THE NAGALAND PETROLEUM AND NATURAL GAS

REGULATIONS, 2012
AS APPROVED BY THE CABINET SUB-COMMITTEE ON PETROLEUM AND
NATURAL GAS ON 12.09.2012
AS APPROVED BY THE CABINET ON 13.09.2012
AS PASSED BY THE NAGALAND LEGISLATIVE ASSEMBLY ON 22.09.2012

WHEREAS the Nagaland Legislative Assembly, in exercise of

its powers under article 371-A (1) (a) of the Constitution of India,
had unanimously passed a Resolution on the 26 th July, 2010
rendering inter alia all Acts of Parliament governing petroleum
and natural gas inapplicable to the State of Nagaland:

WHEREAS the Union of India, while replying in Lok Sabha to

a question raised on the issue on the 10 th March, 2011, declared
that the State of Nagaland has the power to frame rules for
governing matters relating to petroleum and natural gas within
the territory of Nagaland:

NOW THEREFORE, in continuation of the legislative

affirmation as contained in the Resolution dated the 26 th July,
2010 and in exercise of its sovereign Constitutional powers
conferred upon it by the special provisions in article 371-A (1) (a)
of the Constitution of India, the Nagaland Legislative Assembly
hereby resolves to re-state the customary practices of Nagas in
regard to ownership of land and its resources particularly in
relation to petroleum and natural gas within the territory of
Nagaland by enacting the following Regulations:

Short title, extent and commencement:

1. (1) These Regulations shall be called the Nagaland

Petroleum and Natural Gas Regulations, 2012.
(2) These shall extend to the whole of Nagaland.
(3) These shall come into force with immediate effect and
shall be published in the Official Gazette of the State.
Definitions & Interpretation:

2. (1) The word company would mean all business

organizations which are legally authorized to operate within
the territory of India;
(2) Other words used in these Regulations have the same
legal connotation as assigned to them in any other law; and
(3) In the case of any ambiguity, the interpretation of the
State Government shall be final.

Restatement of effects of Assembly Resolution dated

26.7.2010

3. With the adoption of the Resolution of the Nagaland

Legislative Assembly on the 26th July, 2010 under article 371-A (1)
(a) of the Constitution of India, -

(1) No Act of Parliament governing Petroleum and Natural

Gas shall be applicable to the State of Nagaland and all
such Acts shall be deemed to have become inapplicable
to the State from the date of enactment of article 371 A
(1) (a) of the Constitution of India regardless of previous
acts of commissions and omissions;
(2) No Act or Rule or any other instrument of the
Government of Nagaland which is in conflict with the
customary law position as enshrined in article 371-A (1)
(a) of the Constitution of India in regard to land and its
ownership in relation to petroleum and natural gas
within the territory of Nagaland shall be deemed to have
become void since the date of enactment of such Act or
Rule or any other instrument notwithstanding their
presence in the statute book and regardless of previous
acts of commissions and omissions; and
(3) Only these Regulations framed by the Nagaland
Legislative Assembly in exercise of its extraordinary
legislative powers under article 371 A (1) (a) of the
Constitution of India and any other Rules that may be
framed by the Government of Nagaland in accordance
with the provisions of these Regulations, shall apply to
 matters relating to petroleum and natural gas within the
territory of Nagaland.

Owners of Petroleum and Natural Gas:

4. (1) Whoever owns the land beneath which petroleum and

natural gas resources lie, shall be the owners of such petroleum
and natural gas resources, in whatever form these may lie
underneath their land; and
(2) Owners of such land and resources may be, -
(i) Individual land owners who own oil or gas wells and/or
lands in a zone;
(ii) Village Bodies that own wells and/or lands in a zone;
and
(iii) The State Government that own wells and/or lands in a
zone.
(3)An individual owner of oil or gas well and/or lands in a
zone shall be certified to be so, by the village council concerned.

Inalienability of land:

5. No owner of land or oil or gas well in Nagaland, whether an

individual or a village body or the State Government, shall
alienate land or such well in favour of a non-Naga or a company
but may give consent to a non-Naga or a company to access land
or oil or gas well for pre-production, production and post-
production operations in a zone, which shall revert to the owner
at the end of operations.

Petroleum and Gas zones

6. (1) The State Government shall earmark the boundaries of

oil and gas bearing areas in the State into petroleum and natural
gas zones, as far as possible District-wise, classify them into pre-
production, production and post-production zones and name
them appropriately as per procedure to be specified in Rules.

(2)A list of such petroleum and natural gas zones shall be

published in the Official Gazette of the State.
 (3)The State Government shall have powers to redraw the
boundaries of zones, as and when it is found necessary, so that
each zone is exclusively for one kind of operations.

(4)A production zone shall not mean only oil or gas wells but
shall include other adjacent and en route lands essentially
required for production operations.

