1997 Regular Session

To: Public Health and Welfare; Oil, Gas and Other Minerals

By: Senator(s) Johnson (38th) (By Request)

Senate Bill 3033




SECTION 1. Section 53-1-3, Mississippi Code of 1972, is amended as follows:

53-1-3. Unless the context otherwise requires, the words defined in this section shall have the following meaning when found in Sections 53-1-1 through 53-1-47, inclusive, and in Sections 53-3-3 through 53-3-21, inclusive:

(a) "Board" shall mean the State Oil and Gas Board as created by Section 53-1-5.

(b) "Person" shall mean any individual, corporation, partnership, association, or any state, municipality, political subdivision of any state, or any agency, department or instrumentality of the United States, or any other entity, or any officer, agent or employee of any of the above.

(c) "Oil" shall mean crude petroleum oil and all other hydrocarbons, regardless of gravity, which are produced at the well in liquid form by ordinary production methods and which are not the result of condensation of gas.

(d) "Gas" shall mean all natural gas, whether hydrocarbon or nonhydrocarbon or any combination or mixture thereof, including hydrocarbons, hydrogen sulphide, helium, carbon dioxide, nitrogen, hydrogen, casinghead gas, occluded natural gas from coal seams, compressed air and all other hydrocarbons not defined as oil in subsection (c) above.

(e) "Pool" shall mean an underground reservoir containing a common accumulation of oil or gas or both. Each zone of a general structure which is completely separated from any other zone in the structure is included in the term "pool" as used herein.

(f) "Field" shall mean the general area which is underlaid or appears to be underlaid by at least one (1) pool; and "field" shall include the underground reservoir or reservoirs containing oil or gas or both. The words "field" and "pool" mean the same thing when only one (1) underground reservoir is involved; however, "field," unlike "pool," may relate to two (2) or more pools.

(g) "Owner" shall mean the person who has the right to drill into and produce from any pool, and to appropriate the production either for himself or for himself and another or others; "royalty owner" shall mean any person who possesses an interest in the production but who is not an "owner" as herein defined.

(h) "Producer" shall mean the owner of a well or wells capable of producing oil or gas or both.

(i) "Product" shall mean any commodity made from oil or gas, and shall include refined crude oil, processed crude petroleum, residuum from crude petroleum, cracking stock, uncracked fuel oil, fuel oil, treated crude oil, residuum, casinghead gasoline, natural gas gasoline, naphtha, distillate, gasoline, kerosene, waste oil, blended gasoline, lubricating oil, blends or mixtures of oil with one or more liquid products or by-products derived from oil or gas, and blends or mixtures of two (2) or more liquid products or by-products derived from oil, condensate, gas or petroleum hydrocarbons, whether hereinabove enumerated or not.

(j) "Underground Injection Program" shall mean a program regulating the injection of any fluids produced or fluids associated with the exploration, storage and/or production of oil and/or gas and being among those other laws relating to the conservation of oil and gas as referred to in Section 53-1-17(a).

(k) "Illegal oil and illegal gas" shall mean oil or gas which has been produced within the State of Mississippi from any well during any time that the well has produced in excess of the amount allowed by law or by any rule, regulation or order of the board. "Illegal product" shall mean any product derived, in whole or in part, from illegal oil or illegal gas.

(l) "Waste" shall mean and include the following:

(i) The inefficient, excessive or improper use or dissipation of reservoir energy; and the locating, spacing, drilling, equipping, operating or producing of any oil or gas well or wells in a manner which results or tends to result in reducing the quantity of oil or gas ultimately to be recovered from any pool in this state.

(ii) The inefficient storing of oil; and the locating, spacing, drilling, equipping, operating or producing of any oil or gas well or wells in a manner causing or tending to cause unnecessary or excessive surface loss or destruction of oil or gas.

(iii) Abuse of the correlative rights and opportunities of each owner of oil or gas in a pool due to nonuniform, disproportionate, or unratable withdrawals causing undue drainage between tracts of land or resulting in one or more owners in such pool producing more than his just and equitable share of the production from such pool.

