2018 OFFICIAL PUBLICATION OF THE MONTANA PETROLEUM ASSOCIATION
OIL AND GAS 101
Montana Oil & Gas Regulation
Oil and gas production in Montana is governed primarily by state
statute (MCA), federal law, and administrative rules (ARM) promulgated
by the Montana Board of Oil and Gas Conservation (MBOGC)
and the Montana Department of Environmental Quality (MDEQ).
The Montana Environmental Policy Act guides the process for environmental
The MBOGC issues drilling permits, oversees industry activity, and
follows Montana’s oil and gas laws in a manner consistent with the
goals of conservation, efficient resource development, waste prevention,
and protection of surface owner rights and mineral rights.
Geologists locate potential hydrocarbon deposits using geologic
data and a variety of technologies, including seismic surveys. A notice
of intent to explore subsurface (geophysical) resources must be
filed with the Clerk of Recorder within the county (MCA 82-1-103).
Next, “landmen” research land and mineral ownership, and arrange
meetings with property owners to discuss leasing opportunities. Oil/
gas developers must give the surface owner and any purchaser under
contract for deed written notice of planned drilling operations (MCA
Oil and gas developers also use professional surveyors to define areas
of interest. At least 15 days before the desired date of land entry, a
surveyor must give notice to the owner of the land (MCA 70-16-111).
Then, companies must submit detailed drilling plans and file an
application for a permit to drill (APD) with the MBOGC. Once approved,
developers/operators must give notice of intent to drill to
surface owners (MCA 82-11-122). MBOG also requires written notice
to be given to the owners of occupied structures within a quarter
mile of proposed drill sites ahead of operations (ARM 36.22.620)
Montana’s Constitution includes provisions for reclamation of
disturbed lands, protection and improvement of environmental life,
prevention of unreasonable resource depletion, and preservation of
At the end of production (up to 30-40 years) notice must be given
to surface owners ahead of abandonment (MCA 82-10-401, ARM
36.22.1302). Well plugging and reclamation are mandated under
ARM 36.22.502, 36.22.1303, and 36.22.1307.
The MBOGC requires that oil and gas developers must furnish a
reasonable bond with good and sufficient surety, conditioned for performance
of the duty to properly plug each dry or abandoned well.
(MCA 82-11-123). Oil and gas developers are also responsible for all
damages to real or personal property resulting from the lack of ordinary
care by the oil and gas developer or operator (MCA 82-10-505).
The MBOGC has the authority to increase bonds when a “factual
situation warrants such and increase” (ARM 36.22.1308). The MBGOC
has increased bonds to over $100,000.00 where cases have warranted
such an increase.
MCA 82-11-161 Oil and Gas Production Damage Mitigation Account
– creates a source of funding to cover plugging wells or restoring
a drill site if the responsible party cannot be located.
Air & Water
The Clean Air Act and Water Quality Act play significant roles in
regulating the environmental impacts of oil and gas development in
Montana. These Acts are in addition to state and federal law, and are
administered by the MDEQ. Acts are supplemented by agency-issued
rules and regulations pertaining to environmental quality.
Emitting sources, including drilling and production equipment
and refineries, are monitored routinely and managed according to
applicable law to ensure the health and safety of workforces and surrounding
What about flaring? Natural gas produced as a byproduct of oil
production is either shipped to market by pipeline or flared on location
according to ARM 36.22.1220.
In Montana, oil companies can flare for 60 days. Then the BOGC
must vote to extend or curtail the flaring permit, usually a month-bymonth
Modern technology and pipelines have dramatically increased capture
rates to greater than 90% of otherwise flared gas in Montana.
Water quality is strictly regulated by state and federal law, and administrative
rules of Montana to protect ground and surface waters.