William. “Blackstone’s Commentaries on the Laws of England – Book the Second – Chapter the Second : Of Real Property and, First, of Corporeal Hereditaments.” Commentaries on the Laws of England, vol. 2, Clarendon Press, 1765, p. 18, avalon.law.yale.edu/18th_century/blackstone_bk2ch2.asp. accessed November 2017.
[3] “Mineral Rights Ownership – What Is It and Why Is It so Unique in the USA?” Bringing Oil and Capital Together, International Energy Network, www.ieneurope.com/eng/index.html. accessed November 2017.
[4] White, C. Albert. A History of the Rectangular Survey System. Bureau of Land Management, 1983, www.blm.gov/cadastral/Manual/pdffiles/histrect.pdf. accessed November 2017.
[5] Jennings, Marianne M. Real Estate Law. 10th ed., Cengage Learning, 2010.
[6] “Public Land Survey System.” Legal Land Converter, 1 Jan. 2017, legallandconverter.com/p43.html. accessed November 2017.
[7]EnergyHQ. “Oseberg: Oklahoma Start-up Unlocks the Disruptive Power of Data in Oil and Gas.” NewsOK.com, NewsOK, 13 Feb. 2017, newsok.com/article/5537857. accessed November 2017.
[8] “EnergyHQ | Innovation | Oseberg, Unlocking the Disruptive Power of Data.” YouTube, EnergyHQ | Innovation | Oseberg, Unlocking the Disruptive Power of Data, 12 Jan. 2017, www.youtube.com/channel/UC_ZxXfe9wPL01AugGXAZg5A. accessed November 2017.
[9] Cummings, Stephanie. The Energy Industry Needs “Search”. Houston Ventures, 23 Jan. 2016, www.houven.com/the-energy-industry-needs-search-2/.
I was struck by the very existence of this problem, given that the U.S. is largely regarded as having the most advanced and well-defined property rights regimes in the world (with some notable exceptions, such as water rights). It helped to separate, for me, the distinction between an advanced legal framework for property and a widely usable/accessible/cost-efficient one made possible by better technology. Regarding your question of ‘what next’ should the problem in the U.S. be solved, I imagine that the need for Oseberg’s technology solutions are actually far greater outside of the U.S. As the economist Hernando de Soto made famous (see: The Mystery of Capital), the absence of functional property rights systems in most poorer countries is a root cause of underdevelopment. Individuals reside on land that is customarily theirs, but perhaps not legally theirs; if it is legally theirs (say, by custom…), they may have no title to it, and therefore cannot exercise their rights; they may have a title to it, but cannot access it easily, or even know it exists; and so on. There’s an emerging crop of startups (like Landmapp in Ghana, which empowers smallholders farmers with mobile-based technologies to document and protect their land); but the sector is mostly empty of game-changing actors worldwide — which could yet be Oseberg’s biggest opportunity.
Cloudy title for the impoverished is a major issue. I had never heard of Landmapp before but that is an incredible product for those without the necessary means to clear up title on lands they should rightfully own. It reminds me a lot of the Mark Zuckerberg Hawaii vacation estate story: https://www.usatoday.com/story/tech/news/2017/01/27/zuckerberg-drops-kauai-land-suits-hawaii-quiet-title/97152332/
If the company is able to reach all 50 states and efficiently process data, I think there is an important opportunity to capture the value of their efficiency’s. In this “perfect world” scenario, let’s say they are able to process changes to land records instantaneously as they happen. This information would be incredibly valuable to companies who are looking to lease land in a given oil/gas play. Companies would be willing to pay top dollar for access to this immediate data so that they could lease the land before other companies have the opportunity. Oseberg could offer a tiered pricing system in which companies could pay top dollar for instantaneous data while others could chose a less expensive and less timely option.
To your first question – what happens if they capture all historical data across 50 states and have the ability to handle the influx of new information, at that point my strategy would be to maintain that asset and extract as much value as you can from customers. Perhaps they could provide additional innovations like analysis and insights extracted from the massive data bases that customers may be willing to pay for. But I’d be worried that would be in their core competency, and I’d be more excited about seeing them apply their refined model/skill to a different space. What about applying this to broader legal records and trying to put paralegals and legal associates out of jobs instead of just the land men in oil & gas? Judicata is an example of legal tech start up that is trying to offer a similar customer promise to the legal space https://angel.co/judicata. Legal tech has a decent amount of funding sloshing around (see https://angel.co/legal), but not established market leader as far as I can tell. Maybe Oseberg has discovered a winning model and can move across industry to expand and compete.
I’m also fascinated by startups that provide a greater degree of information transparency to areas of knowledge that were formerly very difficult or expensive to access (i.e., legal documents, financial statements, industry reports) or very subjective (industry experts, people who have had a very specific experience.)
Like Oseberg, these startups can capture a lot of value by automating the data collection and sharing process. I wonder what types of effects these companies have on their respective markets as a whole?
For instance, Quora has made it a lot cheaper to access the highly subjective advice and experiences of venture capitalists, while VCs are able to locate curious entrepreneurs on the platform. What happens when the information costs of an industry go down?
I found this essay enlightening because I had no idea information transparency was such an issue as it relates to land assets in the US. Like the author states, I think it is crucial for Oseberg to continue to hone their product so that they can dominate the US market in this category. If this problem exists in the US, I think it is highly likely it exists in other countries as well. I expect that Oseberg has an opportunity to grow beyond the US and introduce their product to foreign markets.