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FAQ: Is the well on my neighbor's property being used to steal my oil (or gas)?

The information on this page is for reference only and is not to be construed as providing binding legal advice. Consult a lawyer if you have questions.

Questions concerning spacing or correlative rights should be addressed to the Kentucky Division of Oil and Gas.

Short answer: Oil and gas are migratory in the same way as a wild animal ("mineral ferae naturae"); they do not necessarily respect property lines. Your neighbor owns all oil or gas produced from their well so long as it was drilled legally.

In Kentucky, the ownership of oil and gas is established by what is known as the "Law of Capture." which recognises the mineral ferae naturae of oil and gas. The ownership of oil and gas is actually an exclusive right to remove oil and gas or control their removal through the exercise of a deed or lease. The ownership of oil and gas is considered to be a severable right, a mineral interest with an agreed value that may be sold or traded separately from the ownership of the surface tract of land.

From: Coal-Bed Gas Development in the San Juan Basin: A Primer for the Lawyer and Landman by J. Hovey Kemp and Kurt M. Peterson:

"Water and oil, and still more strongly gas, may be classed by themselves, if the analogy be not too fanciful, as minerals ferae naturae. In common with animals, and unlike other minerals, they have a power and a tendency to escape without the volition of the owner .... They belong to the owner of the land and are part of it, so long as they are on or in it, and are subject to his control; but when they escape and go to other land, or come under another's control, the title to the former owner is gone. See Williams & Meyers, Oil and Gas Law ' 203.3 (1983 ed.)."

Oil and gas well spacing requirements established in KRS 353 were designed to protect the correlative rights of adjoining property owners, in particular see: KRS 353.510, KRS 353.610, 805 KAR 1:100 section 1-3, and 805 KAR 1:130. In the situation where: (1) you own the oil and gas mineral rights in fee simple, (2) a producing well exists on an adjoining property, and (3) that well complies with the spacing requirements of KRS 353 (or those in effect, if any, at the time it was drilled), the adjacent mineral owner or lessor owns all the oil or gas produced from their well. They captured it or "reduced the oil or gas to possession."

In the case of wells drilled for coalbed methane recovery, new statutes were adopted during the 2004 Legislative Session. The text of House Bill 577 is available on-line. In general, Section 15 of the act establishes 1,500 feet between wells and 750 feet to a (mineral) property line.

Provisions also exist to cover other cases.

• If a well was drilled prior to 1960 (the year KRS 353 became effective) that is closer to a property line than the current spacing regulations, then the existing well is considered to have grandfathered into compliance with the spacing requirements and is governed by correlative rights. As the owner of the mineral rights on the property adjoining the tract with the producing well, you have the right to drill a well a corresponding distance from the common property boundary. If they have a producing well 50 feet from the property line, you have the right to offset the existing well and can drill a well 50 feet from the common property line. (Remember, your well must be permitted and bonded as required by KRS 353.)
• Sometimes a new well may be drilled that is closer to a property boundary than the statutory spacing requirement. In this case, the ownership of the royalty interest in the well is "pooled," or grouped into a unit. Each mineral owner then receives a portion of the income from the well based on their proportion of the ownership of a specified area around the well. Such pooling often occurs in areas of secondary recovery where wells are regularly spaced and conform to an established pattern that doesn't necessarity conform to property lines.
• Wells drilled to certain depths below 4,000 feet are considered to be deep wells (see pages 3-4 of the Kentucky Oil and Gas Well Operator's Manual). When a deep well results in a successful oil or gas discovery, a hearing must be held to establish the spacing requirements. Once the deep well spacing units are defined, mineral ownership tracts are grouped into units and pooling provisions apply.

For more information see the Review of Ownership and Use of Subterranean Space white paper available from the Energy and Mineral Law Foundation. You may have to become a member of the Mineral Law Foundation or pay a fee to view the white paper.

For more information contact Carrie Pulliam

 

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