When a Well is Capped, Whose Liability is it?

We have a natural gas well on our Chautauqua County property whose royalty rights were kept by the previous land owner.  If we buy the rights from this prior owner, will we be liable for the well if the company decides to cap it?  Is the royalty rights owner responsible or is the gas company?

Also, curious why Chautauqua County is not in any of the groups listed in New York.

Thank you. 

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Permalink Reply by KAR on March 20, 2016 at 11:58am

What do you mean cap? Like plug and abandon? The operator of the well is liable for the well, not the landowner. Even if the operator goes away and never plugs the well the well will be added to the states orphan abandoned well program and will be plugged by the state eventually. 

Permalink Reply by Barry D on March 20, 2016 at 12:55pm

Jules,

In general the operator/owner of the well is responsible to plug an abandoned well. I assume that you are in NY state, the exact details of how the plugging and abandonment occurs in NY may differ from other states. You may wish to research this.

Permalink Reply by Jules Bartlett on March 20, 2016 at 5:28pm

I'm sorry that I wasn't clear with my question.  The well currently is still producing.  We are considering buying the royalty rights to the well.  It has been producing since 1977 so we assume that the Drilling Company will not be using this well much longer.  I read that some Companies will sell the well or even give it to the landowner when the well is no longer profitable.  At that time, if we own the well, we were wondering if we will be responsible for any leaking or contamination issues that may occur in the future.  The wellhead (if that's what the metal pipes are called) is very rusted; the Company checks the well weekly but the metal parts are very rusted and not maintained.  They won't even paint it.  

Permalink Reply by Jonathan H on March 20, 2016 at 10:24pm

Before you take over the well from the gas company, check what your state regulations are to be a domestic producer (Ohio's term) or similar - well plugging gets pricey quick, and most states require a financial bond from the well owner.

Buying the mineral rights from the previous owner is probably a better idea than taking over the well, depending on the cost and terms and conditions.

Permalink Reply by KAR on March 20, 2016 at 11:42pm
Agreed. Only someone with experience on how to operate the well should take ownership. Plugging a well can get very costly quickly - like $20,000-$30,000 for a no problems well. If there are other issues it could be 2-4 times that amount. Bottom line: don't agree to take over ownership of the well until you research everything.
Permalink Reply by Barry D on March 21, 2016 at 1:20am

Jules,

Your best bet is to contact (call) whatever agency oversees oil and gas activities in NY.

Permalink Reply by markkot on March 21, 2016 at 1:48am

Jules,

I purchased property in Crawford Co. PA  6 years ago and got the mineral rights, as well.  It had a vertical well on it that was minimal at best, so the PA DEP  had classified it as 'shut-in'.  Since I wasn't HBP, I was able to get it plugged and capped after about a year and a half of dealing with the oil E&P (Atlas), but what I didn't know originally, but found out through researching it, the responsibility language was contained in the lease with the previous owner.  Make sure you get a copy of that lease prior to your decision about the property with the mineral rights.  It's probably spelled out in the lease, and If it is, it'll make your life much easier.   in addition, heed the previous advice already issued, then go to NY's version of the DEP and find out what the laws and requirements are in your state......

good luck.........

0ym9x5ag7ury2Permalink Reply by 0ym9x5ag7ury2 on March 21, 2016 at 2:13am

Oil & Gas companies that have leases don't let them go, they will sell your lease to a Horizontal Well driller.

The current lease was from the 70s, so it will have to be rewritten for a Horizontal Well. As the company tries to make that transition, you may be able to keep them from selling without a signature from the current mineral rights owner.

Read the current lease and ask the mineral rights owner if he signed anything for a Landman. If they did it is probably too late to keep a Horizontal Well from being drilled on the property, the lease has more than likely been modified by the mineral owners signature.

You need to write a sales contract Addendum for your transaction to buy the minerals that causes the transaction to be void if the current minerals holder has taken any action that will deny you the rights you are paying for. Such as he has sold the Oil & Gas to someone else and you are now buying the coal and remaining minerals. As part of land purchase contract, I always include an Addendum that exposes any false statements or hidden mineral severance from past deeds. It's your money and your contract, tailor it to protect yourself. Oil & Gas people aren't the only shysters on the planet.

Let me know if you need some help writing a contract Addendum that protects you for all possible issues. I work for free by the way.

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