Classification of Operations:

7. All operations relating to petroleum or natural gas or both in

every zone shall be categorized into the following:

(i) Pre-production operations which mean and include all

operations like exploration, surveys, prospecting, trial
production etc., prior to the extraction of the first
quantity of oil or natural gas, as the case may be, from
the well for commercial purposes;
(ii) Production operations which mean and include
extraction of oil or natural gas, as the case may be,
from the well for commercial purposes; and
(iii) Post-production operations which mean and include
commencement of transporting of the oil or gas
extracted from the well for purposes of
converting/processing oil/gas within Nagaland into
marketable products and by-products.

Selection of Companies:

8. (1)The State Government shall, as soon as may be after the

notification of the petroleum and natural gas zones, commence
the process of awarding the zones to suitable companies.

(2) The detailed criteria and procedure for award of the

zones to companies shall be as specified in the Rules.

(3)A zone shall be awarded to a company on as is where

is basis.

Award of zone by Permits:

9. (1) Award of a zone for any category of operation to a
company shall be by a permit issued by the State Government
which shall be valid for an initial period of ten years from the date
of issue of the permit, which may be renewed every ten years.

(2) Any such permit issued to a company in respect of a

zone shall state whether the permit is for pre-production
operations or for production operations or for post-production
operations and separate permits shall be required for each of
these three operations.

(3)A permit which ceased to operate under these Rules may

be freshly issued to the same company after payment of
necessary fresh permit fees.

(4)Renewal of a permit to a company shall be generally

allowed if the renewal fees are paid by the company.

(5) Only a company which has the permit for pre-production

in a zone under these Regulations shall be entitled to a permit for
production and post-production operations in that zone, unless
the company itself is not interested in pursuing further operations
in that zone.

(6) Where a zone is ready for production operations and no

pre-production operations are carried out under these
Regulations, only a company which has the permit for production
under these Regulations in that zone shall be entitled to a permit
for post-production operations, unless the company itself is not
interested in pursuing further operations in that zone.

Conditions relating to permits:

10. (1) A company shall commence work in the respective zone

within one year of issue of the permit, failing which the permit
shall automatically cease to operate and the permit thereof shall
not be awarded to the errant company but to a new company.

(2) A company shall not cool off work after commencement

of work in a zone for a continuous period of six months, and if
such a cool off happens, the permit shall automatically cease to
operate which shall not be awarded to the errant company but to
a new company.

(3) The permit of a company shall be permanently

invalidated if the company is found to have violated any provision
of these Regulations or the Rules framed by the State
Government, in which case the licence shall not be issued to the
errant company again.

(4) No permit issued to a company shall be transferred to

another company either by the company or by the State
Government.

(5) Works in a zone may be sub-contracted by a permit-

holding company to another company provided that the value of
works so sub-contracted does not exceed twenty five per cent of
the net worth of the permit-holding company.

Explanation: Sub-clauses (1) and 2) shall not operate in

case the delay in commencing work or the cool-off is caused by
force majeure reasons.

Permit fees:

11. (1) A company shall deposit with the State Government a

fee as specified in the Rules for each of the following, which is
non-refundable:

(1) For a new permit for pre-production operations or

production operations or post-production operations in a
zone;
(2) For fresh issue of a permit which ceased to operate
under these Rules; and
(3) For renewal of a valid permit every Ten years.

(2) Separate fees shall be charged for separate zones even

if the company is the same for more than one zone.

General Advisory on Companies:

12. Besides the criteria to be specified in the Rules, the
following general considerations shall be carefully kept in view by
the State Government while issuing a permit to a company:

(a) The overall technical expertise, the investment

potential, the broad experience in exploration,
prospecting and production of petroleum and natural
gas of the company;
(b) The Plan of the company in regard to corporate social
responsibility especially for providing a sustainable
income generating ambience to the people of the area
concerned and for promoting health, educational and
infrastructural development;
(c) The utmost care the company takes in environment
protection issues;
(d) The trust the company enjoys in the eyes especially of
the land owners;
(e) The companys ability to set up refineries, other
ancillary industries and in utilizing gas;
(f) The Company should have trust in Nagas, their
culture, customs and way of life;
(g) The overall profile of the Company and antecedents of
the company in the State;
(h) The companies other oil and gas related activities in
States with which Nagaland has border disputes;
(i) Such other relevant and related considerations
affecting the larger interests of the public inhabiting
the zone and the people of Nagaland, in general.

