Oil and Gas Land Rights: PNGRB Act, Pipeline ROW, and Exploration Licenses

Introduction

India’s oil and gas sector operates within a complex legal framework that balances federal regulatory authority with state land rights, creating a multifaceted system of land acquisition, pipeline development, and exploration licensing. The sector’s legal architecture encompasses three primary components: the Petroleum and Natural Gas Regulatory Board Act, 2006 (PNGRB Act) [1], the Petroleum and Minerals Pipelines (Acquisition of Right of User in Land) Act, 1962 [2], and the comprehensive exploration licensing regime under the Oilfields (Regulation and Development) Act, 1948 [3]. This framework demonstrates the intricate balance between Union regulatory powers and state land rights, particularly in light of recent Supreme Court jurisprudence on mineral taxation and land rights.

Constitutional Framework and Federal Structure

The constitutional division of powers between the Union and states forms the bedrock of oil and gas land rights in India. Article 246 of the Constitution places petroleum regulation under the Union List, specifically Entry 53 (regulation and development of oil fields and mineral oil resources) and Entry 54 (regulation of mines and mineral development) [4]. However, land acquisition, being a state subject under Entry 18 of the State List, creates a jurisdictional interface that requires careful legal navigation.

The recent Supreme Court judgment in Mineral Area Development Authority v. Steel Authority of India (2024) has significantly clarified the taxation landscape for mineral-bearing lands, holding by an 8:1 majority that states retain the power to tax mineral rights under Entry 50 of the State List, subject only to express limitations imposed by Parliament [5]. This decision, while primarily concerning mining, has potential implications for petroleum exploration and production activities, particularly regarding land taxation and revenue sharing.

PNGRB Act Framework and Pipeline Authorization

Regulatory Authority and Scope

The PNGRB Act, 2006, establishes a comprehensive regulatory framework for the midstream and downstream petroleum sector, excluding crude oil and natural gas production. Section 1(4) specifically delineates the Act’s application to “refining, processing, storage, transportation, distribution, marketing and sale of petroleum, petroleum products and natural gas excluding production of crude oil and natural gas” [6].

The PNGRB Act creates a specialized regulatory body with wide-ranging powers under Section 11, including authorization of entities to “lay, build, operate or expand a common carrier or contract carrier” and “lay, build, operate or expand city or local natural gas distribution network” [7]. This regulatory framework operates parallel to land acquisition requirements, creating a dual authorization system where PNGRB approval does not automatically confer land rights.

Pipeline Classification and Land Rights Interface

The PNGRB Act establishes a sophisticated classification system for pipelines, distinguishing between common carriers, contract carriers, and dedicated pipelines. Section 2(j) defines common carriers as “pipelines for transportation of petroleum, petroleum products and natural gas by more than one entity” on a “non-discriminatory open access basis” [8]. This classification system has significant implications for land acquisition, as different pipeline categories may require different approaches to obtaining land rights.

Recent litigation in IMC Limited v. Union of India has highlighted jurisdictional disputes regarding captive pipelines, with the Bombay High Court examining whether the Board has authority to regulate pipelines developed for self-use by entities [9]. This ongoing jurisprudential development affects the interplay between regulatory authorization and land acquisition for petroleum infrastructure.

Authorization Process and Land Acquisition Interface

Section 17 of the PNGRB Act mandates that entities seeking to lay, build, operate or expand pipelines must apply in writing to the Board for authorization. However, Section 19 clarifies that PNGRB authorization does not automatically provide land acquisition rights, stating that entities must separately “furnish the particulars of such activities to the Board within six months from the appointed day” [10].

Section 20 of the PNGRB Act provides for declaring existing pipelines as common or contract carriers, potentially affecting existing land rights and creating new obligations for landowners. While the provision does not itself grant land acquisition powers, it requires careful consideration of property rights and coordination with compensation mechanisms under the land acquisition framework.

Pipeline Rights of Way: The 1962 Act Framework

Legislative Architecture and Scope

The Petroleum and Minerals Pipelines (Acquisition of Right of User in Land) Act, 1962, provides the primary legal mechanism for acquiring land rights for pipeline development. The Act’s preamble establishes its purpose “to provide for the acquisition of right of user in land for laying pipelines for the transport of petroleum and minerals” [11].

Section 3 of the Act empowers the Central Government to acquire rights of user in land where it appears “necessary in the public interest to lay pipelines under such land for the transport of petroleum from one locality to another” [12]. This power extends to both onshore and offshore areas within India’s territorial jurisdiction.

Acquisition Process and Compensation Framework

The acquisition process under the 1962 Act follows a structured approach outlined in Sections 4-9. Section 4 grants extensive survey and investigation powers, allowing authorized persons to “enter upon and survey any land” and “dig or bore into the sub-soil” for determining pipeline feasibility [13].

Section 10 establishes a comprehensive compensation framework, requiring payment for “any damage, loss or injury sustained by any person interested in the land under which the pipeline is proposed to be, or is being, or has been laid” [14]. The compensation determination process involves a two-tier system: initial determination by a competent authority under Section 10(1), with appeal rights to the District Judge under Section 10(2).

