If I lease my property for oil and gas am I responsible for plugging the wells if they are abandoned on my property?

Published 06/16/2009 07:15 AM   |    Updated 03/09/2010 11:00 AM
If I lease my property for oil and gas am I responsible for plugging the wells if they are abandoned on my property?

In the majority of situations, the landowner is not responsible under the Indiana Oil and Gas Act for proper plugging and abandoning of an oil or gas well. That responsibility rests with the "well owner" or "well operator". Most landowners only possess a royalty interest in the oil and gas produced from a well (typically 1/8th or 12.5 percent). Royalty interest owners do not share in the costs of drilling or operating a well nor are they responsible for any decisions regarding the management of the well or the production operations. Therefore they would not be viewed as the owner or operator of a well.

Working interest (typically the remaining 7/8ths or 87.5 percent) owners are responsible for operating and maintaining the oil and gas wells. Upon abandonment, they are responsible for the proper plugging and abandonment of the well.

In addition to holding a royalty interest, if a landowner also retained a portion of the working interest for a well, then the landowner could be considered a well owner or operator and bear a portion of the responsibility for the operation, maintenance, and plugging of an oil or gas well along with the other working interest owners.

Another situation where a landowner could be held liable for the plugging of a well would be where the landowner begins operating or producing an abandoned well on their property. For example, some landowners might be tempted to begin operating a gas well on their property to produce natural gas for their own use. Under this situation, the landowner would be required to obtain a permit for the well and assume the responsibility for plugging it when it was no longer productive.

If no viable well owner or operator exists, the Division of Oil and Gas, by authority under the Oil and Gas Act, has the ability to enter a property and see that a well is properly plugged and abandoned. This is the primary function of our Orphaned and Abandoned Well Program. Since funding is limited, wells are prioritized for plugging purposes according to the risk which the well poses to public health or safety, or to the environment. For more information about this program see the following informational brochure: http://www.in.gov/dnr/dnroil/files/abandoned.pdf

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