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 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 statement indicating the invitation
must be accepted within thirty days of receiving it.
(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
election to participate must be in writing and must be received by the owner
giving the invitation within thirty days of the participating party's receipt
of the invitation.
c. 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.
d. 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 a 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 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 statement indicating the invitation
must be accepted within thirty days of receiving it.
(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 election to participate must be in
writing and must be received by the owner giving the invitation within thirty
days of the participating party's receipt of the invitation.
c. 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.
d. 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 a
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.
e. 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
a 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 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