Senate Bill 2784

AN ACT REQUIRE THAT OIL AND GAS WELL DRILLING LOCATIONS BE SITUATED A CERTAIN DISTANCE FROM HOMES AND BARNS; TO AMEND SECTION 53-3-5, MISSISSIPPI CODE OF 1972, TO CONFORM; TO DIRECT CODIFICATION; AND FOR RELATED PURPOSES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:

SECTION 1. No well shall be located less than one thousand (1000) feet from any inhabited house or occupied barn without the landowner’s consent, and the operator shall pay for damage caused by its operations to buildings and other improvements, commercial timber and growing crops located on the leased premises or other lands.

SECTION 2. Section 53-3-5, Mississippi Code of 1972, is amended as follows:

53-3-5. (a) The state oil and gas board shall have the power and authority and it shall be its duty, after due notice and a hearing, to regulate the drilling and location of wells in any pool and the production therefrom so as to prevent reasonably avoidable net drainage from each developed unit (that is, drainage which is not equalized by counterdrainage) so that each owner in a pool shall have the right and opportunity to recover his fair and equitable share of the recoverable oil and gas in such pool.

(b) For the prevention of waste, to protect and enforce the correlative rights of the owners in a pool, and to avoid the augmenting and accumulation of risks arising from the drilling of an excessive number of wells, or the reduced recovery which might result from too small a number of wells, the board shall, after a hearing, establish a drilling unit or units for each pool. The establishment of a unit for gas shall be limited and apply only to the production of gas and not oil.

(c) Each well permitted to be drilled upon any drilling unit shall be drilled in accordance with the rules and regulations promulgated by the board and in accordance with a spacing pattern fixed by the board for the pool in which the well is located with such exceptions as may be reasonably necessary where it is shown, after notice and upon hearing, that the unit is partly outside the pool or, for some other reason, a well otherwise located on the unit would be nonproductive, or topographical conditions are such as to make the drilling at such location unduly burdensome. The well location shall also comply with Section 1 of Senate Bill No. 2784, 2010 Regular Session. Whenever an exception is granted, the board shall take such action as will offset any advantage which the person securing the exception may have over other producers by reason of the drilling of the well as an exception, but no well drilled and completed as an exception to prescribed footage limitations for the reason that a portion of the drilling unit upon which such well is located is partly outside the pool or productive horizon shall be allocated a reduced daily production allowable whenever it shall be demonstrated to the satisfaction of the board that the productive acreage underlying such drilling unit is equal to, or more than, the reasonable minimum amount of productive acreage which would underlie such drilling unit under the minimum conditions which would permit the drilling of a well thereon so located as to comply with all applicable footage limitations. Each well drilled and completed as an exception to prescribed footage limitations for the reason that a portion of such drilling unit is partly outside the pool or productive horizon shall be allocated a reduced daily production allowable whenever it cannot be demonstrated to the satisfaction of the board that the productive acreage underlying such drilling unit is equal to, or more than, the minimum amount of productive acreage which would underlie such drilling unit under the minimum conditions which would permit the drilling of a well thereon so located as to comply with all applicable footage limitations. Such reduced allowable shall be allocated in proportion to the relationship which the productive acreage, as determined by the board, bears to the reasonable minimum amount of productive acreage which would underlie such drilling unit under the minimum conditions which would permit the drilling of a well thereon so located as to comply with all footage limitations applicable to such drilling unit. The reasonable minimum amount of productive acreage shall be determined for all purposes as if each oil well drilling unit were a regular governmental quarter-quarter section, comprising forty acres, more or less, and as if each gas well drilling unit were a regular governmental one half section, comprising three hundred twenty acres, more or less, and shall be calculated for the purpose of each oil well drilling unit as being the total acreage which would be encompassed within a triangular shaped area bounded on two sides by the exterior boundaries of such forty-acre drilling unit meeting at a 90° angle corner and on the third side by a straight line running on a 45° angle through a location point situated at the minimum distance out of such corner as shall be in accordance with prescribed oil well drilling unit footage limitations and intersecting each of such two exterior boundaries at 45° angles, and shall be calculated for the purposes of each gas well drilling unit as being the total acreage which would be encompassed within a triangular shaped area bounded on two sides by the exterior boundaries of such three hundred twenty-acre drilling unit meeting at a 90° angle corner and on the third side by a straight line running on a 45° angle through a location point situated at the minimum distance out of such corner as shall be in accordance with prescribed gas well drilling unit footage limitations and intersecting each of such two exterior boundaries at 45° angles. Should drilling units for any field or area be established so as to permit the drilling of oil or gas wells on smaller or larger units than 40 acre or 320 acre drilling units then, in such event, the same method of determining the reasonable minimum amount of productive acreage shall be applied to the consideration of such oil or gas drilling units with respect to the size of, and the prescribed footage limitations applicable to, such drilling units.

(d) Except where otherwise provided, any allocation or apportionment of production shall be made on the basis of and in proportion to the surface acreage content of the drilling units prescribed for the producing horizons for the pools so that each such prescribed unit shall have equal opportunity to produce the same daily allowable, and any special unit of less than the prescribed amount of surface acreage shall be allowed to produce only in the proportion that the surface acreage content of any such special unit bears to the surface acreage content of the regular prescribed unit. In the event any well in attempting to make its allowable should be operated in a way that would commit waste as herein defined, or to the detriment of the field as a whole, the allowable for any such well shall be subject to adjustment.

SECTION 3. The codifier is directed to place Section 1 of this act in Title 53, Chapter 3, Mississippi Code of 1972.

SECTION 4. This act shall take effect and be in force from and after July 1, 2010.