Arkansas Administrative Code › Agency 178 - Arkansas Oil and Gas Commission › Rule 178.00.20-001 - See attached General Rules

Current through Register Vol. 49, No. 6, June, 2024
RULE
		  A -
ADMINISTRATIVE
RULE A-1:
REPEALED
Rule Repealed Effective October 19, 2018 in accordance with Act
			 781 of 2017
RULE A-2:
GENERAL HEARING PROCEDURES
a) Execution and Filing
1) All applications, except for applications
		  filed by the Director, shall be in writing and state the interests of the
		  application and the general nature of the order requested. Fourteen copies of
		  the application, including exhibits, shall be filed with the Commission
		  Director's office located in Little Rock, Arkansas ("Director's Office"). The
		  application shall be deemed filed when it is received by the Director's
		  Office.
2) All fourteen (14) copies
		  of the applications, including exhibits, except for those filed by the
		  Director, must be received in the Directors Office at least twenty (20) days
		  prior to the first day of regularly scheduled hearing. If the applicant or
		  his/her representative files an electronic version (a .pdf file labeled by the
		  assigned docket number) of the application, including exhibits, on an
		  electronic storage device approved by the Director a minimum of twenty (20)
		  days prior to the first day of the regularly scheduled hearing, the fourteen
		  (14) copies of the applications, including exhibits must be received in the
		  Director's office eighteen (18) days prior to the first day of the regularly
		  scheduled hearing.
3) Every
		  application shall be signed by the applicant or his/her representative and
		  his/her address shall be stated thereon. The signature of the applicant or
		  his/her representative constitutes a certificate by him/her that he/she has
		  read the petition and that to the best of his/her knowledge, information and
		  belief there is good ground to support the same.
4) Unless otherwise provided by General Rule
		  of the Commission, each application, except for applications filed by the
		  Director, shall be accompanied by a five hundred dollar ($500.00) filing fee
		  made payable to the Arkansas Oil and Gas Commission.
5) The applicant shall also submit a check
		  payable to the Arkansas Oil and Gas Commission in an amount approved by the
		  Commission, not to exceed two dollars ($2.00) per name of persons named in the
		  application, whose address are known as well as addresses for other persons
		  that the applicant seeks to provide a copy of the order. The applicant shall
		  also provide mailing labels for each person named in the application whose
		  address is known, as well as any other person that the applicant seeks to
		  provide a copy of the order. If the address of the person is unknown, the
		  Applicant shall provide a statement to that affect. All mailing labels shall be
		  provided within three (3) days after the date of the hearing.
6) If after the application is filed, and
		  prior to the hearing date, the Director finds the application deficient
		  relative to the requirements of subsections a) 1) through 4) above, the
		  Director shall return the application to the applicant with a statement as to
		  the deficiencies.
7) If after the
		  application is filed, and prior to the hearing date, the Director determines
		  that additional facts, data, records, or other information are necessary to
		  fully evaluate the application, the Director may require the applicant to
		  submit such necessary facts, data, records or other information.
8) Amendments may be filed at the time of the
		  hearing. However, any amendments filed prior to the hearing date shall be
		  submitted at least ten (10) days prior to the hearing date, and contain a
		  written statement or a clear indication as to what the amendment is being
		  amended. Any application that is substantially amended, as determined by the
		  Commission, regardless of the time of the amendment, may be continued until the
		  next hearing of the Commission.
b) Notice of Hearing
1) The Applicant shall prepare a notice of
		  hearing which shall be issued in the name of the Arkansas Oil and Gas
		  Commission. Such notice shall include a statement pertaining to the legal
		  authority for the hearing; the name of the applicant; the legal description of
		  the property or unit; a statement of the requested action; a listing of
		  interested parties; the time, date and location of the hearing; the Commission
		  assigned docket number; and the contact information of the Commission offices.
		  The notice shall also state that any interested person may file an entry of
		  appearance in the hearing by submitting such entry of appearance in writing to
		  the Hearing Officer or Director, and that thereafter such person shall be
		  deemed a party of record in the proceeding.