The compensation criteria under Section 10(3) specifically address: removal of trees or standing crops, temporary severance of land, and injury to other property or earnings. However, the Act excludes compensation for structures or improvements made after the notification date, ensuring that landowners cannot enhance compensation through post-notification developments [15].

Interface with Environmental and Forest Clearances

Pipeline development under the 1962 Act requires coordination with environmental and forest clearance requirements. The Environmental Impact Assessment Notification, 2006, mandates environmental clearances for pipeline projects exceeding specified thresholds. Forest clearances under the Forest (Conservation) Act, 1980, are required for pipeline routes passing through forest areas.

The Supreme Court’s judgment in T.N. Godavarman Thirumulpad v. Union of India has established strict guidelines for forest clearances, requiring prior approval from the Central Government for any non-forest use of forest land [16]. These requirements create additional layers of approval beyond the basic land acquisition process under the 1962 Act.

Exploration Licensing and Land Rights

Historical Evolution and Current Framework

India’s petroleum exploration licensing has evolved through several phases, from the nomination regime of the 1970s to the current Hydrocarbon Exploration and Licensing Policy (HELP) introduced in 2016. The Oilfields (Regulation and Development) Act, 1948, provides the foundational legal framework, empowering the Central Government to grant Petroleum Exploration Licenses (PEL) and Petroleum Mining Leases (PML) [17].

The Petroleum and Natural Gas Rules, 1959, enacted under the 1948 Act, provide detailed procedures for licensing. Rule 6 prohibits “prospecting or mining of petroleum except in pursuance of a licence or lease granted under these rules” [18]. The recent amendment in July 2018 expanded the definition of ‘petroleum’ to include shale and other unconventional hydrocarbons, broadening the regulatory scope.

Exploration License Framework and Land Access Rights

Under the current HELP framework, exploration licenses are granted through a competitive bidding process for blocks identified by the government. However, the Supreme Court’s decision in Threesiamma Jacob v. Geologist, Department of Mining and Geology (2013) has clarified that “ownership of sub-soil or mineral wealth should normally follow the ownership of the land, unless the owner of the land is deprived of the same by some valid process” [19].

This judicial pronouncement significantly impacts exploration licensing by recognizing private ownership rights in mineral resources, subject to valid governmental acquisition. The decision creates a framework where exploration companies must either negotiate private agreements with landowners or rely on governmental acquisition processes.

Production Sharing Contracts and Revenue Allocation

The exploration licensing framework operates through Production Sharing Contracts (PSCs) between the government and contractors. Under the model PSC framework, contractors bear exploration costs and risks while sharing production with the government according to predetermined formulas. The Revenue Sharing Model under HELP replaced the earlier profit-sharing mechanism, providing contractors with greater flexibility in cost recovery [20].

Section 6A of the Oilfields (Regulation and Development) Act, 1948, empowers the Central Government to levy royalty on petroleum production. The rate determination follows the Second Schedule of the Petroleum and Natural Gas Rules, 1959, with different rates for onshore and offshore production. Recent litigation in Udaipur Chamber of Commerce v. Union of India addresses whether Goods and Services Tax can be levied on petroleum royalties, with potential implications for overall tax treatment [21].

Judicial Interpretation and Case Law Development

Supreme Court Jurisprudence on Mineral Rights

The Supreme Court’s recent pronouncement in Mineral Area Development Authority v. Steel Authority of India has significant implications for petroleum exploration and production. The Court’s holding that states retain taxation powers over mineral rights, subject only to express Parliamentary limitations, potentially extends to petroleum-bearing lands, reinforcing the legal framework protecting oil and gas land rights. Justice B.V. Nagarathna’s dissenting opinion warned of potential “race to the bottom” scenarios in mineral taxation, which could affect petroleum sector investments [22].

The majority opinion’s distinction between royalty and tax – holding that “royalty is conceptually different from tax” and represents “contractual consideration paid by the mining lessee to the lessor” – provides clarity for petroleum sector revenue arrangements [23]. This distinction affects how petroleum companies structure their agreements with landowners and government entities.

Land Acquisition and Compensation Jurisprudence

The Supreme Court’s interpretation of compensation principles in various land acquisition cases affects petroleum infrastructure development. In State of Rajasthan v. Sharwan Kumar Kumawat, the Court emphasized that “there is neither a right nor it gets vested through an application made over a Government land” [24]. This principle applies to petroleum exploration license applications, confirming that applications do not create vested rights.

The Court’s approach to determining “public purpose” in land acquisition cases, particularly in the context of private company projects, affects petroleum infrastructure development. The requirement for demonstrating genuine public benefit rather than private commercial advantage influences how petroleum companies approach land acquisition for pipeline and infrastructure projects.

Contemporary Challenges and Regulatory Interface

Environmental Compliance and Land Use Integration

The intersection of petroleum exploration licensing with environmental regulations creates complex compliance requirements. The National Green Tribunal’s jurisdiction under the National Green Tribunal Act, 2010, extends to petroleum exploration and production activities affecting environmental quality. Recent NGT decisions have emphasized the need for comprehensive environmental impact assessments before granting exploration permissions, highlighting the importance of safeguarding oil and gas land rights during project planning.

