1998 Regular Session

To: Oil, Gas and Other Minerals

By: Senator(s) Cuevas

Senate Bill 2524



SECTION 1. An owner of the surface estate may collect damages from any person who causes destruction to the surface lands, including destruction to any growing timber or homesites located on the surface lands, arising from mineral exploration or production, or both.

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, growing timber or homesites 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.

(7) Notwithstanding any other provision contained in the Laws of the State of Mississippi, the board shall have exclusive jurisdiction and authority, and it shall be its duty, to make, after notice and hearing as hereinafter provided, such reasonable rules, regulations, standards and orders, and to issue such permits as may be necessary, to regulate the use, management, manufacture, production, ownership, investigation and noncommercial disposal of oil field exploration and production waste in order to prevent, eliminate or reduce waste by pollution to acceptable levels in order to protect the public health, safety and the environment.

SECTION 3. Section 53-3-11, Mississippi Code of 1972, is amended as follows:

53-3-11. (1) Any person desiring or proposing to drill any well in search of oil or gas, before commencing the drilling of any such well, shall notify the oil and gas supervisor upon such form as the board may prescribe. The drilling of any well for oil or gas is hereby prohibited until such notice is given and a permit therefor is issued.

(2) (a) Before any nonresident not qualified to do business in this state is issued a permit pursuant to subsection (1) of this section, such nonresident shall file with the Secretary of State, on a form prescribed by him, a surety or cash bond in a sum of not less than Ten Thousand Dollars ($10,000.00), or in a greater amount if so approved by the Secretary of State, conditioned that such sum be paid to the State of Mississippi for the benefit of all persons interested, their legal representatives, attorneys or assigns, in the event the operator of such well shall fail to reasonably restore the land and improvements of the surface estate as a result of mineral exploration and/or production, or in the event the operator shall fail to properly plug a dry or abandoned well in the manner prescribed by the rules of the board. Such bond shall be executed by the operator listed in the drilling permit and, in case of a surety bond, by a corporate surety licensed to do business in the State of Mississippi. Such bond shall cover all subsequent drilling permits issued to such nonresident operator and shall be for a term coextensive with the terms of the permits.

(b) The Secretary of State is hereby designated as the agent upon whom process may be served in any action against such nonresident operator to recover damages to the surface estate, including damage to growing timber or homesites located on the surface estate, arising from mineral exploration and/or production. Any such action for damages shall be commenced within six (6) years next after the closing of the well.

(3) The drilling of any well, which is not in accordance with a spacing pattern fixed by the board, is hereby prohibited until and unless a permit is issued by the board after notice and hearing.

SECTION 4. This act shall take effect and be in force from and after July 1, 1998.