1. One Leadership Square , 15th Floor
A Survey of Oklahoma Water Law As it Relates to the Oil and Gas Industry
Dale E. Cottingham
One Leadership Square , 15th Floor
211 N. Robinson
Oklahoma City, OK
(405) (telephone)
(405) (facsimile)
November 11, 2010

2. The Basics Industry needs water for Focus of this talk
Drilling and fracturing of an oil or gas well
Enhanced recovery to increase or maintain production of a drilled oil or gas (hydrocarbon) well
Industrial facilities affiliated with oil and gas, e.g. refineries.
Focus of this talk
Emphasis on water for drilling and enhanced recovery
Discussion of Oklahoma
Water as a property resources and water rights arising from water as a resource
Water quality and waste disposal are environmental issues.

3. The Basics Three sources
Stream water includes natural lakes and ponds, bays, flowing and intermittent streams, springs on surface
Groundwater includes fresh water under the surface of the earth
Diffuse surface water includes water flowing over the ground (rainwater, irrigation runoff) before entering a defined stream

4. Physical Classifications of Water
Water in a "definite stream" (definite, natural channel with defined beds and banks, originating from definite source of supply) – playa lake
Water flowing under the surface but not forming a definite stream is "groundwater" (fresh water under the surface of the earth regardless of the geologic structure in which it is standing or moving outside the cut bank of any definite stream)
Water flowing over the surface not in a definite stream – diffused surface water

5. Arbuckle-Simpson Aquifer Johnston County, OK

6. Ownership v. Use
60 O.S. §60 - "The owner of the land owns water flowing under its surface but not forming a definite stream. The use of groundwater shall be governed by the Oklahoma Groundwater Law. Water running in a definite stream, formed by nature over or under the surface…“
“may be used by the owner of the land riparian to the stream for domestic uses as defined in Section of Title 82 of the Oklahoma Statutes, but he may not prevent the natural flow of the stream, or of the natural spring from which it commences its definite course, nor pursue not pollute the same…”
“as such water then becomes public water and is subject to appropriation for the benefit and welfare of the people of the state, as provided by law ..."

7. Doctrines to Regulate Use of Groundwater
Appropriation – public water; priority in time and beneficial use required; junior rights must cease withdrawal to satisfy senior rights; Oklahoma law from 1949 to 1973; amount of land owned irrelevant
English rule of absolute ownership – affect of withdrawal on others no matter except if withdrawing with intent to cause damage; Texas `right of capture' under attack
American rule of reasonable use – impact on others not determinative if use is reasonable, but reasonableness may include consideration of impact on others; not reasonable to use out-of-area; Oklahoma before 1949
Correlative rights – mutual or reciprocal rights to a common water source; California `fair and just portion' to overlying landowners; out-of-basin use restricted
Allocation – modified correlative rights; Oklahoma system after 1972, based on quantum of overlying land (surface acres) – more closely ties ownership of land to use

8. Principles of Oklahoma Groundwater Law (82 O.S. §1020.1 et seq.)
OWRB to issue permits to applicants who "own or lease" the land. Easements attached to land – 60 O.S. §49(5) - right of taking water. Easements not attached to land – 60 O.S. §50(6) – right of taking water.
Ricks Exploration v. OWRB, 1984 OK 73
Unit Petroleum v. OWRB, 1995 OK 73
Permit quantity is based on number of acres "owned or leased"
Use must be "beneficial" – reasonable intelligence, reasonable diligence, economically necessary for lawful purpose
No "waste" – by pollution or by depletion

9. Principles of Oklahoma Groundwater Law (82 O.S. §1020.1 et seq.)
"Maximum annual yield“: determinations of the amount that may be withdrawn for each acre overlying a basin; regular permit allocates; legislative quantification of two acre-feet per acre allocation by “temporary” permit before MAY completed
Macro management vs. micro management:
well interference – cone of depression effects
activities that may cause pollution to groundwater
obvious depletion by physical waste – broken pipes, leaks

10. Groundwater Applicants for Enhanced Recovery Projects
To use fresh groundwater for enhanced recovery of oil or gas, the operator/applicant must provide the following:
Provide a schedule of use
Discuss availability of saltwater
Provide an economic study
Additional cost of saltwater
Comparison of value of fresh water for oil and gas use versus other uses
Provide analysis of waste by pollution
Provide analysis of waste by depletion

11. Groundwater Issues To Address
Groundwater pumping affects on stream and spring flows – conjunctive or integrated use management
Store and preserve groundwater for future generations – compare oil and gas restrictions; at what point does restricting use trigger takings?

12. Stream Water Appropriation
Appropriation - Fundamental Elements:
Priority in time gives the better right
Beneficial use is the basis, measure and limit
Statutory permit elements:
In amount applied for
Applicant has a present or future need for the water
Proposed use is a beneficial use
Shall consider availability of all stream water sources and may consider availability of groundwater as an alternative
Proposed use does not interfere with domestic or existing appropriative uses
If application for transportation of water outside area of origin, proposed use cannot interfere with existing and proposed beneficial uses within the stream system of origin

13. Stream Water Appropriation
No physical/geographical connection to the water source
Eminent domain and access to the water source, 82 O.S. §105.3 – Watchorn Basin v. OG&E
Transferring stream water rights:
Rights to appropriate for irrigation are appurtenant to the land
Transfer possible – if changes made without detriment to existing rights
Use-it-or-lose-it forfeiture – seven years or schedule of use
No "public interest" element in Oklahoma – broad, open-ended authority

14. Riparian Rights Distinguished
Physical/geographical connection to waterbody required
Natural flow doctrine – fiction, but prevents large diversions
Reasonable use doctrine – correlative rights, share the pain of low flows

15. Dual System Franco American Charolaise, Ltd. v. OWRB, 1990 OK 44
Riparian claims, if determined reasonable, are superior to appropriations
Reasonableness factors case-by-case —footnote 40, Restatement of Torts (2nd) §850A; relative reasonableness
New riparian uses or changes to riparian uses can occur — reasonableness must be determined by a court for each new or changed use; no stability, certainty, security
Franco under attack — Heldermon v. Wright, SC #100,709
dam construction, release requirement, two riparians
domestic use protection versus reasonable use
1993 statute confirming 1963 statute — unconstitutional?

16. Stream Water Applicants for Enhanced Recovery Projects
To use fresh stream water for enhanced recovery of oil or gas, the operator/applicant must provide the following:
Provide a schedule of use
Discuss availability of saltwater
An economic study
Additional cost of saltwater
Comparison of value of fresh water for oil and gas use versus other uses
Provide analysis of waste by pollution
Provide analysis of waste by depletion

17. One Leadership Square, 15th Floor
I appreciate the opportunity to discuss this subject with you. I am happy to answer questions you might have.
Dale E. Cottingham
One Leadership Square, 15th Floor
211 N. Robinson
Oklahoma City, OK
(405) (telephone)
(405) (facsimile)