Current through Register Vol. 49, No. 2, February 2024
RULE B-4: APPLICATION TO TRANSFER A
WELL
a)
Definitions
1) "Current Permit Holder" means
the person required to hold the permit or to whom the permit was issued and who
is the owner of the right to drill, produce and/or operate said well(s),
possesses the full rights and responsibilities for operating the well(s) in
accordance with applicable Arkansas law and/or rule or order of the Commission,
and has the current obligation to plug said well(s), who is the assignor,
transferor or seller (whether voluntary or involuntary) of the
well(s).
2) "Deepen" for a cased
well means an operation whereby a well is drilled to a measured depth below the
cement casing shoe. For an open hole completion, "Deepen" means an operation
whereby a well is drilled below the original measured depth of the
well.
3) "Drill" means the
commencement of an operation to either set conductor pipe or the moving in a
drilling rig capable of drilling to a depth to set the requisite amount of
surface casing and spudding the well, if conductor pipe is not used.
4) "New Permit Holder" means person acquiring
the well(s) and the right to drill, produce, and/or operate said well(s), who
obtains the full rights and responsibilities for operating the well(s) in
accordance with applicable Arkansas law and/or rule or order of the Commission,
whom will obtain the obligation to plug said well(s), and who as owner or
operator in accordance with applicable Arkansas law and/or rule or order of the
Commission is required to hold the permit.
5) "Re-enter" means an operation whereby
surface access to the wellbore is established.
6) "Transfer" means any assignment, devise,
release, transfer, takeover, buyout, merger, sale, conveyance, or other
transfer of any kind, whether voluntarily or involuntarily.
7) "Well" means a production well as defined
by General Rule B-1.
b)
The provisions of this rule apply to all transfers of the interest of the
person required to hold and to whom the well transfer approval is issued
(Permit Holder), including but not limited to:
1) A change of ownership of the right to
drill, produce and/or operate well(s), including the obligation to ultimately
plug said well(s); or
2) A change
in the designation of the owner or operator under an operating or other similar
agreement; or
3) A change pursuant
to the action of the owners of separate interests who designate an owner to be
Permit Holder; or
4) A change
required by the appointment, by a court of competent jurisdiction, of a trustee
or a receiver to exercise custody and control over the well(s), including the
right to drill, produce and/or operate well(s), and the obligation to
ultimately plug said well(s)
c) The provisions of this rule shall not
apply to the transfer of the royalty, overriding royalty or fractional working
interests not affecting the rights or responsibilities of the Permit
Holder.
d) The provisions of this
rule shall not apply to transfers of well(s) abandoned or orphaned in
accordance General Rule G-1 or G-2. Transfers of well(s) deemed abandoned or
orphaned are subject to the transfer provisions in General Rule G-3.
e) Notification of a transfer shall be given
to the Director, or his designee, by the Current Permit Holder on a form
prescribed by the Director.
f) A
separate form shall be completed for each lease, well, or other unit
transferred.
g) The notification
shall be signed by the Current Permit Holder and the New Permit Holder, or by
authorized representatives specified on the Organizational Report filed in
accordance with General Rule B-13, except as follows:
1) In lieu of the signature of the Current
Permit Holder, the New Permit Holder may submit a court order or other legal
document evidencing ownership of the lease or unit to be transferred in the
event that the Current Permit Holder cannot be located or refuses to sign the
notification of transfer form.
2)
In lieu of the signature of the New Permit Holder, the Current Permit Holder
may submit documentation evidencing transfer of the ownership of the well,
lease, or unit in the event the New Permit Holder refuses to sign the
notification of transfer form.
h) Prior to the Director, or his designee,
approving the transfer request, the New Permit Holder shall:
1) Be authorized to do business within the
State of Arkansas; and
2) Provide
the required financial assurance, if applicable, in accordance with General
Rule B-2 and subparagraphs h) 4) and h) 5) below; and
3) File the required organizational report,
if applicable, in accordance with General Rule B-13; and
4) If the transfer is for a gas well
producing less than 25 MCF/day per AOGC records, or a well that has received an
approved temporarily abandonment status in accordance with General Rule B-7,
then the Current Permit Holder and New Permit Holder may file an application,
on a form prescribed by the Director, requesting administrative approval of the
transfer request.
a. If the transfer request
is approved administratively, the New Permit Holder shall file an additional,
well specific financial assurance of $35,000 for each natural gas well in a
form authorized by General Rule B-2.
b. If the transfer request is denied, or if
the Director notifies the Current Permit Holder and the New Permit Holder that
he is referring the request to the Commission, the Current Permit Holder and
New Permit Holder may file an application in accordance with General Rules A-2,
A-3, and other established hearing procedures to have the Commission review the
transfer request.
i. If the transfer request
is approved by the Commission after notice and hearing as provided above, the
New Permit Holder shall file an additional, well specific financial assurance
of $35,000 for each natural gas well in a form authorized by General Rule B-2,
unless otherwise provided by the Commission after notice and
hearing.
