Q:       When someone installs an oil and gas well on my property, is there any waste? If so, what kind?

            A:        Yes. Drilling well borings for oil and gas production creates a variety of wastes and byproducts including drill cuttings, drilling mud, pipe scale and brine. Drill cuttings are generally pulverized rock returned to the surface during the drilling of the well boring. Drilling mud is typically a semi-solid dirt/fluid mixture designed to keep the boring open during drilling. Pipe scale is a buildup caused by drilling that sticks to boring surfaces and drilling equipment. Brine is basically salty water produced from the rock layers and combined with some drilling fluids. Brine is generated during the well-drilling or fracking process, and also during the cleaning and development process used to prepare for oil and gas production. 

                        These various types of waste or byproducts may contain oil-based substances and low-level, naturally occurring radioactive materials. Each waste or byproduct generated is handled according to its nature and type.

            Q:       What regulatory controls address oil and gas well wastes in Ohio?

            A:        In July 2013, House Bill 59 amended several sections of Ohio law to provide greater assurance that oil and gas well waste is being managed safely. These amendments give the Ohio Department of Health, the Ohio Department of Natural Resources (ODNR) and the Ohio Environmental Protection Agency (Ohio EPA) greater oversight and coordination over oil and gas well management, and revise Ohio’s solid waste statute for “Technologically Enhanced Naturally Occurring Radioactive Material,” as explained below.

            As of 2014, a person is prohibited from storing, recycling, treating, processing or disposing of brine or other wastes associated with the exploration, development, well stimulation, production operations or plugging of oil and gas resources unless the Chief of the ODNR, Division of Oil & Gas Resources Management, gives that person an order or permit. Laws in the Ohio Revised Code (Chapter 1509) govern disposal of brine waste. Non-brine waste material that is removed from the drilling site must be disposed of according to Ohio solid waste law. 

Q:       What does the law say about how oil and gas well wastes must be handled?

            A:        Generally, drill cuttings may be managed on the drill site. Drill cuttings and scale that come into contact with refined oil-based substances or other contaminants are generally disposed off-site; the Ohio Environmental Protection Agency regulates these substances as solid waste. Drilling muds typically are recycled, since they can be useful for subsequent borings. The ODNR Division of Oil and Gas Resources Management regulates brine transport and disposal. The Division also permits and oversees underground injection wells for disposal of waste fluids including brine.

                        Drillers may also need an Ohio EPA air permit for installations or activities that emit air pollutants.

           

            Q:       Can oil and gas well development cause radioactive materials to move within the environment?

            A:        Yes. Soils and muds produced during oil and gas well development may emit radionuclides. Naturally Occurring Radioactive Material (NORM) consists of undisturbed materials that exist in the environment and emit low levels of naturally-occurring radiation. An example of NORM is the radon gas collecting in home basements. NORM is exempted from regulation.

            However, when NORM radionuclides are modified, either naturally or through various technologies, they may become concentrated. When this happens, they turn into Technologically Enhanced Naturally Occurring Radioactive Material (TENORM). The Ohio Department of Health, Bureau of Radiation Protection, has primary regulatory authority over TENORM. In addition to oil and gas wastes, examples of TENORM wastes include wastes derived from the metal mining/processing industry, and sludge from water treatment plants­­ and from geothermal energy production. TENORM is also found in phosphate fertilizers.

Q:       What does Ohio law say about handling TENORM wastes?
A:        Ohio has some of the most stringent TENORM rules in the country. TENORM wastes cannot be disposed of at the drill pad. Oil and gas drilling solids that are also TENORM must be tested for radium concentrations before leaving the drill pad. TENORM wastes with concentrations of less than 5 pico-curies per gram above a “natural background” (about 79.4 millirem) may be disposed of at licensed solid waste landfills. Wastes with elevated concentrations of TENORM must be sent to a low-level radioactive waste disposal facility. If brine contains TENORM, brine disposal laws govern disposal. In Ohio, this almost always means that the brine is injected into a deep well for disposal.

  

This “Law You Can Use” column was provided by the Ohio State Bar Association. It was prepared by Columbus attorney Brian A. Ball, former practicing geologist, of the Ohio Attorney General’s Environmental Enforcement Section. Articles appearing in this column are intended to provide broad, general information about the law. Before applying this information to a specific legal problem, readers are urged to seek advice from an attorney.

Shale-related development is bringing Ohio more than $12 billion in economic development projects, according to a recent report cited in Columbus Business First—and that’s just the tip of the iceberg. None of this development would be possible if landowners were not leasing their oil and gas mineral rights. The oil and gas lease defines the rights of the landowners and the oil and gas company. Here are some issues landowners and developers alike should keep in mind regarding oil and gas leasing issues.

Q:        Do I automatically own the rights to oil and gas that may exist beneath my property?

A:        No; it is possible for you to own the surface of a piece of land without owning the mineral rights underneath it. That’s because the mineral rights can be severed from the surface rights. Usually, this happens when the property owner sells the surface rights to someone else, but keeps (or “reserves”) some or all of the mineral rights. This is called a mineral rights reservation.

Q:        How do I know who owns the rights to oil and gas under my property?

A:        The best way to figure out who owns what interests in the land is to have a reputable, experienced mineral rights title abstractor conduct a search of the public records in the county where the land is located.

Q:        What does an oil and gas lease actually do, and how would I, the landowner, get paid?

A:        An oil and gas lease gives a developer (the “lessee”) the legal right to develop oil and gas from your property. In return, you likely would receive a per-acre “bonus payment” and, if a well is drilled, a royalty payment based on a percentage of the oil and gas sold.

Q:        What issues can come up when negotiating the granting clause?

A:        The granting clause contains important language setting out the parties’ rights under an oil and gas lease. Common issues include whether:

·         the lease includes all minerals underlying the property, or just oil and gas;

·         roads, driveways, fences, and pipelines can be constructed on the property;

·         Class II underground injection control wells can be located on the property;

·         the developer can use water, oil, or gas from the property free of charge;

·         all geologic formations are being leased; and

·         the developer can store gas under the property.

Q:        What issues can come up when negotiating the term of the gas and oil lease?

A:        The habendum clause in an oil and gas lease establishes the duration of the lease. The habendum clause includes two terms: the primary term and the secondary term.  The primary term generally lasts for a fixed amount of time—commonly, five years—and establishes the oil and gas company’s deadline for drilling a well on the property (or including the property in a drilling unit). In addition to negotiating the length of the primary term, one must consider whether to include an extension or renewal option and the amount of any payment associated with the extension or renewal payment. The secondary term is triggered by oil and gas drilling on the leased property. In the vast majority of oil and gas leases, the secondary term will continue as long as oil or gas “is produced in paying quantities” or operations are conducted on the leased property. Defining the terms “operations,”  “production,” and “production in paying quantities” can be very important.

Q:        I’ve heard a lot about lawsuits over calculation of royalty payments. How can I avoid that?

A:        Leases typically provide that a landowner will receive a continuing royalty payment based on a percentage of the oil and gas sold. Although royalty disputes may be difficult to avoid, defining the types of post-production costs and expenses that can be deducted prior to paying royalties could minimize the risk. In addition, a landowner should consider adding an audit provision that allows for annual audits of production and royalty records.

This “Law You Can Use” column was provided by the Ohio State Bar Association. It was prepared by attorney Dan Gerken, a litigation associate at Bricker & Eckler LLP in Columbus, and member of the firm's Shale Task Force. This article offers broad, general information about the law. It is not legal advice. Seek an attorney’s advice before applying this information to a specific legal issue.