The Wildlife Protection Act, 1972, and the Coastal Regulation Zone Notification further restrict exploration activities in ecologically sensitive areas. These restrictions require petroleum companies to demonstrate minimal environmental impact and often necessitate alternative route planning for pipeline projects.

State Government Interface and Dual Approval Requirements

The federal structure necessitates coordination between Union licensing authorities and state land acquisition agencies. While the Union government grants exploration licenses under the 1948 Act, state governments retain authority over land acquisition and local approvals. This dual approval system creates implementation challenges, particularly for cross-state pipeline projects.

Recent amendments to various state land acquisition acts have introduced additional requirements for petroleum projects. States like Rajasthan and Gujarat have specific provisions for petroleum exploration activities, requiring compliance with state-specific environmental and social requirements beyond Union regulations.

Technology Integration and Digital Land Records

The integration of digital land records with petroleum exploration databases presents both opportunities and challenges. The government’s Digital India Land Records Modernization program aims to create integrated databases linking exploration licenses with land ownership records. However, implementation challenges persist due to varying state systems and data quality issues.

Blockchain technology implementation for land record management, as piloted in states like Andhra Pradesh and Telangana, could potentially streamline the interface between exploration licensing and land rights verification. These technological developments may reduce disputes and enhance transparency in the land acquisition process.

Future Directions and Reform Considerations

Legislative Harmonization and Single Window Clearances

The current fragmented regulatory landscape requires multiple approvals from different agencies for petroleum projects. The proposed single window clearance mechanism under the proposed Indian Hydrocarbon Vision 2030 aims to streamline approvals while maintaining regulatory oversight. This reform would integrate PNGRB authorizations with land acquisition approvals and environmental clearances, helping to clarify and protect oil and gas land rights in the process.

The Law Commission of India’s recommendations on land acquisition reform emphasize the need for time-bound clearances and transparent compensation mechanisms. These recommendations, if implemented, would significantly affect petroleum infrastructure development timelines and costs.

Emerging Technologies and Regulatory Adaptation

The advent of unconventional petroleum resources, including shale gas and coal bed methane, requires adaptation of existing legal frameworks. The 2018 amendment to include unconventional hydrocarbons in the petroleum definition represents initial regulatory adaptation, but comprehensive framework development remains pending.

Carbon capture and storage technologies for enhanced oil recovery present new land use challenges not adequately addressed in current legislation. The development of specific regulations for these technologies will require careful consideration of long-term land use rights and environmental obligations.

Conclusion

India’s oil and gas land rights framework represents a complex interplay between federal regulatory authority and state land rights, creating both opportunities and challenges for sector development. The PNGRB Act, the Petroleum and Minerals Pipelines (Acquisition of Right of User in Land) Act, 1962, and the exploration licensing system under the Oilfields (Regulation and Development) Act, 1948, together form a comprehensive but sometimes fragmented legal structure.

Recent Supreme Court jurisprudence, particularly the Mineral Area Development Authority decision, has clarified important aspects of mineral taxation while leaving certain petroleum-specific issues for future determination. The Court’s emphasis on state taxation powers, subject to express Parliamentary limitations, provides a framework for understanding the evolving federal-state dynamics in petroleum sector regulation.

The sector’s future development will likely require legislative harmonization to address the current fragmentation between regulatory authorization under the PNGRB Act and land acquisition processes. The proposed single window clearance mechanism and technology integration initiatives represent positive steps toward streamlining the regulatory interface.

As India pursues energy security objectives while balancing environmental and social concerns, the oil and gas land rights framework will continue evolving to address emerging challenges including unconventional resources, carbon management technologies, and digital transformation initiatives. Success in this evolution will depend on maintaining the delicate balance between federal regulatory oversight, state land rights, and private investment incentives essential for sector growth.

References

[1] The Petroleum and Natural Gas Regulatory Board Act, 2006, Act No. 19 of 2006. Available at: https://pngrb.gov.in/pdf/Act/ACT_PNGRB.pdf 

[2] The Petroleum and Minerals Pipelines (Acquisition of Right of User in Land) Act, 1962, Act No. 50 of 1962. Available at: https://www.indiacode.nic.in/handle/123456789/1424 

[3] The Oilfields (Regulation and Development) Act, 1948, Act No. 53 of 1948

[4] Constitution of India, Article 246 and Seventh Schedule

[5] Mineral Area Development Authority v. Steel Authority of India Ltd., 2024 SCC OnLine SC 1796

[6] The Petroleum and Natural Gas Regulatory Board Act, 2006, Section 1(4)

[7] The Petroleum and Natural Gas Regulatory Board Act, 2006, Section 11(c)

[8] The Petroleum and Natural Gas Regulatory Board Act, 2006, Section 2(j)

[9] IMC Limited v. Union of India, Bombay High Court, 2024

Authorized and Published by Prapti Bhatt