Oil Gas and Minerals Law and Legal Definition
The right to mine a parcel of property can be separated from the ownership and other uses and control of that property. Mineral rights allow its owner to control the mining of a parcel of property for coal, gems, copper and other minerals.
A property owner can sell mineral rights while keeping the rest of her property. Similarly, the same property owner can sell the land while retaining the mineral rights to the property. The sale or transfer of mineral rights may impose limitations on how mining operations can proceed, especially if the owner of the rest of the property is still using the surface.
When a parcel of property is purchased, the mineral rights are normally included with the rest of real estate being transferred—unless it is explicitly stated that the mineral rights have been separated from the rest of the real estate transaction. When in doubt, check the county property records office. Any sale or lease of mineral rights normally must be recorded to be official.
The minerals involved can be precious gems, copper or coal. But it is rare for the mineral right to identify one mineral and exclude all others from being extracted. When mineral rights are transferred, it usually covers everything underground, starting at a certain depth and proceeding downwards.
For example, a farm owner may sell the mineral rights to his property and continue to farm the surface of the property. The miner who purchases the mineral rights is allowed to dig shafts into the ground and start removing dirt and minerals. As long as the miner's work doesn't cause a surface collapse or doesn't affect the farmer's ability to farm, this should prove to be a stable relationship.
Interestingly, many locales allow the miner to continue to own the subsurface rights even after all the minerals have been removed.
Subsurface oil and gas are treated in a slightly different manner as compared to hard minerals. Much of this is because oil and gas are not permanently fixed like minerals. When oil and gas are pumped from a parcel of land, the person who removed the oil or gas—and is authorized to do so—owns the removed oil or gas as personal property.
Once pumped oil or gas becomes personal property, it normally stays that way even if it is put back into the ground. No one else can then pump out that oil or gas a second time and claim it his or her personal property. That re-pumped oil or gas is considered the personal property of the person who first pumped it out.
But while oil or gas remains in the ground, their ownership is, in fact, governed by two legal theories or approaches, depending on the state in which property is located:
- Law of Capture. States such as California, Oklahoma and Louisiana follow the "law of capture," which rule that the property owner actually does not own the oil and gas until they are pumped out of the ground or captured. This approach is based on the belief that oil and gas are fluid and may move from one parcel of property to another.
- Law of Ownership. Many states, such as Mississippi, Ohio, Texas and West Virginia, are more pro-landowner. These states believe that oil and gas are naturally trapped, so oil and gas are owned by the property owner, just as hard minerals are owned.
Permit requirements to drill wells for oil or gas vary by state and type of well. Local laws should be consulted for specific requirements in your area. The following is an example of an Indiana statute governing some of the requirements for gas and oil well permits:
- 312 IAC 16-3-2 Permit applications
- Authority: IC 14-37-3
- Affected: IC 4-21.5; IC 14-34; IC 14-37; IC 25-39-1.5
Sec. 2. (a) This section establishes general application requirements for a permit to drill, deepen, operate, or convert a well for oil and gas purposes.
(b) An application for a permit to drill, deepen, operate, or convert a well for oil and gas purposes shall be made on a division form.
(c) A permit application must be signed by:
(1) the person designated as the owner or operator on the application; or
(2) an authorized agent.
Upon a request by the division, a person who signs as an agent for an owner or operator must furnish satisfactory evidence of authority.
(d) An applicant shall remit with the application a permit fee of one hundred dollars ($100) in cash, by check, or by draft, payable to the department of natural resources.
(e) This subsection describes the surveying requirements for a permit application as follows:
(1) Except as otherwise provided in this subsection, an application must be accompanied by a survey showing the location of the proposed well for oil and gas purposes, giving the:
- quarter, quarter, quarter section, township, range, county, lot number;
- block of the recorded plat if the land is platted;
- three (3) nearest boundary lines of the tract; and
- distance in two (2) directions from a corner of the tract of land upon which the well is to be drilled and from the nearest quarter post or lot corner.
A registered Indiana land surveyor must certify the survey with respect to the information required under this subdivision.
(2) With respect to a Class II well, or a noncommercial gas well, in addition to the requirements set forth in subdivision (1), the survey must include the permit number, location, and state the depth of the following:
(A) Each well for oil and gas purposes located within one-fourth (¼) mile of the proposed well (including abandoned and nonoperational wells) that intersect the injection or production zone.
(B) Each water well recorded with the department under IC 25-39-1.5 located within one-fourth (¼) mile of the proposed Class II well location.
(3) Information of public record and information that should have been known to the applicant must be included under this subsection. This subsection does not apply to an existing injection well unless otherwise ordered by the department.