2) Unless otherwise provided by the Brine Act
		  found in Ark. Code Ann. §
										15-76-201
et. seq.
or General Rule of the Commission, the Applicant
		  shall serve such notice in the following manner:
A) By mailing such notice by U.S. Postal
		  service, first-class mail, directed to all interested parties at their last
		  known addresses at least ten (10) days prior to the date of the hearing, but
		  not more than thirty (30) days prior to the date of the hearing; and
B) By publication of such notice for at least
		  one (1) day, with the notice appearing at least ten (10) days prior to the date
		  of the hearing, but not more than thirty (30) days prior to the date of the
		  hearing, in the newspaper of general circulation published in each county
		  containing some portion of the land identified in the
		  application.
c)
		  Emergency Hearings
In the event an emergency is found to exist by the Commission
			 which in its judgment requires the making, changing, renewal or extension of an
			 order or special rule, without first having a hearing, such emergency order
			 shall have the same validity as if a hearing with respect to the same had been
			 held after due notice. The emergency order permitted by this section shall
			 remain in force until the date of the next regular Commission hearing set to be
			 held after the emergency rule or order was issued, or sixty days from its
			 effective date in accordance with the Brine Act found in Ark. Code Ann. §
									15-76-307,
			 and, in any event, it shall expire when any order made after due notice and
			 hearing with respect to the subject matter of such emergency order becomes
			 effective.
d) Pre-Hearing Conferences
1) Upon his/her own motion, or the motion of
		  a party of record, the Hearing Officer, as designated by the Commission, may
		  convene a meeting of the parties or their counsel in order to:
A) Simplify the factual and legal issues
		  presented by the hearing request;
B) Receive stipulations, admissions of fact
		  and the contents and authenticity of documents;
C) Exchange lists of witnesses the parties
		  intend to have testify and copies of all documents the parties intend to
		  introduce into evidence at the hearing; and
D) Discuss and resolve such other matters as
		  may tend to expedite the disposition of the hearing request and to assure a
		  just conclusion thereof.
2) Pre-hearing conferences may be held by
		  telephone conference if such procedure is acceptable to all parties.
e) Hearings
1) Every hearing shall be held on a date and
		  at a location established by the Commission, and conducted by a Hearing Officer
		  designated by the Commission. The Hearing Officer shall take all necessary
		  actions to avoid delay, to maintain order and to develop a clear and complete
		  record, and shall have all powers necessary and appropriate to conduct a fair
		  hearing and to render a decision on the petition, including but not limited to
		  the following:
A) To administer oaths and
		  affirmations;
B) To receive
		  relevant evidence;
C) To regulate
		  the course of the hearing and the conduct of the parties and their counsel
		  therein;
D) To consider and rule
		  upon procedural requests;
E) To
		  examine witnesses and direct witnesses to testify, limit the number of times
		  any witness may testify, limit repetitive or cumulative testimony and set
		  reasonable limits on the amount of time each witness may testify; and
F) To require the production of
		  documents or subpoena the appearance of witnesses, either on the Hearing
		  Officer's own motion or for good cause shown on motion of any party of record.
		  The Hearing Officer may require that relevant documents be produced to any
		  party of record on his/her own motion or for good cause shown on motion of any
		  party of record.
2) Every
		  person appearing shall enter his/her appearance by stating his/her name and
		  address. Thereafter, such person shall be deemed a party of record.
3) All participants in the hearing shall have
		  the right to be represented by an attorney licensed to practice law in the
		  State of Arkansas. An attorney appearing in a representative capacity in any
		  proceeding hereunder shall file a written notice of appearance identifying his
		  or her name, address and telephone number, and identifying the party
		  represented.
4) The Hearing Officer
		  shall allow all parties to present statements, testimony, evidence and argument
		  as may be relevant to the proceeding.
5) The Director, or his/her designee, may
		  appear at any public hearing and shall have the opportunity to question parties
		  or otherwise elicit such information as is necessary to reach a decision on the
		  application.
6) Preliminary
		  Matters: Where applicable, the following shall be addressed prior to receiving
		  evidence:
A) The applicant may offer
		  preliminary exhibits, including documents necessary to present the issues to be
		  heard, notices, proof of publication and orders previously entered in the
		  cause.
B) Rulings may be made by
		  the Hearing Officer on any pending motions.
C) Any other preliminary matters appropriate
		  for disposition prior to presentation of evidence.
7) Every hearing shall be conducted in
		  accordance with the Commission's rules and applicable laws of this
		  State.
f) Evidence
1) Admissibility: A party shall be entitled
		  to present his/her case by oral or documentary evidence, to submit rebuttal
		  evidence, and to conduct such cross-examination as may be required for a full
		  and true disclosure of the facts. Any oral or documentary evidence may be
		  received, but the presiding Hearing Officer may exclude evidence which is
		  irrelevant, immaterial or unduly prejudicial or repetitious. However, the
		  erroneous ruling on the admissibility of evidence shall not of itself
		  invalidate any rule or order.
