In the United States, state agencies are responsible for permitting oil and gas operations on private and state-owned minerals. On federal lands, the federal government is responsible for permitting oil and gas drilling and development while oil and gas development on tribal lands is under the authority of a tribal government.
Oil and gas development may require the acquisition of multiple permits for various activities or processes including drilling, air emissions, and water management. State and federal agencies may also have requirements related to surface and road construction, waste management, stormwater management, pit development and site restoration. It would take an entire class to cover the basics of U.S. environmental law. In our case, we are going to focus on obtaining drilling permits without going into specific environmental laws.
Who issues permits?
Oil and gas operators must obtain the needed permits from the government agency that has authority in the region of development. Typically, this includes the state governments, tribal governments, or the federal government.
The permitting process is quite complex and requires a significant investment of resources by the government agency and operator. The permitting process works to ensure that drilling is carried out in a safe, efficient, and environmentally friendly manner that prevents waste of the resource and protects correlative rights
Let’s hear from Nebraska Oil and Gas Conservation Commission Director Bill Sydow on why he feels it is appropriate for state-level governing bodies to regulate and permit their own drilling activity.
Transcript
State Regulation – Bill Sydow – Nebraska Oil and Gas Conservation Commission
Each of the states regulates their own oil and gas. And you can have various oil and gas basins within a state that we can at least be familiar with.
Operating conditions, climate, can affect operations and so that can be different from state to state or certainly regional. And at the state level, we can, in a way, tailor or customize our regulations for our operating conditions in the geology and the fluids that we have to deal with and pressures.
What is the process for obtaining a permit?
Obtaining a permit to drill requires the collection of data, preparation of a detailed application or plan that is submitted to the governing authority. The regulatory agency then conducts a scientific and engineering assessment of the application or plan. Once a drilling permit is issued, drilling companies can begin operations, assuming they have obtained access to the mineral rights for lands that which they permitted.
By applying for a permit, an operator provides the regulatory authority with comprehensive information on the proposed drilling operation. Based on this data, regulators assess the proposed activity to determine whether it complies with state drilling and completion, environmental and other regulations. A permit may be approved, rejected, or approved conditionally, given certain changes or additional requirements.
Permit Applications
Information typically required when applying for a drilling permit includes the following.
Permit type
Separate drilling permits are usually required for the following stages of oil and gas development:
- Initial drilling of the well
- Deepening an existing well
- Re-entering an existing well
- Recomplete an existing well
Type of well
Gas. oil, coalbed, other.
Business information
This information ties a company to a particular well and includes the well name and a section for operator name, registration number, and detailed contact information. Since some companies operate hundreds or thousands of wells, maintaining good records organization is critical
Geographic information
Geographic information for the location of the proposed well is an important part of the application. This information may be expressed in township, range and quarter/quarter section along with footages, using another land survey system, and latitude and longitude.
Geographic information is used to make sure that drilling operations will comply with regulations affecting well spacing and provides adequate buffer space between the drilling operation, critical infrastructure and resources such as water wells, streams, wetlands and inhabited structures. Existing and abandoned oil and gas wells, which can serve as conduits for groundwater contamination, are also included. Typically, applicants must submit surveyed maps, or documents drawn to scale showing divisions of tracts of land plats of the proposed well locations that includes wellheads, access roads, and drill pad boundaries. Aerial or satellite imagery is also required in many cases.
The following composite forms, submitted to the Pennsylvania Department of Environmental Protection, illustrate the detailed geographic data required for a typical drilling permit application.
Right to Construct
A typical application will also require certification from the operator or designated agent that they have obtained appropriate lease rights for lands described in the permit. However, because the lease is a legal contract a detailed review of it is outside the scope of the state government responsible for issuing permits.
Site Restoration
Operators may be required to submit a site restoration plan along with the drilling permit application or as a part of a separate surface location permit (Colorado for example has a separate process for permitting surface locations). This plan, which can be form-based or written, contains detailed information about the proposed methods for site restoration after the well is plugged and abandoned.
Geologic and Technical Information
This information is the heart of the application to drill. It includes the target formation, final depth of the well, and a detailed drilling and casing plan. It also includes information on the techniques that will be used to drill the well. Regulators will be looking for a few specific things for this part of application. They will want to know that the operators have done their homework – for example, the proposed depth of the well should be sufficient to reach the target formations.
They will also be looking to see if the casing plan, meets the requirements of the regulations, and whether the plan addresses potential geohazards such as formation pressures and fluid composition. The surface casing plan will be reviewed to ensure it provides a barrier to groundwater contamination.
Financial Information
Oil and gas operators are usually required to be insured. When a company registers to become an operator, they supply information on general liability insurance and submit information on what form of financial assurance will be in place. Financial assurance serves as collateral if the operator goes out of business before meeting operational and site restoration conditions set down in the permit or by regulation. Financial assurance can be provided in various forms such as bond, cash, insurance, certificate of deposit, letter of credit, escrow account, or sinking funds).
Financial assurance regulations vary by state and may also depend on specific issues such as the type of well to be drilled, well depth, and whether it is covered by an individual bond or blanket bond that covers hundreds of wells. In the last several years states have been updating financial assurance regulations to address increasing costs and the number of idle and abandoned wells that currently exist. The 2021 IOGCC Report Idle and Orphan Oil and Gas Wells: State and Provincial Regulatory Strategies, outlines a few of the strategies to manage potential deficient financial assurance funding issues.
In some states an application fee may be required to help cover the cost of the regulatory process.
Additional Permits or Submittals
Drilling operations require a basic drilling permit, however, depending on the location, additional permits may be required. These could include injection permits, wastewater permits, construction permits, environmental impact statements, and other regulatory applications.
In addition to the permit to drill a well, oil and gas regulations may require submittal of additional data and forms. A drilling completion report with the total depth (vertical and actual) and casing/cementing information follows drilling activities. Some form of completed interval report, that describes the formation(s) or horizon(s) completed, the number and size of perforations, and any well stimulation processes conducted, such as acidization, or hydraulic fracturing, will also be required. Other activities may require submittal of data such as a proposed plan of well abandonment, the subsequent report on abandonment and sundry notices for shutting in or temporary abandoning a well.
What’s Next
Once an operator leases mineral rights and obtains a drilling permit, things really start to move forward on the ground, assuming a company has deemed it financially prudent to continue with its plans given the short-term economic situation.
The next step is to build the infrastructure required to conduct drilling and production operations. In the past a lease road and drill pad would be constructed followed by a production facility sized based on estimated production from the well. However, within a shale play or well-defined field it is not uncommon for oil and gas operators to construct production facilities and pipelines concurrent with the drilling location.
On-site Inspection of Drilling Permit
- Check for approved drilling permit.
- Compare permit location data to actual location data.
- Yes, drilling companies do set up on the wrong well.
- The rig may have been skid to a location outside of acceptable window.
- Check permitted activity
- Examples
- Is the permitted borehole being drilled or was the well sidetracked without approval?
- Is the surface casing being drilled via mud rotary when casing plan calls for freshwater?
- Review drilling logs to check type , size and setting depth of casing as compared to information on the approved permit.
- Compare permit location data to actual location data.
- Did permit approval require additional actions such as spud notice, notice of move in rig up, or a notice to the surface owner.
Images: “East Resources Permit Application” by Scott Detrow/StateImpact Pennsylvania; “Illustration” by Top Energy Training