Current through Bulletin 2024-18, September 15, 2024
1. Subject to
the provision of Subsections R649-2-4(3) and (4), the designated operator of a
drilling unit for oil and gas operations shall be the owner which, in the
applicable drilling unit:
1.1. owns more than
an undivided 50% of the working interest;
1.2. owns 50% or less of the working
interest, and has the written authorization and designation by additional
owners to operate on their behalf which, combined with the designated
operator's interest, totals more than an undivided 50% of the working interest;
or
1.3. is the designated owner
selected by the consenting parties to a JOA if:
(a) a JOA has been entered by owners owning
more than an undivided 50% of the working interest;
(b) the operator designated under the JOA has
elected to go non-consent to the proposed operation, and
(c) the terms of the JOA allow the
designation.
2.
Subject to the provision of Subsections R649-2-4(3) and (4) below, in the
absence of a board order establishing a drilling unit for oil and gas
operations, the designated operator of a well shall be the owner that:
2.1. owns more than the aggregate of the
undivided 50% of:
(a) the working interest in
the lease covering the lands which the well will physically penetrate and in
the targeted formations from which the well will produce; and
(b) the working interest derived from oil and
gas owned in fee in the lands which the well will physically penetrate and in
the targeted formations from which the well will produce;
or
2.2. owns the
aggregate of the undivided 50% or less of:
(a) the working interest in the lease
covering the lands which the well will physically penetrate and in the targeted
formations from which the well will produce; and
(b) the working interest derived from oil and
gas owned in fee in the lands which the well will physically penetrate and in
the targeted formations from which the well will produce; and (c) has the
written authorization and designation by additional owners to operate on their
behalf which, combined with the designated operator's interest totals more than
the aggregate of an undivided 50%:
2.2.1. the working interest attributable to
the lease covering the lands which the well will physically penetrate and in
the targeted formations from which it will produce; and
2.2.2. the working interest derived from oil
and gas owned in fee in the lands which the well will physically penetrate and
in the targeted formations from which it will produce; or
2.3. the designated owner selected by
consenting parties to a JOA if:
(a) a JOA has
been entered by owners owning more than the aggregate of an undivided 50% of:
(i) the working interest in the lease
covering the lands which the well will physically penetrate and in the targeted
formations from which the well will produce; and
(ii) the working interest derived from oil
and gas owned in fee in the lands which the well will physically penetrate and
in the targeted formations from which the well will produce;
(b) the operator designated under
the JOA has elected to go non-consent to an operation; and
(c) the terms of the JOA allow the
designation.
3.
If the criteria set forth in Subsection R649-2-4(1) or (2) cannot be met, or if
any owner desires to challenge whether any of the required criteria have been
satisfied, or if any owner desires to challenge the designation of the operator
on any other good faith basis, including those specified in Subsection
R649-3-4(4),
the owner may file a request for agency action seeking board review and
designation of a different operator provided that no challenge may be asserted
after the protest period specified in Subsection
R649-3-4(4)
has elapsed and, if the division has determined that good cause exists for
shortening the ten day period under Subsection
R649-3-4(4),
preparation for drilling has commenced.
3.1.
The board may elect to consider the provisions of the applicable JOA regarding
change of operatorship in determining which owner shall be the operator rather
than designating an operator under this rule.
3.2. The board may elect to take the
designation of an operator under advisement or continue the request until
additional information is provided to the board.
4. If a request for agency action is filed as
provided in Subsection R649-2-4(3), and after opportunity for a hearing, the
board may consider any of the following factors in its deliberations and
ruling:
4.1. experience, prudence and
competence as an operator in other similarly situated wells;
4.2. multi-well expenditures already made for
infrastructure that involve the applicable well or drilling unit;
4.3. good faith negotiations prior to the
board's consideration of the operator designation;
4.4. whether drainage of the spacing or
drilling unit has occurred or is likely to occur in the immediate future and
whether an owner has committed to drill a well in a timely fashion;
4.5. project complexity and
geology;
4.6. contractual
obligations including those arising under a drilling contract, surface use
agreement, or an expiring lease; and
4.7. any other factors the board may deem
material to its decision.
5. Subject to Subsection R649-2-4 (5.3) the
designated operator has the right to request the division revoke any other
approved APDs for any wells where preparation for drilling has not yet
commenced relating to:
5.1. the applicable
drilling unit; or
5.2. in the
absence of a board order establishing a drilling unit, any approved APDs for
any wells approved under the criteria specified in R649-2-4(2) above.
5.3. The division may not revoke APDs
approved pursuant to Subsection
R649-3-4(5).