2)
		  Official Notice: Official notice may be taken of any material fact not
		  appearing in evidence in the record if the circuit courts of this State could
		  take judicial notice of such fact. In addition, notice may be taken of
		  generally recognized technical or scientific facts within the Commission's
		  specialized knowledge.
3) Order of
		  Proof: The applicant shall open the proof. Other parties of record shall be
		  heard immediately following the petitioner. The Hearing Officer or Director or
		  his/her designee, as well as any Commissioner may examine any witnesses. In all
		  cases, the Hearing Officer shall designate the order of proof and may limit the
		  scope of examination or cross-examination.
4) Briefs: The Hearing Officer may require or
		  allow parties to submit written briefs to the Hearing Officer within 10 days
		  after the close of the hearing or within such other time as the Hearing Officer
		  shall determine as being consistent with the Commission's responsibility for an
		  expeditious decision.
g)
		  Recording of Proceedings; Testimony
The Commission shall provide a certified court reporter to take
			 down the testimony and preserve a record of all proceedings at the hearing. Any
			 person testifying shall be required to do so under oath. However, relevant
			 unsworn statements, comments and observations by any interested person may be
			 heard and considered by the Commission as such and included in the
			 record.
h) Postponement or
		  Continuance of Hearing
Any hearing may be postponed or continued for due cause by the
			 Hearing Officer upon his/her own motion or upon the motion of a party to the
			 hearing. A motion filed by a party to the hearing shall set forth facts
			 attesting that the request for continuance is not solely for the purpose of
			 delay. All parties involved in a hearing shall avoid undue delay caused by
			 repetitive postponements or continuances so that the subject matter of the
			 hearing may be resolved expeditiously. The Applicant may postpone or continue
			 the hearing of an application for three consecutive regularly scheduled
			 Commission meetings without prior approval of the Hearing Officer. After the
			 third consecutive postponement, the application shall be dismissed, unless the
			 Hearing Officer allows an exception for due cause, and the applicant shall be
			 required to re-file in accordance with applicable General Rules in order for an
			 application to be scheduled for a hearing.
i) Default - Failure to Appear.
If a party, after proper service of notice, fails to appear at
			 the pre-hearing conference or at a hearing, and if no continuance is granted,
			 the Commission may then proceed to make its decision in the absence of such
			 party. If the failure to appear at such pre-hearing conference or hearing is
			 due to an emergency situation beyond the parties' control, and the Commission
			 is notified of such situation on or before the scheduled pre-hearing conference
			 or hearing, the Hearing Officer may continue or post-pone the pre-hearing
			 conference or hearing. Emergency situations include sudden unavailability of
			 counsel, sudden illness of a party or his representative, or similar situations
			 beyond the parties' control.
j) Administrative Issuance of Default
		  Integration Order for Certain Unleased Mineral Interests.
1) The Director is authorized to issue an
		  administrative order integrating unleased mineral interest owners in any unit
		  where there is not a well capable of production if all of the following
		  criteria are met:
A) An application is filed
		  with the Director that includes all of the information required in General Rule
		  A-3 b) 2) A) though G);
B) Each
		  mineral interest sought to be integrated is less than one (1) net mineral
		  acre;
C) The cash bonus and royalty
		  rate requested by the applicant are equal to or greater than the highest and/or
		  best cash bonus and royalty terms that the applicant has knowledge of that have
		  been offered and accepted, or contracted for, for any acreage within the
		  unit(s) where the well is located (as defined in Section (a)(2) of General Rule
		  B-3), including any acreage within the unit(s) subject to leases or other
		  agreements with a fee mineral owner covering lands located in more than one
		  unit.
D) The applicant specifies
		  which Model Form Operating Agreement approved by the Commission it seeks to
		  use, with Paragraph III.1.A.(1) of the COPAS:
i) Not to exceed more than $7,500.00 for a
		  drilling well rate and $750.00 dollars for a producing well when the proposed
		  well is a dry natural gas well; or
ii) Not to exceed more than $4,500.00 for a
		  drilling well rate and $450.00 dollars for a producing well when the proposed
		  well is a liquid hydrocarbon well.
