Current through Register Vol. 63, No. 12, December 1, 2024
(1) Definitions. For purposes of this rule:
(a) "Costs" include:
(A) "Drilling costs," which means all
reasonable costs and expenses of drilling, redrilling, reworking, deepening,
plugging back, testing, and completing the well; and
(B) "Production costs," which means all
reasonable on-site costs and expenses of production and production equipment
for the well, including wellhead, but not pipeline costs and not
overhead.
(b)
"Participating owner" means each owner in the spacing unit who, prior to
commencement of drilling operations, entered into a written agreement with the
operator to share costs, production, and entitlements. However, where no such
agreement has been reached, an owner, who prior to drilling tendered the
operator a written agreement to pay not less than the owner's pro rata share of
costs attributable to the owner's interest, as computed in section (2) of this
rule, in the spacing unit in exchange for a share of production and
entitlements, will be considered to be a participating owner and to have
entered into a constructive agreement to that effect.
(2) Timing. In the absence of a voluntary
integration agreement for the entire spacing unit, the board will enter an
order integrating all mineral rights ownership interests in a spacing unit
pursuant to ORS 520.220(2), at
any time following the entry of an order establishing the spacing unit for a
pool pursuant to ORS 520.210.
(3) Determination of Interests. A compulsory
integration order determines the interest of each mineral rights owner in the
spacing unit by dividing:
(a) The number of
surface acres subject to an owner's mineral rights located in the spacing unit;
by
(b) The total number of surface
acres in the spacing unit.
(4) Content. The compulsory integration order
will provide for the drilling, if necessary, and operation of the well on the
spacing unit for the sharing of production and for the payment of
costs.
(5) Effective Date. The
compulsory integration order becomes effective on the date of initial
production, unless the board establishes another date.
(6) Allocation of Costs and Earnings:
(a) The compulsory integration order will
treat the operator and participating owners as a single entity. The
operator-participating owners' entity is entitled to share production and pay
costs, both in proportion to the total interest, as computed under section (2)
of this rule, of the operator-participating owners' entity in the spacing unit.
The express and constructive agreements between the operator and participating
owner(s) control the allocations of production and costs attributable to the
operator-participating owners' entity; and
(b) The compulsory integration order will
allocate each non-participating owner a full share in production in proportion
to the owner's interest in the spacing unit subject to royalty obligations, if
any.
(c) The compulsory integration
order will authorize the operator-participating owners' entity to withhold from
each nonparticipating owner's share of production a pro rata share of drilling
and production costs. The pro-rata share of costs may also be subject to a
multiplier established by the Board to compensate the operator-participating
owners assumption of risks associated with production.
Stat. Auth.: ORS 520
Stats. Implemented: ORS
520.095