California Code of Regulations
Title 14 - Natural Resources
Division 2 - Department of Conservation
Chapter 4 - Development, Regulation, and Conservation of Oil and Gas Resources
Subchapter 3 - Unit Operations
Article 2 - Definitions and Standards
Section 1821 - Standards

Universal Citation: 14 CA Code of Regs 1821

Current through Register 2024 Notice Reg. No. 38, September 20, 2024

In implementing Chapter 3.5, the following standards shall be applied by the Supervisor whenever relevant in any determination or order:

(a) "Price of hydrocarbons" shall be the current price as of the date of the petition for:

(1) Crude oil and liquid or liquefied products extracted and sold from wet gas, the average posted price for crude oil and like products of the same gravity in the field of which the unit area is a part, or if none, in the nearest field;

(2) Residue dry gas, the average price in the field in which the unit area is located.

In the event there are no relevant posted prices or a dry gas price, all relevant data shall be considered.

(b) "Reasonable value of the use of the surface" as used in Public Resources Code Section 3648 shall be deemed to be fair rental value. The amount stipulated in the unit agreement shall be accepted as the fair rental value for any parcel for which royalty owners have signed the agreement. For those royalty owners included by an order by the Supervisor, the fair rental value shall be determined by the Supervisor.

(c) "Present worth value" as used in Public Resources Code Section 3643(d) shall be determined by using a discount rate equal to two percent above the generally prevailing prime rate charged by three major banks in the district in which the field of which the unit area is a part as of the date of the filing of the petition.

(d) The "reasonable interest charge" provided for in Public Resources Code Section 3646(b) shall not exceed two percent above the generally prevailing prime rate charged by major banks in the metropolitan area nearest the field of which the unit area is a part as of the first day of January and the first day of July of each year.

(e) Upon a petition of a person for carrying or otherwise financing made pursuant to Section 3646(b), the Supervisor shall order a committee to review the matter and submit a report. The committee shall be made up of one person nominated by the petitioner, one person nominated by the unit operator and one person chosen by the other two nominees, or in the event of disagreement between such two nominees as to the selection of the third person, one person chosen by the Supervisor. The committee shall review all data and submit a report and recommendation to the Supervisor as to (1) whether the petitioner is unable to meet his or her financial obligations in connection with unit operations; and (2) a program and plan for carrying or otherwise financing the petition, including but not limited to source of money, recommended interest rate and source of funds for repayment including future production from the petitioner's tract or tracts.

(f) Under Section 3646(b) of the Public Resources Code, the provisions for carrying or otherwise financing persons who request the same and are determined by the Supervisor to be unable to meet their obligations in connection with the unit operations, shall be met in one of the following methods:

(1) By one or more of the working interests.

(2) By the unit operator.

(g) The tract share or tract assignment of hydrocarbon production shall be determined by calculating the estimated economic production using good oil field practices and prudent engineering.

1. New NOTE filed 10-7-82; effective thirtieth day thereafter (Register 82, No. 41).
2. Change without regulatory effect amending subsection (e) filed 9-3-96 pursuant to section 100, title 1, California Code of Regulations (Register 96, No. 36).
3. Change without regulatory effect amending section filed 12-26-2006 pursuant to section 100, title 1, California Code of Regulations (Register 2006, No. 52).

Note: Authority cited: Section 3685, Public Resources Code. Reference: Sections 3643(d), 3644, 3646(b), 3648 and 3652, Public Resources Code.

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