E) The applicant provides an affidavit or
		  other documentary evidence to support a reasonable risk factor penalty, and the
		  requested risk factor does not exceed 400%.
F) No earlier than ten (10) business days
		  prior to, and no later than three (3) business days prior to, the filing of the
		  application, the applicant shall send to affected mineral interests owners,
		  whose mailing addresses may reasonably be ascertained, a notice of the
		  application's filing and verify such mailing by affidavit, setting out the
		  names and addresses of all owners and the date(s) of mailing.
G) The applicant shall also submit proof of
		  publication of such notice of the applications in a newspaper of general
		  circulation within the county or counties within which the unit is located that
		  appeared at least one time no earlier than ten (10) days prior to filing the
		  application, and no later than the date of filing the application.
H) Any owner, so noticed shall have the right
		  to object to the granting of such application within fifteen (15) days after
		  the date of receipt of the application by the Commission. Each objection must
		  be made in writing and filed with the Director. If a timely written objection
		  is filed, then the applicant shall be promptly furnished a copy and such
		  application shall be denied, unless the objection is withdrawn within the
		  original fifteen (15) day time period after receipt of the application. If the
		  application is denied under this section, the applicant may request to have the
		  application referred to the Commission for determination in accordance with
		  General Rules A-2 and A-3, and other applicable hearing requirements, except
		  that no additional fee is required.
I) If no timely objection is received, or if
		  one is received and withdrawn within the original fifteen day time period after
		  receipt of the application, the Director is authorized to approve the
		  application administratively.
2) An application may be referred to the
		  Commission for determination when the Director deems it necessary that the
		  Commission make such determination for the purpose of protecting correlative
		  rights of all parties, in order to prevent waste, or for any other reason.
		  Promptly upon such determination, and not later than fifteen (15) days after
		  receipt of the application, the Director shall give the applicant written
		  notice, citing the reason(s) for referral to the full Commission for
		  determination. If the application is referred under this section, the applicant
		  shall file a request for a hearing, in accordance with General Rules A-2 and
		  A-3, and other applicable hearing requirements, except that no additional
		  filing fee is required.
3) If the
		  Applicant has satisfied all applicable provisions, the Director has not
		  notified the applicant of the determination to refer the application to the
		  Commission within the fifteen (15) day period in accordance with the foregoing
		  provisions, and if no objection is received at the office of the Commission
		  within the fifteen (15) days as provided for in subsection j)1)H) above, the
		  application shall be approved and an administrative default order shall be
		  issued by the Director.
k) Voting
1) In order for the Commission to adopt a
		  motion approving an application as applied for, or as amended by either the
		  applicant of a Commissioner, there must be:
A)
		  A quorum present;
B) A majority of
		  the votes cast must be in favor of the motion outlining the proposed order;
		  and
C) At least five (5) votes cast
		  must be in favor of the motion outlining the proposed
		  order.
2) If a motion
		  approving the application as applied for, or as modified by either the
		  applicant or a Commissioner does not receive the votes required in
		  subparagraphs 1) A) through C) above, and no subsequent or substitute motion
		  receives the votes required in subparagraphs 1) A) through C) above, then the
		  application shall be deemed to be denied by the Commission.
3) If an application is deemed to be denied
		  by the Commission in accordance with subparagraph i) 2) above, the Commission
		  shall enter an order of denial, which may be appealed as a final decision under
		  the Arkansas Administrative Procedures Act found in Ark. Code Ann. §
										25-15-201
et. seq.
4)
		  Nothing in this subparagraph shall limit the Commission's authority to continue
		  any application for due cause.
l) Commission's Order-Final Administrative
		  Decision
Within 30 days of the close of the hearing record, the Commission
			 shall issue findings of fact, conclusions of law and final administrative
			 decision of the Commission signed by the Director. The Commission shall have
			 continuing jurisdiction for the purposes of enforcement, and/or modifications
			 or amendments to the provisions of all orders. Any appeals shall be governed by
			 the Administrative Procedures Act found in Ark. Code Ann. §
										25-15-201
et. seq.
m)
		  Notice of Order-Recordation
Within 30 days after an order has been issued, a copy of such
			 order shall be mailed by the Commission to each interested party at his/her
			 last known address or his/her attorney of record, and filed in accordance with
			 the Administrative Procedures Act found in Ark. Code Ann. §
										25-15-201
et. seq.
n)
		  Official Record
In every case of adjudication, the official record shall be
			 complied in accordance with the Administrative Procedures Act found in Ark.