5) If
the transfer is for a liquid hydrocarbon production well and the well has
received an approved temporarily abandonment status in accordance with General
Rule B-7, then the New Permit holder is required to replace any amount of well
specific financial assurance that is required by the Current Permit Holder,
unless otherwise provided by the Commission after notice and hearing, prior to
transfer.
i) A transfer
to a New Permit Holder shall be denied by the Director, or his designee, if:
1) The New Permit Holder has not fully
satisfied all applicable requirements.
2) The Commission has not approved the
transfer in accordance with h) 4) above; or
3) The New Permit Holder has falsified or
otherwise misstated any material information on or relative to the transfer
application; or
4) No further
permits or authorities may be issued in accordance with General Rule A-5 e)
12); or
5) The Director, or his
designee, deems it necessary that the transfer request be denied for the
purpose of protecting correlative rights of all parties, or to prevent waste as
defined by Ark. Code Ann. §
15-72-102.
j) The New Permit Holder shall be responsible
for all regulatory requirements relative to all wells and all other surface
facilities in existence at the time of the transfer related to the well(s). The
New Permit Holder shall not be responsible for regulatory requirements relative
to spills of crude oil or other production fluids which occurred prior to the
date of the transfer, unless the New Permit Holder has otherwise agreed with
the Current Permit Holder.
k) If
any well, or any lease or other unit associated with the well, is in violation
at the time of the transfer request to the New Permit Holder, the transfer
request shall be denied pending abatement of all violations by the Current
Permit Holder. However, if the New Permit Holder, after being notified of the
violation(s), agrees in writing to the transfer approval including conditions
to abate all violations, the transfer may be approved by the Director, or his
designee in accordance with this Rule. Failure to abate the violations within
the time period specified by the Director or his designee may result in
revocation of the transfer approval in accordance with subparagraph (o) below,
and/or other applicable enforcement actions in accordance with General Rule
A-5.
l) The Current Permit Holder
is not responsible for any regulatory violation caused by the actions of the
New Permit Holder during the permit transfer process. However, if the transfer
is denied by the Director, or his designee, the Current Permit Holder assumes
all responsibility for the violations caused by the New Permit Holder. Nothing
in this subparagraph shall affect the contractual rights and obligations
between the person or entity transferring the well(s) and the person or entity
acquiring the well(s).
m) The
transfer request shall not affect the rights of the Commission, or any
obligation or duty of the Current Permit Holder arising under any applicable
Arkansas laws, or rules or orders of the Commission.
n) The Director shall notify the Current and
New Permit Holder of the transfer approval or denial in writing. Following the
approval or denial of the transfer approval request, the Current or New Permit
holder shall have thirty (30) days from the date of the approval or denial to
appeal the Director's Decision in accordance with General Rule A-2, A-3 and
other applicable hearing procedures. A transfer request approval or denial, for
which an appeal has not been filed, shall become a final administrative
decision of the Commission thirty (30) days following the date of the approval
or denial.
o) Well Transfer
Revocation Procedures
1) The Director may
revoke a well transfer approval if the Permit Holder fails to meet permit
conditions as specified in the well transfer approval, the well transfer
approval was issued in error, or the Permit Holder falsified or otherwise
misstated any material information in the application form.
2) The Director shall notify the Permit
Holder of the well transfer revocation in writing. Following the revocation
notice the Permit Holder is required to plug the well. The Permit holder shall
have thirty (30) days from the date of the well transfer revocation to appeal
the Director's Decision to revoke the well transfer approval in accordance with
General Rule A-2, A-3 and other applicable hearing procedures. Drilling,
production, or operation may not commence or continue during the appeal
process. A revocation of a well transfer approval for which an appeal has not
been filed, shall become a final administrative decision of the Commission
thirty (30) days following the date of the revocation.
