If an oil and/or gas well located within a federal oil and gas lease on split-estate land is converted to an injection well for disposing of off-lease, off-unit-produced fluids by either a third party or the current oil and gas lessee or operator, a right-of-way (ROW) is not the appropriate authorization and will cease being the permitting instrument. This policy resulted from two key IBLA decisions pertaining to (1) the Mallon Oil Company (104 IBLA 145, September 2, 1988) and (2) the Phillips Petroleum Company (105 IBLA 345, November 17, 1988). The outcome from the Mallon Oil Company case was that once the minerals have been removed from the ground, the void formerly occupied by the minerals reverted to the surface owner. In this case, both the surface and minerals were owned by the United States, and the court upheld that a ROW issued by the BLM was the appropriate authorization. In the Phillips Petroleum Company case, which involved split-estate lands, the BLM did not have the authority to issue a permit for the disposal of salt water into a dry well located on private surface and federal minerals. In actuality, the BLM used the wrong authorization mechanism—a permit pursuant to Section 302(b) of the FLPMA—instead of a ROW under Section 501 of the FLPMA. However, the BLM was not the owner. According to the Mallon Oil Company case decision, the void space was the property of the surface owner. Henceforth, the federal mineral estate will be protected using the following guidelines and procedures.
Where BLM determines that there are federal minerals within the formation for injection of fluids, the appropriate authorization for fluid disposal on existing federal oil and gas leases on split-estate lands is by an approved Sundry Notice (Form 3160-5). These well activities will be the responsibility of the appropriate lessee or operator and not a third party. In considering and documenting feasibility for each case, the following factors must be analyzed, where applicable, in the applicant’s proposal for subsequent well operation (Sundry Notice): (1) geology, (2) economic factors, (3) volume of produced fluids, (4) hydrology and hydrogeology, (5) land use plans, (6) availability of private, state, and other land disposal sites, (7) state and/or federal agencies’ permitting requirements (Onshore Oil and Gas Order #7, 1994), (8) water quality, (9) wellbore schematics (present and/or proposed), (10) monitoring requirements of down hole injection or disposal, and (11) other factors determined by the authorized officer. Not only the applicant, but even more importantly, the BLM must consider these factors before approving an authorization.
If the proposal is determined to be feasible and a Sundry Notice is the instrument of authorization, the following conditions and stipulations should be considered and included as part of the authorization:
A stipulation stating that “The disposal well authorization may be terminated by the authorized officer of the BLM by a decision notifying the approved lessee or operator thirty days (30) prior to the date of termination. Termination must be for cause which includes, but is not limited to, compliance with both the lease and specific Sundry Notice authorization stipulations and conditions as well as the protection of the federal mineral estate, and the laws and regulations that govern thereof.”
An approved UIC permit issued by the Wyoming Oil and Gas Conservation Commission (WOGCC) and written approval from the surface owner.
Produced fluid disposed in a well traced to the specific oil and gas well(s) from which it came, and these specific well(s) so stated as part of the approved Sundry Notice.
Converting federal oil and gas oil wells within a federal lease on split-estate lands to Class I commercial injection wells (wells used to dispose of hazardous waste; 40 CFR 144.6, 1993) will not be authorized for fluid disposal into a formation containing federal minerals.
If the BLM determines that the off-lease, off-unit-produced fluids are to be disposed of by injection into a formation found to be totally void of federal minerals, the following conditions must be addressed before a well is approved for disposal purposes:
The lessee or operator must comply with all the appropriate regulations within 43 CFR 3160 (1994), and, more specifically, Section 3162.3-4, “Well Abandonment.”
If used for disposal purposes, the BLM must consider that the well meet specific criteria, including (1) that appropriate steps be taken to avoid intermingling of fluids (oil, gas, and water) between formations or intervals that contain fluids of substantially different quality, and (2) protection of all federal minerals that may exist in other formations.
For an abandoned federal well to be used for subsurface disposal of off-lease or off-unit produced fluids into a formation depleted of federal minerals, a BLM release form must be properly filled out and signed by the private surface owner(s) and accepted by the BLM authorized officer. By signing this release form, the private surface owner acknowledges his or her potential future liability for disposal activities and ensures that the operation of the well is operated according to standards as required by appropriate federal and state regulatory agencies. With an approved release, the landowner also could ultimately assume the responsibility for the final plugging and reclamation requirements for the well. When the BLM accepts this release, the lessee’s or operator’s oil and gas bond also should be released for this well.