What are the requirements when a property has an operating or abandoned gas or oil well?

Operating Oil or Gas Wells
The Appraiser must examine the site for the existence of any readily observable evidence of an oil or gas well and report the distance from the dwelling.
The Appraiser must notify the Mortgagee of the deficiency of Minimum Property Requirements (MPR) or Minimum Property Standards (MPS) if the dwelling is located within 75 feet of an operating or proposed well. The distance is measured from the dwelling to the site boundary, not to the actual well site.
 
Abandoned Oil or Gas Wells
If the Appraiser notes an abandoned gas or oil well on the subject site or an adjacent Property, the Appraiser must stop work and notify the Mortgagee.
The Appraiser may resume work when the Mortgagee provides a letter from local jurisdiction or the appropriate state agency, stating that the subject well was permanently abandoned in a safe manner.
 
If the Property contains any abandoned petroleum product wells, the Mortgagee must ensure that a qualified petroleum engineer has inspected the Property and assessed the risk, and that the appropriate state authorities have concurred on clearance recommendations.
 
The Appraiser may only complete the appraisal on a Property located near a gas well that emits hydrogen sulfide if the minimum clearance has been established by a petroleum engineer. The Appraiser must assess any impact that the location of the well has on the value and marketability of the Property.

For additional information see: Handbook 4000.1 II.A.3.a.ii(E) and II.A.8.i.vii(A)(2) available at: https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh

All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.


Topic Number: KA-01244