In the U.S., extraction of oil and gas is regulated by the individual states through statutes and common law. However, federal and constitutional law also applies in oil and gas matters. Unless explicitly separated by a deed, oil and gas rights are owned by the surface landowner. When a person is severed from surface ownership, oil and gas rights can be bought, sold, or transferred, like other real estate property. Third parties also have a right regarding the injuries and damages caused because of the exploration and definitions of oil and gas wells.
A gas and oil producer can make any use of his/her property in a reasonable and lawful manner[i]. The person’s use should not inflict injury upon his/her neighbors. If a property owner permits waste oil or salt water to invade an adjoining land, the person can be held liable in an action for damages[ii].
A court can issue injunction in a proper case. If oil from an operator’s wells flows into a stream and injures a lower riparian owner’s land, courts have held that it is not a sufficient reason to enjoin the operator from using its land for the production of oil where the injury to the lower riparian owner’s land is temporary. However, the lower riparian owner is subject to compensation by an award of damages.
In certain cases, courts have granted damages for the wrongful death of a welder who was killed when gas that had accumulated in the area of an oil well pump on which he was working exploded. The award was based on the jury’s finding that the oil well operator who had engaged the welder had violated a duty to disclose to the welder who came on the premises as an invitee of the hidden danger of which the operator knew or should have known[iii]. Courts can impose liability on an oil well operator for injuries suffered by passersby because of the negligent manner in which the operator blows out an accumulation of water from well piping. An expert oil well shooter when using a dangerous substance such as nitroglycerine is required to exercise a reasonable degree of care and caution that is proportional with the danger involved[iv].
However, even if the operator of a gas well or oil well used due care in his/her operations it will not necessarily relieve the person from liability for injury. This is possible only if the conduct or entity that caused the injury sued upon what amounts to a nuisance. Generally, it appears that drilling or operation of oil or gas well is not a nuisance per se. However, such drilling or operation can be a nuisance in fact. Courts can award damages as compensation for injuries to real property caused by vibrations from the drilling of oil and gas wells on adjacent property. Courts grant damages under the view that the lawful business of drilling wells constitutes a private nuisance.
Normally, the basis for liability for injury to property by pollution of subterranean waters from oil, gas, or similar substances from wells will be either negligence or nuisance. In some states statutes provide that no flammable product or saltwater from any oil or gas well can be permitted to flow over the land. The owner of an oil and gas well can be held liable for harm to another person’s premises caused by oil, gas, or saltwater spray from the well without proof of any specific acts of negligence on the part of the well owner. Such violations can be described as negligence per se. Under some circumstances, an oil well’s pumping unit can also be a nuisance. If a builder of residential property fails to allege any duty of care owed to it by the owner of an oil and gas lease affecting the property that the builder sought to purchase or by an oil and gas drilling company set to drill such a property, the builder’s negligence to allege will stand against the person.
A party liable for injuries that arise out of drilling or operation of a gas or oil well is the operating lessee rather than the lessor or the assignor of the leasehold estate[v]. In cases where such liability exists, it can also be imposed on persons other than the operating lessee.
In some states, statutes can affect the extent of liability for injuries arising out of the flowage of oil or water over lands. Therefore, under a statute providing that no flammable product or saltwater from any oil or gas well can be permitted to flow over the land, the duty of preventing such substances from escaping from the well to the premises of another person and the liability for violation of such duty without proof of specific acts of negligence will extend to both to the owner of an oil and gas lease who contracts for and procures the drilling of a well and to the contractor in charge of the drilling.
[i] Cities Serv. Oil Co. v. Merritt, 1958 OK 185 (Okla. 1958).
[ii] Ashland Oil, Inc. v. Corporation Comm’n of Oklahoma, 1979 OK 17 (Okla. 1979).
[iii] Commonwealth v. Poteet, 1924 Pa. Dist. & Cnty. Dec. LEXIS 51 (Pa. C.P. 1924).
[iv] Harris v. Coliver, 105 W. Va. 174 (W. Va. 1928).
[v] Consol. Coach Corp. v. Consol. Realty Co., 251 Ky. 614 (Ky. 1933).