(iv) Producing oil or gas in such manner as to cause unnecessary channeling of water or gas or both or coning of water.

(v) The operation of any oil well or wells with an inefficient gas-oil ratio.

(vi) The drowning with water of any stratum or part thereof capable of producing oil or gas.

(vii) The creation of unnecessary fire hazards.

(viii) The escape into the open air, from a well producing both oil and gas, of gas in excess of the amount which is necessary in the efficient drilling or operation of the well.

(ix) Permitting gas produced from a gas well to escape into open air.

(x) The use of gas from gas wells, except sour gas, for the manufacture of carbon black, except and unless the board shall find that there are no adequate pipeline connections to otherwise market the gas.

(m) "Drainage unit" or "drilling unit" shall mean the maximum area in a pool which may be assigned to one (1) well so as to produce the reasonably recoverable oil or gas in such area, shall be established by statewide rules or by special field rules of the board, and shall be of such size and configuration as will foster, encourage and promote the development, production and utilization of the natural resource of oil and gas.

(n) "Developed area" or "developed unit" shall mean a drainage unit having a well completed therein which is capable of producing oil or gas in paying quantities.

(o) A "certificate of compliance" shall mean a certificate issued by the board showing compliance with the conservation laws of the state, and conservation rules, regulations and orders of the board, prior to connection with a pipeline.

(p) A "certificate of clearance" shall mean a permit for the transportation or the delivery of oil, gas or products, approved and issued or registered under the authority of the board.

(q) "Supervisor" or "State Oil and Gas Supervisor" shall mean the officer appointed by the State Oil and Gas Board pursuant to Section 53-1-7.

(r) "Orphan well" shall mean any oil or gas well in the state, including Class II wells, which has not been properly plugged according to the requirements of the statutes, rules and regulations governing same and for which a responsible party such as an owner or operator cannot be located or for which, for whatever reason, there is no other party which can be forced to plug the well.

(s) "Refined hydrocarbons" shall mean any refined petroleum products.

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SECTION 2. Section 53-1-17, Mississippi Code of 1972, is amended as follows:

53-1-17. (1) The board shall have jurisdiction and authority over all persons and property necessary to enforce effectively the provisions of this chapter and all other laws relating to the conservation of oil and gas.

(2) The board shall have the authority, and it shall be its duty, to make such inquiries as it may think proper to determine whether or not waste, over which it has jurisdiction, exists or is imminent. In the exercise of such power the board shall have the authority to collect data; to make investigations and inspections; to examine properties, leases, papers, books and records, including drilling records and logs; to examine, check, test and gauge oil and gas wells, tanks, refineries and modes of transportation; to hold hearings; to require the keeping of records and the making of reports; and to take such action as may be reasonably necessary to enforce the provisions of Sections 53-1-1 through 53-1-47, inclusive, and Sections 53-3-1 through 53-3-21, inclusive.

(3) The board shall have the authority, and it shall be its duty, to make, after notice and hearing as hereinafter provided, such reasonable rules, regulations and orders as may be necessary from time to time in the proper administration and enforcement of the provisions of Sections 53-1-1 through 53-1-47, inclusive, and Sections 53-3-1 through 53-3-21, inclusive, and to amend the same after due notice and hearing, including but not limited to, rules, regulations and orders for the following purposes:

(a) To require that the drilling, casing and plugging of wells be done in such a manner as to prevent the escape of oil or gas out of one stratum to another; to prevent the intrusion of water into an oil or gas stratum from a separate stratum; to prevent the pollution of freshwater supplies by oil, gas or saltwater; and generally to prevent waste as herein defined. The duty is hereby imposed upon the State Oil and Gas Board to make suitable and adequate rules and regulations, subject to the approval of the Mississippi Commission on Environmental Quality, requiring the disposal of waste products such as, but not limited to, mud, acids, saltwater or any corrosive products brought to the surface from any oil, gas or condensate well in this state, to prevent seepage, overflow or damage and injury to the topsoil or surface. The Commission on Environmental Quality shall have the exclusive authority to regulate the commercial disposal of such waste products pursuant to Section 17-17-47. However, the board shall have the exclusive authority to regulate and promulgate rules and regulations pertaining to commercial and noncommercial Class II underground injection wells. It is the policy of the state not only to conserve minerals but to conserve and protect its surface lands for agriculture, timber and any and all other beneficial purposes, and the destruction of surface lands where reasonable means of their protection exist shall no longer be permitted.