			 Code Ann. §
										25-15-201
et. seq.
(Source: 1992 rule book; amended April 13, 2008; amended June 5,
			 2009; amended October 24, 2009; amended July 1,
			 2016)
RULE A-3:
ADDITIONAL REQUIREMENTS FOR SPECIFIC TYPES OF
		  HEARINGS
a) Abandoned
		  Well and Emergency Response Hearings
1) Unless
		  otherwise specified below, General Rule A-2 shall apply to all abandoned well
		  and emergency response hearing proceedings pursuant to Ark. Code Ann. §
										15-72-217.
2) The Director shall only provide notice to
		  the permit holder named in the application, in accordance with General Rule A-2
		  (b) (2).
3) The Director shall have
		  the burden of proof at the hearing. A decision shall be supported by a
		  substantial evidence standard.
b) Integration Hearings
1) Unless otherwise specified below, General
		  Rule A-2 shall apply to all drilling unit integration proceedings heard by the
		  Commission.
2) Commencement of
		  Action
Where the oil or gas rights within a drilling unit are separately
			 owned and the owners of those rights have not voluntarily agreed to integrate
			 or pool those rights to develop the oil or gas, an owner may petition the
			 Commission for an order integrating those rights, pursuant to Ark. Code Ann.
			 §
											15-72-302
			 and §
											15-72-303.
			 The application for an order integrating interests shall contain the
			 following:
A) The name and address of
		  the applicant;
B) The applicant's
		  reasons for desiring to integrate the separately owned interests;
C) A legal land description of the drilling
		  unit sought to be established;
D) A
		  geologic report of the area where the proposed drilling unit is to be located
		  indicating the potential presence of reservoirs;
E) If the application is for the integration
		  of an exploratory drilling unit, as contemplated by Ark. Code Ann. §
											15-72-302:
i) the names of all owners named in the
		  application who have not agreed to integrate their interests in the right to
		  drill and produce oil or gas, or both, in the proposed drilling unit as of the
		  date of filing the petition, as disclosed by the records in the office of the
		  clerk for the county or counties in which the drilling unit is situated,
		  and;
ii) a statement that the
		  persons who own at least an undivided fifty percent (50%) interest in the right
		  to drill and produce oil or gas or both, from the total proposed unit agree
		  thereto at the time of the filing of the application;
F) If the application is for the integration
		  of an established drilling unit, as contemplated by Ark. Code Ann. §
											15-72-303,
		  and created in accordance with applicable Commission Orders or General Rules;
		  the names of all owners named in the application who have not agreed to
		  integrate their interests in the right to drill and produce oil or gas, or
		  both, in the proposed drilling unit as of the date of filing the petition, as
		  disclosed by the records in the office of the clerk for the county or counties
		  in which the drilling unit is situated;
G) Unleased mineral owners.
i) A resume of efforts showing that the
		  applicant has exercised due diligence, to locate each unleased mineral owner,
		  and that a bona fide effort was made to reach an agreement with each owner as
		  to how the unit would be developed, as follows:
aa) Due diligence, regarding non-industry
		  owners (persons who are not actively involved in the oil and gas business)
		  means, except for good cause shown, to be determined at the discretion of the
		  Commission, that the Applicant attempted to contact said owners and that bona
		  fide efforts to reach an agreement commenced at least sixty (60) days prior to
		  the date of the hearing; and that there are sufficient contacts to show that
		  the Applicant has exhausted all reasonable efforts to reach an agreement.
		  However, the Applicant shall not be required to contact an owner that the
		  Applicant is precluded by law from contacting, or an owner who has expressly
		  stated that the Applicant is not to contact said owner.
bb) Due diligence, regarding industry owners
		  (person who as an active business practice are involved in the oil and gas
		  business) means that the Applicant has provided industry owners notice,
		  including an Authorization for Expenditure ("AFE") and Well Proposal, prior to
		  filing the integration application.
ii) An affidavit indicating what the highest
		  and/or best cash bonus and royalty terms that the Applicant has knowledge of
		  that have been offered and accepted, or contracted for, for any acreage within
		  the unit(s) where the well is located (as defined in Section (a)(2) of General
		  Rule B-3), including any acreage within the unit(s) subject to leases or other
		  agreements with a fee mineral owner covering lands located in more than one
		  unit. If this information changes prior to the hearing, the Applicant shall
		  inform the Commission of any changes. If no affidavit is provided prior to or
		  at the time of the hearing, the Applicant shall provide sworn testimony as to
		  the highest and/or best cash bonus and royalty terms that the Applicant has
		  knowledge of that have been offered and accepted, or contracted for, for any
		  acreage within the unit(s) where the well is located (as defined in Section
		  (a)(2) of General Rule B-3), including any acreage within the unit(s) subject
		  to leases or other agreements with a fee mineral owner covering lands located
		  in more than one unit.
