(I-12) 01 / 2 0 16 38-08-06.1. N A T U R

A L G A S WELL S T A T U S D E TE R M I N A T I O NS A N D

F I N DI N G S. R e p eale d.

S our ce : N

. D . C e n t

ury C od e

.

38-08-06

. 2. D I S C R

I M I N A T I O N I N T H E P R O C E S S IN G A N D P U R C H A S I N G OF

G A S P R O H I B I TE D. G a s p r odu ce d i n t h i s s t a te m u s t b e p r o c e ss e d a nd p u r c h a s e d w it hou t

d i s c r i m i n ati on b e t

w ee n p rodu ce r s i n t

h e s a m e r e s e rvo i r

, r e c o gn izi ng t h e r i gh t of t

h e pur c h a s e r t o

e s ta b li s h r ea s on a

b le q u a lit y s ta nd a r d s f

o r ac c e p t a n ce of g a s

, w h ic h m u s t b e a pp lie d w it

ho u t

d i s c r i m i n at i o n a m on g pro d u c e r s

. A f

te r no tice a nd h ea r i ng, for g o od c a u s e

, t h e c o m m i s s i on m a y

r elie v e a n y p e r s on of t

h e d u t y t o pro ce s s a nd pu

r c h a s e g a s pr o du ce d i n t h i s s tate w it

hou t

d i s c r i m i n ati on.

S our ce : N

. D . C e n t

ury C od e.

38-08-06. 3

. I N FO R

M A T I O N S T A TE M E N T T O AC C O M P A NY P AY M E N T T O

R O Y A LT Y O W N E R

- P E NA L T Y. A n y p e r s on w h o m a k e s a p a y m e n t t o a n o w n e r of a ro y a lt y

i n te r e s t i n la n d i n t

h i s s tate for t

h e pu r c h a s e o f o il or g a s pro d

u ce d fro m t

h at r o y alt y i n te r e s t s h all

pr o v i d e w it

h t h e p a y m e n t t o t

h e roy alt y o w n e r a n i nfor

m ati o n s t a

te m e n t t h at w ill all o w t

h e roy alt y

o w n e r t o c l ea r l y i d e n ti fy t h e a m ou n t o f o il o r g a s s o l d a nd t h e a m o u n t a nd pur

p o s e of e ac h

d e du cti on m a d e f

r o m t h e gro s s a m ou

n t d u e

. T h e s tat e m e n t m

u s t b e on fo r m s a

ppr o v e d b y t

h e

i nd u s t r ial c o mm i ss i o n a nd c on tai n t h e i n for m at i on t h at t h e c o mm i ss i o n pr e s c r i b e s by r u le

. A

p e r s on w ho f

a il s t o c o m

p l y w it h t h e r e qu i r e m e n t s of t

h i s s ect i o n i s g u i lt

y of a c la s s B

m i s d e m ea nor.

S our ce : N

. D . C e n t

ury C od e.

38-08-0 6 .4. F L A R I N G OF G A S R E S T R I C T E D

- I M PO S I T I O N O F T A X

-

P A Y M E N T OF R O Y A LT I E S

- IN D U S T R I A L C OM M I S S I O N AU T H O R I T Y.

1. As p e r

m itte d und e r ru le s o f t

h e i n du s t r ial c o m m i s s i on, g a s prod u c e d w it h c rud e o il

fr o m a n o i l w e ll m a y b e f la r e d dur i n g a on e

- y e a

r p e r i od fro m t

h e d ate of f

i r s t

pr o du ct i o n fro m t

h e w ell

. 2. A f te r t h e ti m e p e r i od i n s u

b s ecti on 1, f

l a r i ng o f g a s fro m t

h e w e l l m u s t c e a s e a n d t

h e

w e ll m u s t b e :

a

. C a pp e d ;

b

. C o nn ec t e d t o a g a s g at h e r i ng li n e;

c

. E qu i p p e d w i t

h a n elect r i c al g e n e r a t or t h at c on s u m e s a t l ea s t s e v e n t y- f i v e

p e r ce n t of t h e g a s fr o m t h e w ell;

d

. E qu i p p e d w it h a s y s t e m t h at i n t a k e s at lea s t s e v e n t y -f i v e p e r c e n t of t h e g a s

a nd n at ur al g a s li qu i d s vo l u m e fro m t h e w ell f o r b e n e f i cial c o n s u m

p t i o n b y

m ea n s o f c o m

pr e s s i on t o l i q u i d for u s e a s fu el

, t r a n s p o r t t o a pr o c e s s i ng

f aci l it y, p r odu cti on of p et ro c h e m ica l s or f e r ti l ize r, c o nv e r s i o n t o l i q u i d

fu el s

, s e p a r ati ng a n d c o lle c ti ng ov e r f i f t y p e r c e n t of t

h e prop a n e a n d h ea v ie r

hy d ro ca rbon s ; or(I-13) 01 / 2 0 16 e

. E qu i pp e d w it h o t h e r v al u e

- a dd e d pr o c e s s e s a s a pp r ov e d by t h e i n du s t r i al

c o mm i s s i on w h i c h r e du ce t h e v o l u m e or i n te n s it y of t h e f la r e b y m or e t h a n

s i x t y p e r c e n t.

3. A n elec t

r i cal g e n e r at or a nd it s a ttac h m e n t un it s t o pro d u c e ele c t r icit y fro m g a s a nd

a c o l lecti on s y s te m d e s c r i b e d i n s ubd i v i s i on d of s u b s ec t i o n 2 m u s t b e c o n s i d e r e d

t o b e p e r s on al pro p e r t y for all purp o s e s.

