Oil and Gas at Your Door? (2005 Edition) - Earthworks

Oil and Gas Development and Impacts
Stages of Oil and Gas Development, 1.2.3.4.
Prior to the start-up of an oil and gas exploration or development project there are certain legal
steps that companies take to prepare themselves. First, they must acquire the mineral rights to
the targeted oil or gas deposit. Once the legal work has been taken care of, the technical work
can begin.
The stages of oil development are similar to gas development, and include: 1) exploration; 2)
field organization; 3) production; and 4) site abandonment. During exploration, a company will
search for oil or natural gas deposits. If the company finds an economically viable deposit, production
may occur. Prior to production, however, there may be an administrative stage that
involves organizing the area where exploration has proved successful. During this period,
efforts are made to ensure that as much oil or gas as possible will be extracted from the area.
This is often referred to as field organization. When production occurs, the oil or gas is brought
to the surface, and processing and refining take place. Finally, site abandonment, which typically
involves plugging the well and doing some on-site restoration work, occurs when a well is
no longer producing enough oil or gas to be economically profitable.
The oil and gas development process can span several decades, as some property owners have
found out (see Terry Fitzgerald’s story in Chapter IV). Below you will find detailed explanations
of the processes involved in extracting oil and gas, as well as information on what you may experience
if a company wants to develop a well on or near your property.
There are many publications and resources that provide greater detail on the oil and gas development
process. For a listing of these resources, see Chapter V.
Obtaining Mineral Rights
Before companies may legally enter your property for exploration purposes, they typically must
own or have leased the right to explore for minerals that are under your land, or have permission
from the mineral owner to conduct exploratory tests. 30
If you own the minerals
If you own the minerals beneath your land, you have a greater ability to determine if and how
oil and gas development on your property will proceed than if you do not own the minerals. In
order to explore or drill for oil or gas, the company will have to lease your mineral rights. You
may refuse to lease those rights, or you may negotiate lease provisions that will help to protect
your interests.
Mineral owners will often receive more than one offer to lease their mineral rights. This often
happens well in advance of any actual development. Long before earth is moved or governments
are involved, investors usually begin speculating about the next big oil or gas play, and
may try to purchase the mineral rights over a large area. 31 The investors can then sell these mineral
rights to exploration and development companies should the area prove to be a viable oil
or gas field.
If you live in an area of known oil and gas deposits, it is possible that speculators have already
leased the rights to minerals from prior owners (or your family members) under or near your
property. Depending on when the leasing occurred, it is also possible that the lease terms may
expire before development has a chance to occur. If this is the case, interested companies will
have to obtain new leases before development may legally occur.
It should be noted that even if you own your land and the minerals beneath it, there are times
when you may not be able to prevent exploration and development from occurring on your land.
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