H)
		  Uncommitted Leasehold Working Interest Owners.
A resume of efforts showing that the applicant has exercised due
			 diligence, to locate each uncommitted leasehold working interest owner and that
			 a bona fide effort, was made to reach an agreement with each owner as to how
			 the unit would be developed, by providing the uncommitted leasehold working
			 interest owners notice, including an AFE and Well Proposal, prior to filing the
			 integration application.
I)
		  Any other information relevant to protect correlative rights of the parties
		  sought to be affected by the order.
c) Appeal of Director's Decision.
1) Any interested party may appeal a permit
		  denial, any enforcement action, or rule interpretation decision made by the
		  Director to the Commission.
2)
		  Unless otherwise specified below, General Rule A-2 shall apply to all hearings
		  requested to appeal a decision of the Director.
3) The application to appeal a Director's
		  decision shall be accompanied by a two hundred and fifty dollar ($250.00)
		  filing fee.
d)
		  Exceptional Well Location
1) Unless otherwise
		  specified below, General Rule A-2 shall apply to all hearings for an
		  application which has been referred to the Commission in accordance with
		  General Rule B-40, or for which General Rule B-40 is not applicable.
2) The application shall include proof of
		  notice to each owner within the unit in which the well is located and within
		  the units offsetting the boundary line or lines, or in the case of wells in
		  uncontrolled fields within the boundaries of mineral lease lines and the
		  offsetting lease(s), which shall be encroached upon by the exceptional well
		  location.
3) If the application has
		  been referred to the Commission in accordance with General Rule B-40, no
		  application fee is required to be submitted with the application.
e) Authority to Commingle and
		  Additional Completions
1) Unless otherwise
		  specified below, General Rule A-2 shall apply to all hearings for which the
		  applicant has requested a hearing for an application which has been denied in
		  accordance with General Rule D-18 or General Rule D-19, or for which General
		  Rules D-18 or D-19 are not applicable.
2) If the applicant requests the hearing in
		  accordance with General Rule D-18, the application shall include proof of
		  notice to all offset operators in all adjacent units.
3) If the applicant requests the hearing in
		  accordance with General Rule D-19, the application shall include proof of
		  notice to all working interest owners in the subject unit and all offset
		  operators in all adjacent established units including all working interest
		  owners in the offset unit where the operator is the same as the
		  applicant.
f)
		  Establishment of Field Rules
1) Unless
		  otherwise specified below, General Rule A-2 shall apply to all hearings for the
		  creation of field rules, as provided by General Rule B-38.
2) The application shall include proof of
		  notice to each owner, as defined in Ark. Code Ann. §
										15-72-102(9),
		  within the proposed unit(s) in which the well(s) is/are located and within all
		  units offsetting the boundary line or lines of the proposed unit(s).
3) The application shall include a geologic
		  report of the proposed field, specifying the geologic setting of the proposed
		  field and including at a minimum a completion report of the discovery and other
		  wells located within the proposed field, a type geophysical log from a well(s)
		  in the proposed field and a structure and isopach map of the productive zone(s)
		  within the proposed field.
(Source: 1992 rule book; amended April 13, 2008; amended December
			 14, 2008; amended July 17, 2009; amended July 1, 2016)
RULE A-4:
DEFINITIONS
Unless the context otherwise requires, the words defined shall
			 have the following meaning when found in these rules, to-wit:
ATMOSPHERIC PRESSURE
-
			 shall mean the pressure of air at the sea level, equivalent to about 14.7
			 pounds to the square inch.
BALANCE
- (Gas) shall mean
			 an instrument used for determining the specific gravity of gases by weighing
			 methods.
BAROMETRIC PRESSURE
- shall
			 mean the pressure or weight of air determined by the use of a barometer at a
			 given point.