4. F or a w ell o p e r a

te d i n v i o lati on of t

h i s s e c ti o n

, t

h e p rodu ce r s h all p a y roy altie s t o

ro y a lt y o w n e r s u

p on t h e v al u e o f t

h e f la r e d g a s a n d s h all al s o p a y gro ss p rodu cti on

ta x on t h e f l a r e d g a s at t h e r ate i m po s e d un d e r s ecti on 5 7 -51- 0 2.2.

5. T h e i n d

u s t r ial c o mm i s s i on m a y e nf o r c e t h i s s ec t i o n a n d, for ea c h w ell o p e r a t o r

fo u nd t o b e i n v i o la t i o n o f t h i s s e c ti o n

, m a y d e te r

m i n e t h e v a l u e o f f

la r e d g a s for

pu r po s e s o f p a y m e n t o f roy altie s u

n d e r t h i s s ecti on a nd i t s d ete r

m i n ati on i s f

i n al

. 6. A p rodu ce r m a y o b t a i n a n e x e m p t i o n f r o m t h i s s ecti on fro m t

h e i n du s t r i a l

c o mm i s s i o n up o n a

pp lica t i o n t

h at s h o w s t o t

h e s ati s f a cti on o f t

h e i n d u s t r i al

c o mm i ss i o n t

h a t c on n e cti o n of t

h e w ell t o a n at

u r a l g a s g at

h e r i n g li n e i s

ec ono mi c all y i nf

ea s i b le at t

h e ti m e o f t

h e a pp licati on o r i n t

h e for e s e e a

b l e fu t ur e o r

t h at a m a rk et f

or t h e g a s i s no t a v ail a

b le a nd t h a t e qu i pp i n g t h e w e ll w it h a n

ele c t r ical g e n e r a t o r t o prod u c e e l ect r i c it y fro m g a s or em p l oy i ng a c o lle c ti on

s y s te m d e s c r i b e d i n s ub d i v i s i on d o f s u b s ect i o n 2 i s ec on o mi call y i nf ea s i b le

.

S our ce : N

. D . C e n t

ury C od e

.

38-08

- 07. C OMM I SS I O N S H A L L S ET S P AC I N G U NI T S. T h e c o mm i s s i on s h all s et

s p a c i n g un it s a s fo ll o w s :

1. W h e n n ece s s a ry t o p r e v e n t w a s te

, t o a vo i d t h e dr illi ng of unn ece s s a ry w ell s

, o r t o

pr o t e ct c orr elati v e r i g h t s

, t h e c o m m i s s i on s h a ll e s ta b li s h s p aci ng un it s fo r a poo l

. S p ac i n g un it s w h e n e s ta

b l i s h e d m u s t b e o f un i for

m s ize a n d s h a p e for t h e e n ti r e po o l

,

e x ce p t t h at w h e n foun d t o b e n ece s s a ry fo r a n y of t h e p urpo s e s a

b o v e m e n ti on e d, t

h e

c o mm i s s i o n i s a

u t h o r i z e d t o d i v i d e a n

y p o o l i n t o z o n e s a n d e s ta b li s h s p a ci n g un it s

fo r ea c h z on e

, w h i c h un it s m a y d i ff e r i n s i ze a nd s h a

p e fr o m t ho s e e s t a b l i s h e d i n a n

y

o t h e r z o n e

. 2. T h e s ize a nd s h a

p e of s p a c i n g un it s a r e t o b e s u c h a s w i l l r e s u lt i n t h e e ff icie n t a nd

ec ono m ical d e v el op m e n t o f t h e poo l a s a w h o l e

. 3. A n or d e r e s t a

b l i s h i ng s p ac i n g un it s for a poo l m u s t s p ec i f y t h e s i z e a nd s h a

p e o f eac h

u n i t a nd t h e l o cati on of t

h e p e r m itte d w ell t

h e r e on i n acc ord a n ce w it h a r e a s on a

b l y

un i f o r m s p aci ng p la n

. U pon a

pp lic a ti on

, i f t h e c o mm i ss i o n f

i n d s t h at a w e l l d r ill e d a t

t h e pr e s c r i b e d l o cati on w o u l d no t p rodu ce i n p a y i n g qu a n titie s

, t h at s u r f ace

c on d i ti o n s w ou l d s ub s t a

n t i all y a d d t o t

h e bu r d e n or h aza rd of dr ill i n g s u c h w el l

, o r

t h at t h e d r ill i n g of s u c h w el l at a l o cat i o n o t h e r t h a n t h e p r e s c r i b e d l o cat i o n i s

o t h e r w i s e n e ce s s a r

y e it h e r t o p ro tect c o rr elat i v e r i gh t s

, t o p r e v e n t w a s te

, or t o e ff ect

gr eate r u l t im a

te r e c o v e ry of o il a n d g a s

, t h e c o m mi s s i on i s a

u t hor ize d t o e n te r a n

or d e r p e r m it t i n g t

h e w ell t o b e dr ille d a t a l o cat i o n o t h e r t h a n t h at pr e s c r i b e d by s u c h

s p ac i n g o rd e r ; ho w e v e r, t

h e c o mm i ss i o n s h all i n cl ud e i n t h e ord e r s u ita

b le pr o v i s i o n s

t o p r e v e n t t

h e pro d u ct i o n fr o m t

h e s p a c i n g un it o f m or e t h a n i t s j u s t a nd e qu ita

b le

s h a r e of t h e o il a nd g a s i n t

h e p oo l

.