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Maryland Oil and Gas Laws

The production and development of oil and gas resources is very important to the economic well being of the state and the nation.  The state of Maryland has enacted laws for the proper utilization of its natural resources.  Maryland oil and gas laws are provided under Md. Environment Code Ann. § 14-101 through § 14-511, and Md. Natural Resources Code Ann. § 5-1701 through § 5-1703.  Pursuant to Md. Environment Code Ann. § 14-101, the drilling and production of oil and gas should be conducted in a manner that will minimize their effects on the surrounding environment.  The section also states that oil and gas production must be undertaken using the most environmentally sound drilling and production methods.  It prohibits oil exploration and production methods that would be detrimental to the general welfare, health, safety, and property interests of Maryland citizens.

Authority of the Department

In order to enforce the oil and gas laws, the Maryland Department of the Environment (“Department”) may adopt and promulgate rules and regulations[i].  However, the Department may not prorate or limit the output of any gas or oil well.

Regulation of Production

Pursuant to Md. Environment Code Ann. § 14-104(a), a person may drill any well for the exploration, production, or underground storage of gas or oil in Maryland, only after obtaining a permit from the Department.  The applicant for a permit is also required to submit an environmental assessment for the purpose of evaluating the application[ii].  Drilling must be done in compliance with the terms and conditions the Department prescribes.  Disposal of any product of a gas or oil well must also be with necessary permits issued by the Department[iii].  Seismic operations also require permits[iv].

Pursuant to Md. Environment Code Ann. § 14-107, a person may not drill for oil or gas in the waters of the Chesapeake Bay, any of its tributaries, or in the Chesapeake Bay Critical Area.  Md. Environment Code Ann. § 14-112 contains provisions regarding the location of wells.  Wells must be located following these provisions.

Rehearing

Pursuant to Md. Environment Code Ann. § 14-116, any person adversely affected by any rule, regulation, determination, or order of the Department may within 15 days after its effective date apply to the Department in writing for a rehearing. The application will be acted upon within 15 days after its filing. If the rehearing is granted, it will be held promptly.

Appeals

Pursuant to Md. Environment Code Ann. § 14-117, any person aggrieved  by the Department’s action  may apply to the circuit court of the county in which the person resides or the well is located for review of the Department’s decision. Any other interested party may intervene. The Department may become a party to the appeal. Any party aggrieved by the final decision of the court may appeal to the Court of Special Appeals[v].

Penalties

Pursuant to Md. Environment Code Ann. § 14-120, any person who willfully violates any provision of this subtitle is guilty of a misdemeanor and upon conviction in a court of competent jurisdiction is subject to a fine of:

  1. Up to $ 50,000;
  2. An amount sufficient to cover the cost of damages resulting from any oil or gas spill, any other discharge, any other violation of the subtitle, caused by the permittee or a contractor of the permittee.
  3. Costs imposed in the discretion of the court.

Leases

Provisions relating to the leasing of state oil and gas resources are found in Md. Natural Resources Code Ann. § 5-1701 through § 5-1703.  Pursuant to Md. Natural Resources Code Ann § 5-1701, the Board of Public Works shall adopt regulations establishing procedures and standards for awarding any oil or natural gas lease for production or reserve under lands or waters of the Maryland.  An area leased for reserve may not be put into production until the lessee obtains a lease for production pursuant to  § 5-1702[vi].

The Board of Public Works will adopt regulations establishing a system by which persons may periodically nominate areas beneath lands or waters of the State for possible leasing for production or reserve of oil or natural gas[vii].  However, the Board of Public Works may not enter into any lease that would preclude or interfere with the public or private harvesting of finfish or shellfish.

Pursuant to Md. Natural Resources Code Ann § 5-1702, before soliciting bids for, or awarding any lease for production of oil or natural gas from beneath lands or waters of the state, and after receiving the written recommendation of the Critical Area Commission for the Chesapeake and Atlantic Coastal Bays (if the leased area is located in the state’s critical areas) and the advisory comments of the Secretaries of Budget and Management, Natural Resources, the Environment, and Business and Economic Development and the Director of Planning, the Board of Public Works shall direct the Secretary of Natural Resources to prepare a statement of environmental, fiscal, and economic impact of the proposed lease.  Such statement is prepared and filed by the Secretary within six months after receiving the Board of Public Works’ direction.  The costs of preparing a statement may be recovered from bidders or lessees.  The statement of environmental, fiscal, and economic impact and any written background and supporting material will be available for public inspection.
Pursuant to Md. Natural Resources Code Ann § 5-1703, any person who drills for oil or gas on the lands or in the waters of the state is strictly liable for any damages that occur in the exploration, drilling, or producing operations or in the plugging of the person’s oil or gas wells.  The person is also liable to the state for any environmental damage.

Maryland Oil and Gas Laws

[i] Md. Environment Code Ann. § 14-101.

[ii] Md. Environment Code Ann. § 14-104(b).

[iii] Md. Environment Code Ann. § 14-104(d).

[iv] Md. Environment Code Ann. § 14-109(b).

[v] Md. Environment Code Ann. § 14-117(b).

[vi] Md. Natural Resources Code Ann. § 5-1701.

[vii] Md. Natural Resources Code Ann. § 5-1701.


Inside Maryland Oil and Gas Laws