(b) To require the making of reports showing the location of oil and gas wells; to require the filing, within thirty (30) days from the time of the completion of any wells drilled for oil or gas, of logs and drilling records.

(c) To require adequate proof of financial responsibility in a form acceptable to the board and conditioned for the performance of the duties outlined in paragraphs (a) and (b) of this subsection, including the duty to plug each dry or abandoned well.

(d) To prevent the drowning by water of any stratum or part thereof capable of producing oil or gas in paying quantities and to prevent the premature and irregular encroachment of water which reduces, or tends to reduce, the total ultimate recovery of oil or gas from any pool.

(e) To require the operation of wells with efficient gas-oil ratios, and to fix the limits of such ratios.

(f) To prevent "blowouts," "caving" and "seepage" in the sense that conditions indicated by such terms are generally understood in the oil and gas business.

(g) To prevent the creation of unnecessary fire hazards.

(h) To identify the ownership of all oil and gas wells producing leases, refineries, tanks, plants, structures and storage and transportation equipment and facilities.

(i) To regulate the shooting, perforating and chemical treatment of wells.

(j) To regulate secondary recovery methods, including the introduction of gas, air, water or other substances into producing formations.

(k) To regulate the spacing of wells and to establish drilling units.

(l) To allocate and apportion the production of oil or gas, or both, from any pool or field for the prevention of waste as herein defined, and to allocate such production among or between tracts of land under separate ownership in such pool on a fair and equitable basis to the end that each such tract will be permitted to produce not more than its just and equitable share from the pool. The owners and producers of each discovery well located in a new field or pool shall certify to the Oil and Gas Board an itemized list of the expenses incurred in the actual drilling of such well. The Oil and Gas Board shall investigate such cost and shall certify the amount found by them to be correct. The discovery well shall not be liable to the restrictions of Sections 53-1-1 through 53-1-47, inclusive, and Sections 53-3-1 through 53-3-21, inclusive, until the cost of drilling such well shall have been recovered in oil or gas from said discovery well. Such cost having been recovered, the discovery well shall be subject to the terms of said sections as are other wells in the field.

(m) To prevent, so far as is practicable, reasonably avoidable drainage from each developed unit which is not equalized by counter-drainage.

(n) To require all of those making settlement with the owners of oil or gas interests to render statements to such owners showing the quantity and gravity purchased and the price per barrel of oil or one thousand (1,000) cubic feet of gas.

(o) To require, either generally or with respect to particular areas, certificates of clearance in connection with the transportation or delivery of oil, gas or any product thereof.

(p) To promulgate rules and regulations governing the safety of storage of gas, liquefied petroleum gases, refined hydrocarbons and/or oil in underground storage wells, but the jurisdiction of the State Oil and Gas Board regarding safety shall cease upon reaching header on flow line beyond associated wellhead facilities, which includes the wellhead, manual and automatic safety valves, automatic shut-in safety devices, flow lines from wellhead to header, brine lines, and tanks or pits and flares.

(q) To make such determinations of oil and/or natural gas maximum lawful ceiling prices as allowed by federal or state law.

(4) In order to carry out its duties and responsibilities as fixed by law, the board is authorized and empowered to purchase, own and operate automobiles in the number and in the manner specified in Section 25-1-85. The board is further authorized and empowered to purchase, in the manner specified by law, operate and maintain in good order the necessary and suitable equipment required to install a complete radio base station, including mobile units to be installed in automobiles owned by the board.

(5) The board shall have the authority, and it shall be its duty, to promulgate official policies of the board.

(6) The board shall continue to have the power to make rules, regulations and orders necessary to prevent and protect against discrimination in the purchase, production and sale of oil and gas and against the unratable withdrawal of same, including as provided in Statewide Rule 48.

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SECTION 3. This act shall take effect and be in force from and after July 1, 1997.