What Landowners Need to Know About Oil and Gas Wells
Landowners in New York may be affected by oil and gas activity in several ways:
- An oil and gas company may seek a lease for oil and gas development.
- A landowner may own or purchase property with an existing lease and/or well.
- Unleased land may be included in a spacing unit scheduled for a compulsory integration hearing.
- An oil and gas company may offer to sell or give a well to a landowner for self-use.
- An abandoned well may be found on the land.
Land agents, typically called "landmen," may be direct employees of exploration and production companies or may be contractors. The leases they offer are private contracts which grant rights and place obligations on both the lessor (i.e., the landowner) and the lessee (i.e., the oil and gas company). Any lease should be carefully reviewed and negotiated by the landowner before it is signed. Read A Landowner's Guide to Oil and Gas Leasing and Gas Leasing Comments (below) for more information. Because private leases are not subject to DEC's jurisdiction, these materials are posted on this website for informational purposes only and should not be viewed as advocacy or legal advice.
The Oil, Gas and Solution Mining Law provides a process to address land that is associated with a well but is not controlled by the well operator through a lease or other type of voluntary agreement. This process begins when a well permit is issued, and provides the mineral rights owner with three choices - at three different risk levels - for potential compensation for oil or gas production if the well is successful. Read the Guide to Compulsory Integration Options for more information. Again, this guide is provided for informational purposes and does not substitute for legal advice.
Oil and gas companies sometime offer to sell or give a well to the landowner when it is no longer productive enough for commercial purposes but may produce enough gas to heat a house. The landowner may pay a small fee for the well or may acquire it without cost. Production for self-use may be beneficial to the landowner and makes use of a non-renewable resource that would otherwise be left in the ground. The landowner will become responsible, however, for maintenance of the well, compliance with all environmental and reporting regulations, and plugging of the well when it is depleted.
Before well ownership can be transferred, the new owner must file an Organizational Report and may be required to post Financial Security. A Request for Transfer of Plugging Responsibilities must be signed by both the buyer and seller and approved by the Division of Mineral Resources after a site inspection. The change in ownership will not be recognized until the new owner has filed the Organizational Report and any required financial security, and Division of Mineral Resources staff have determined that the well is in compliance with all applicable state regulations. Annual Well Reports must be filed until the well is plugged, and the well must not be plugged until the Division of Mineral Resources has issued a permit to do so.
Finally, when acquiring a well for self-use, a landowner must learn and follow safe procedures for well operation and maintenance, and file a non-routine incident report if a spill, leak, fire or other problem occurs at the wellhead. Before filing a non-routine incident report, contact the appropriate Division of Mineral Resources regional minerals manager (oil and gas) to determine if one is necessary.
At least 70,000 oil and gas wells have been drilled in New York since the 1800's, but information is available for only about 30,000 of them. Locations for the others are unknown, and wells have been found in such unexpected places as basements, stream banks and under parking lots. Abandoned wells may pose hazards not only to walking on the ground surface if outdoors, but also to ground water resources if not properly plugged. In addition, they provide a potential conduit for leakage of oil, gas or brine to the atmosphere, soil or surface water. More information about identifying existing wells is provided below.
More about What Landowners Need to Know About Oil and Gas Wells:
- Landowner's Guide to Oil & Gas Leasing - Advice for landowners who have been approached to lease their property for oil and gas development
- Gas Leasing Comments - Facts and questions landowners can ask to evaluate some common misperceptions about the decision to lease.
- Identifying Existing Wells - How do I find out if there is an oil, gas, underground gas storage or brine well on my land. Information from the NYSDEC Division of Mineral Resources.
- Oil, Gas or Solution Salt Mining Well Ownership - More information about the responsibilities associated with well ownership.