Current through Supplement No. 392, April, 2024
The following govern the recovery of the risk penalty
pursuant to subsection 3 of North Dakota Century Code section 38-08-08 and
subsection 3 of North Dakota Century Code section 38-08-09.4:
1. An owner may recover the risk penalty
under the provisions of subsection 3 of North Dakota Century Code section
38-08-08, provided the owner gives, to the owner from whom the penalty is
sought, a written invitation to participate in the risk and cost of drilling a
well, including reentering a plugged and abandoned well, or the risk and cost
of reentering an existing well to drill deeper or a horizontal lateral. If the
nonparticipating owner's interest is not subject to a lease or other contract
for development, an owner seeking to recover a risk penalty must also make a
good-faith attempt to have the unleased owner execute a lease.
a. The invitation to participate in drilling
must be in writing and contain the following:
(1) The approximate surface location of the
proposed or existing well, proposed completion and total depth, objective zone,
and completion location if other than a vertical well.
(2) An itemization of the estimated costs of
drilling and completion.
(3) The
approximate date upon which the well was or will be spudded or
reentered.
(4) A written election
to participate and a statement indicating the invitation or election must be
accepted within thirty days of receiving it. Such election to participate must
be received by the owner giving the invitation within thirty days of the
participating party's receipt.
(5)
Notice that the participating owners plan to impose a risk penalty and that the
nonparticipating owner may object to the risk penalty by either responding in
opposition to the petition for a risk penalty, or if no such petition has been
filed, by filing an application or request for hearing with the
commission.
(6) Drilling or spacing
unit description.
b. An
invitation to participate and an election to participate must be served
personally, by mail requiring a signed receipt, or by overnight courier or
delivery service requiring a signed receipt. Failure to accept mail requiring a
signed receipt constitutes service.
c. An election to participate is only binding
upon an owner electing or declining to participate if the well is spudded or
reentry operations are commenced on or before ninety days after the date the
owner extending the invitation to participate sets as the date upon which an
election response to the invitation is to be received. It also expires if the
permit to drill or reenter expires without having been exercised. If an
election to participate lapses, a risk penalty can only be collected if the
owner seeking it again complies with the provisions of this section.
2. An owner may recover the risk
penalty under the provisions of subsection 3 of North Dakota Century Code
section 38-08-09.4, provided the owner gives, to the owner from whom the
penalty is sought, a written invitation to participate in the unit expense. If
the nonparticipating owner's interest is not subject to a lease or other
contract for development, an owner seeking to recover a risk penalty must also
make a good-faith attempt to have the unleased owner execute a lease.
a. The invitation to participate in the unit
expense must be in writing and contain the following:
(1) A description of the proposed unit
expense, including the location, objectives, and plan of operation.
(2) An itemization of the estimated
costs.
(3) The approximate date
upon which the proposal was or will be commenced.
(4) A written election to participate and a
statement indicating the invitation or election must be accepted within thirty
days of receiving it. Such election to participate must be received by the
owner giving the invitation within thirty days of the participating party's
receipt.
(5) Notice that the
participating owners plan to impose a risk penalty and that the
nonparticipating owner may object to the risk penalty by either responding in
opposition to the petition for a risk penalty, or if no such petition has been
filed, by filing an application or request for hearing with the
commission.
b. An
invitation to participate and an election to participate must be served
personally, by mail requiring a signed receipt, or by overnight courier or
delivery service requiring a signed receipt. Failure to accept mail requiring a
signed receipt constitutes service.
c. An election to participate is only binding
upon an owner electing or declining to participate if the unit expense is
commenced within ninety days after the date the owner extending the invitation
request to participate sets as the date upon which an election response to the
request invitation is to be received. If an election to participate lapses, a
risk penalty can only be collected if the owner seeking it again complies with
the provisions of this section.
d.
An invitation to participate in a unit expense covering monthly operating
expenses shall be effective for all such monthly operating expenses for a
period of five years if the unit expense identified in the invitation to
participate is first commenced within ninety days after the date set in the
invitation to participate as the date upon which an election response to the
invitation to participate must be received. An election to participate in a
unit expense covering monthly operating expenses is effective for five years
after operations are first commenced. If an election to participate in a unit
expense comprised of monthly operating expenses expires or lapses after five
years, a risk penalty may only be assessed and collected if the owner seeking
the penalty once again complies with this section.
3. Upon its own motion or the request of a
party, the commission may include in a pooling order requirements relating to
the invitation to participate and election to participate, in which case the
pooling order will control to the extent it is inconsistent with this
section.
General Authority: NDCC 38-08-04
Law Implemented: NDCC 38-08-04,
38-08-08