Land Access Fees for pre-production and post-production

operations:

13. (1) Besides the permit fees paid to the State Government,
for commencing and continuing pre-production operations or
post-production operations in respect of petroleum or natural gas
in a zone, a company concerned shall pay to the State
Government for further disbursement to the land owners, a land
access fee for using their land at such uniform rates as are
currently applicable in the State for such land, which shall be
restated by the State Government in the Rules besides an
additional compensation, to be determined by the State
Government to damage caused to crops, property etc.,.
 (2)The company shall pay the land access fee annually, one
month in advance of the beginning of operations in the zone
initially, and thereafter one month in advance of every
subsequent year, to the land owners to be calculated from the
date of commencement of the pre-production or post-production
operations and deposit the same with the State Government for
further disbursement.

(3)No permit for pre-production or post-production

operations shall be issued to a company and no renewal of permit
or fresh issue of permit shall be done, without an agreement
providing for the payment of the land access fees annually in
advance to the land owners, being signed between the
Government on behalf of the land owners, and the company, with
the Tribal Hoho(s) and village councils concerned as witnesses.

(4) Immediately upon the signing of the Agreement in

clause (3) above, another Agreement shall be signed between the
land owners and the company for handing over the land for
access to the company for the requisite period, with the Village
Council concerned as witness.

(5) Delay in payment of land access fees to the land owners

shall attract a monthly interest to be specified in the Rules.

Explanation: The land shall revert back to the owners once

the pre-production or post-production operations are certified to
have been concluded by the State Government and from the date
of such reversion, the company concerned is not liable to pay
land access fee to the land owners.

Revenue Share in production of petroleum and natural

gas:

14. (1) Besides the permit fees paid to the State Government,
for commencing and continuing production of petroleum or
natural gas in a zone, the company concerned shall additionally
pay to the State Government not less than sixteen per cent. of
total value of production of petroleum or not less than twelve per
cent. of value of production of natural gas as ascertainable at the
mouth of the oil or gas well, as the case may be, which shall be
distributed in the following manner:

(a) Not less than two per cent both in the case of
petroleum and natural gas collectively to the
individual land owners who own oil or gas wells in a
zone;
(b) Not less than four per cent in the case of
petroleum or not less than two per cent in the case of
natural gas collectively to other individual land owners
who do not own oil or gas wells in a zone;
(c)Not less than two per cent in the case of petroleum
and not less than two per cent in the case of natural
gas to the District Development Board of that zone;
(d) Not less than eight per cent in the case of
petroleum and not less than six per cent in the case of
natural gas to the State Government.

(2) The above shares,-

(a) meant for the oil or gas well owners shall be

distributed equitably amongst them based upon the number
of wells, the quantity of production and other rational
considerations;
(b) meant for other individual land owners shall be
distributed equitably based upon the extent of ownership of
land by each land owner in that zone; and
(c) meant for the DPDB concerned shall be distributed
in terms of assistance for a developmental package with the
Tribal Hoho (s) as pivotal agencies.

(3) The value of production shall be pitched to an

international petroleum and natural gas price index to be
specified in Rules.

(4)The share in the value of production to the parties as

aforesaid shall be calculated by the company at the end of each
month from the date of commencement of production of
petroleum and natural gas and payments actually made to the
State Government by the Company within forty five days for
further disbursement.
 (5) No permit for production operations shall be issued to a
company without an agreement to the aforesaid revenue sharing
arrangement being signed between State Government on behalf
of the landowners and the company with the Tribal Hoho(s) and
the village councils concerned as witnesses.

(6) The company shall not be liable to pay any land access
fee to land owners in the case of production operations except
the above mentioned revenue shares.

(7) Delay in payment of share in revenue as aforesaid shall

attract a monthly interest to be specified in the Rules.

Explanation: The above revenue shares are applicable

only to that quantities of oil or gas that are fit for commercial use.

Refinery, Bottling and Ancillary Industries:

15. No part of crude oil or natural gas extracted from Nagaland

shall be transported out of the State without being refined or
bottled or converted into marketable products and by-products
within Nagaland as part of post-production operations subject to
the production limits required for setting of such refinery,
bottling and ancillary industries is reached by the companies.

Naga to be Brand Name of products and by-products:

16. The company operating under these Rules shall name all
petroleum and natural gas products and by-products by prefixing
to the name of every such product or by-product the Brand Name
NAGA, failing which it shall be deemed as violation of these
Regulations by the Company.

Employment:

17. (1) Every company to which a permit is issued in respect of

a petroleum or natural gas zone, shall compulsorily reserve not
less than 50% jobs of unskilled category and 10% of non-
technical white collar jobs to Naga youths from the respective
oil/gas bearing Districts in all (i) pre-production (ii) production
and (iii) post-production operations.

(2)10% of all non-technical white collar jobs and 10% of

technical jobs shall be reserved for the Naga Youths from all over
the State.

(3)Failure to implement this provision shall be deemed as

wilful contravention of these Regulations entailing invalidation of
permit of the company.