(f) In addition to the general requirements for a permit application provided in this section, an application for a permit for a Class II well must be accompanied by the following:
(1) A schematic diagram of the well showing the following:
(A) The total depth of the plugback of the well.
(B) The depth of the injection or disposal interval.
(C) The geological name of the injection or disposal zone.
(D) The geological name, thickness, and description of the confining zone.
(E) The vertical distance separating the uppermost extremity of the injection zone from the base of the lowest underground source of drinking water.
(F) The depths of the tops and the bottoms of the casing and the cement to be used in a well.
(G) The size of the casing and tubing, and the depth of the packer.
(H) The depth to the base of the lowermost underground source of drinking water.>
(2) If the well has been drilled, a copy of the completion report and any available geophysical log of the well.
(3) Proposed operating data as follows:
- The geological name, depth, and location of the injection fluid source.
- A standard laboratory analysis of a representative sample of water to be injected under the proposed Class II permit.
- The location and description of each underground source of drinking water through which the well would pass.
- A description of the current or proposed casing program, including the following:
- Casing size, weight, and type.
- Cement volume and type.
- Packer type.
- Type of completion for the well and the proposed method for testing casing.
(E) The proposed maximum injection rate and pressure. The owner or operator shall limit injection pressure to either:
- a value that does not exceed a maximum injection pressure at the wellhead calculated to assure that the pressure during injection does not initiate new fractures or propagate existing fractures in the confining zone adjacent to an underground source of drinking water and will not cause the movement or injection of fluids into an underground source of drinking water; or
- a value for wellhead pressure calculated by using the following formula:
Pmax = (0.8 psi/ft - (.433 psi/ft (Sg))d
Pmax=Maximum injection pressure (psia).
Sg=Specific gravity of the injected fluid.
(g) A bond as set forth in 312 IAC 16-4-2 must accompany a permit application.
(h) If a drilling unit, lease, or tract of land is communitized for exploration or development, the original or a certified copy of the communitization agreement or declaration of pooling must accompany the initial permit application made under that agreement or declaration. An application for a subsequent permit must identify the agreement or declaration and the permit number of the initial permit.
(i) With respect to an application for a Class II well, or a noncommercial gas well, an applicant must serve a written notification describing the proposed well personally or by certified mail on each of the following persons, if the described property is located within one-fourth (¼) mile of the proposed well:
- The owner or operator of each well for oil and gas purposes, including a well having temporary abandonment status under 312 IAC 16-5-20 or not yet in production.
- The permittee of an underground mine permitted under IC 14-34.
- The person who files a mine plan under 312 IAC 16-5-4(b) through 312 IAC 16-5-4(g) showing the workable limits for a proposed underground mine.
- Each owner of rights to surface or subsurface property that the well penetrates.
(j) The notification required under subsection (i) shall specify that a person who wishes to object to issuance of the permit may, within fifteen (15) days of receipt of the notification, submit written comments or request an informal hearing before the commission under 312 IAC 16-2-3. The notification shall include the address to which written comments or the hearing request must be forwarded and where additional information may be obtained.
(k) In addition to the notification required under subsection (i), the division shall cause a notice of a permit application to be placed in a newspaper of general circulation in the county where the proposed well is located. The notice must include the following:
- The name and address of the applicant.
- The location of the proposed well.
- The geological name and depth of the injection zone.
- The maximum injection pressure.
- The maximum rate of barrels each day.
The notice shall specify that a person who wishes to object to issuance of the permit may, within fifteen (15) days of publication of the notification, submit written comments or request an informal hearing before the department. The notification shall include the address to which the written comments or hearing requests must be forwarded, how a person may receive written notice of the proceedings, and where additional information concerning the proposed permit can be obtained.
(l) Proof of service of the notification required in subsection (i) must be delivered to the division before a permit for a Class II well can be issued.
(m) A person may file a written request for an informal hearing under 312 IAC 16-2-3 within fifteen (15) days after the notification required under subsections (i) through (k) to consider an objection to a permit.
(n) No permit shall be issued for a Class II well or a noncommercial gas well:
- until eighteen (18) days after service of any notification required under subsections (i) through (k); or
- if a hearing is requested under subsection (m), until the division director makes a determination with respect to the objection.
Upon issuance of the permit, IC 4-21.5 and 312 IAC 3-1 apply.
(o) Upon notification by the division that the requirements of this section are satisfied, an owner or operator may act upon a permit. (Natural Resources Commission; 312 IAC 16-3-2; filed Feb 23, 1998, 11:30 a.m.: 21 IR 2332; filed Jan 16, 2003, 10:52 a.m.: 26 IR 1896)
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