Use of Revenues:

18. (1) Subject to the provisions herein the revenues accruing to

the DPDBs and State Government under these Regulations shall
be credited to respective Special Corpus Funds to be exclusively
applied to overall infrastructure development of the State and the
District respectively;

(2)The quarterly reports of the Deputy Commissioner and

the Annual Reports of the High Powered Committee, referred to in
Regulation No. 23, should precisely inform about the quantum of
revenues received under these regulations and the manner in
which visibly infrastructure has been improved in the State and
District levels.

Naga Petroleum Academy:

19. The State Government shall establish a Training Institution

by name Naga Petroleum Academy to train Naga youths in
unskilled and skilled jobs, technical and non-technical jobs and
other related work in petroleum and natural gas industry.

Single Window:

20. (1) The State Government shall nominate an

Agency/Department, whether existing or a newly created one, as
the Nodal Agency/Department to carry out the purposes of these
Regulations and Rules to be framed by the State Government.
 (2) The Agency/Department so nominated shall function as
Single Window for the companies to correspond with in all
matters under these Regulations and the Rules to be framed.

(3) It shall be the responsibility of the Nodal

Department/Agency to obtain all clearances and carry out all
necessary documentary work on behalf of the companies so that
the companies are not caught in delays and uncertainties and
feel at ease in the State.

(3)A permit granted to a company shall be invalidated or

may cease to operate only in the contingencies expressly
specified in these Regulations and not on account of deficiency
on any ground including the ground of not having any clearance
and it shall be the endeavour of the Nodal Department to assist
the Company in remedying any such deficiency if detected after
the issue of the permit.

Explanation: This concession shall not apply to a company

which contravenes any provision relating to economic
offences, tax violations, money laundering etc., punishable
under any law operative in the territory of India.

(4)As the operations under these Regulations are conducted

within the framework of article 371-A(1)(a) of the Constitution of
India, only these Regulations and Rules to be framed by the State
Government shall apply in regard to clearances for operations by
a company in the State.

Security:

21. (1) Every Company operating under these Regulations on

the soil of Nagaland shall be the Special Guest of the Nagas, and
it shall be the special responsibility of the people of Nagaland in
particular, the individual landowners, the Village Councils, the
Tribal Hoho(s), the District Administration and the State
Government to protect the lives, liberties and properties of those
in the Company and to provide necessary logistics to the
operations of the Company.

(2) The individual land owners, the village councils, the

District Administration, the Tribal Hoho(s) concerned and the
State Government shall, before the operation is begun by the
company in a zone, sign a covenant to the effect that the lives,
liberties and properties of those in the company shall be
protected at all costs and shall not be damaged under any
provocation.

(3) In line with the covenant, the State Government shall

ensure adequate security to the equipment, installations,
manpower and other resources of the companies operating in the
State in the respective zones.

Companies to comply with customary law:

22. (1) Every company, before being issued with a permit for
pre-production or production or post-production operations, shall
give an undertaking to the State Government that it shall bind
itself to the Naga customary practices of the respective tribes.

(2)Any such undertaking as referred in clause (1) above

shall be deemed part of the Agreements the company is required
to sign with the State Government under these Regulations.

Monitoring & Reporting:

23. (1) The implementation of these Regulations shall be

continuously monitored by a High Powered Committee headed by
the Chief Minister of the State and comprising some Ministers and
the Chief Secretary.

(2) There shall also be a Committee at the District level of

the zone(s) concerned with the Deputy Commissioner as the
Head and the President(s) of the Tribal Hoho(s) as members with
representatives drawn from the private land owners and village
councils.

(3)The District level Committee shall present quarterly

reports to the High Powered Committee which in turn cause
Annual Reports made and laid before the Nagaland Legislative
Assembly.

Power to make Rules:

24. (1) The Nagaland Legislative Assembly hereby delegates its
legislative powers available to it under article 371-A (1)(a) of the
Constitution of India in relation to land and its resources
particularly in relation to petroleum and natural gas, to the
Government of Nagaland to make appropriate Rules within the
scheme and scope of these Regulations in order to effectively
carry out the purposes of these Regulations which shall make
provisions, -

(a) for matters required to be specified under these

Regulations; and

(b) to remedy all insufficiencies and inadequacies in these

Regulations that may arise during implementation.

(2)Rules so made by the Government of Nagaland shall take

effect from the dates specified therein, but shall be laid before
the Nagaland Legislative Assembly, as soon as may be after
these are made.

(3)The Nagaland Legislative Assembly has powers to annul

or modify any of these Rules.

(4) The Government of Nagaland shall consult the Tribal

Hoho (s) while framing rules under this provision.

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__________________________________________________________________

Printed for the Department of Geology & Mining, Government of

Nagaland by the Member-Secretary, Cabinet Sub-Committee on
Petroleum and Natural Gas (APC Cell)

September 2012