"BARREL" or "BARREL OF OIL"
- shall mean 42 United States gallons of oil at a test of 60 degrees
			 Fahrenheit, with deductions for the full percent of basic sediment, water and
			 other impurities present, ascertained by centrifugal or other recognized and
			 customary test.
BLOW-OUT
- shall mean a
			 sudden or violent escape of crude oil or natural gas, as from a drilling well,
			 when high formation pressure is encountered.
BLOW-OUT PREVENTER
- shall
			 mean a heavy casing head control filled with special gates or discs which may
			 be closed around the drill pipe, or which completely closes the top of the
			 casing if the pipe is withdrawn.
BOTTOM HOLE PRESSURE
-
			 shall mean the pressure in pounds per square inch at or near the bottom of an
			 oil or gas well determined at the face of the producing horizon by means of a
			 pressure recovery instrument, adopted and recognized by the oil and gas
			 industry, which can be lowered into the bore of the well. In the case of gas
			 wells or wells having no fluid in the well bore, it shall mean the pressure as
			 calculated by adding the pressure at the surface of the ground to the
			 calculated weight of the column of gas from the surface to the bottom of the
			 hole.
CASING PRESSURE
- shall
			 mean the pressure built up between the casing and tubing when the casing and
			 tubing are packed off at the top of the well.
CASINGHEAD GAS
- shall mean
			 any gas or vapor, or both gas, and vapor, indigenous to an oil stratum and
			 produced from such stratum with oil.
CHRISTMAS TREE
- shall mean
			 an assembly of valves and fittings at the head of the casing of a well to
			 control the flow. Also spoken of as "well head connections."
CIRCULATION
- shall mean
			 the passing of an approved fluid down through the drill stem and up to the
			 surface in the process of rotary drilling in setting casing.
COMBINATION WELL
- shall
			 mean a well productive of both oil and gas in commercial quantities from the
			 same common source of supply and which has sufficient natural gas pressure to
			 cause the gas to enter a pipe line carrying more than atmospheric
			 pressure.
COMMISSION
- shall mean the
			 Arkansas Oil and Gas Commission.
COMMON SOURCE OF SUPPLY
-
			 shall mean the geographical area or horizon definitely separated from any other
			 such area or horizon and which contains, or from competent evidence appears to
			 contain, a common accumulation of oil or gas or both. Any oil or gas field or
			 part thereof which comprises and includes any area which is underlaid, or which
			 from geological or other scientific data or experiments or from drilling
			 operations or other evidence appears to be underlaid by a common pool or
			 accumulation of oil or gas or both oil and gas.
CONDENSATE
- shall mean the
			 liquid produced by the condensation of a vapor or gas either after it leaves
			 the reservoir or while still in the reservoir. Condensate is often called
			 Distillate, Drips, White Oil, Etc.
CONNATE WATER
- shall mean
			 water which was deposited with the deposition of solid sediments in an oil or
			 gas reservoir and which has not, since its deposition, existed as surface water
			 at atmospheric pressure.
CONSERVATION
- shall mean
			 the conserving, preserving, guarding or protecting the oil and gas resources of
			 the state by obtaining the maximum efficiency with minimum waste in the
			 production, transportation, processing, refining, treating and marketing of the
			 unrenewable oil and gas resources of the state.
CONTROLLED OIL FIELD
-
			 shall mean any common source of supply of crude oil discovered after January 1,
			 1937, or any field discovered prior to January 1, 1937, provided any pool
			 therein has been discovered after January 1, 1937.
CONTROLLED GAS FIELD
-
			 shall mean any common source of supply of natural gas discovered after January
			 1, 1937, or any field discovered prior to January 1, 1937, provided any pool
			 therein has been discovered after January 1, 1937.
CONTROLLED PRODUCTION
-
			 shall mean the production of oil or gas or both oil and gas from a controlled
			 oil or gas field.
CORE HOLE
- shall mean a
			 hole drilled below the fresh water level for obtaining geological and
			 structural information without penetrating a known producing formation in the
			 area.
CRUDE OIL
- shall mean
			 petroleum oil, and other hydrocarbons, regardless of gravity, which are
			 produced at the well in liquid form by ordinary production methods, and which
			 are not the result of condensation of gas before or after it leaves the
			 reservoir.
CUBIC FOOT OF GAS
- shall
			 mean the volume of gas contained in one cubic foot of space at the standard
			 pressure base and the standard temperature base. The standard pressure base
			 shall be 14.65 pounds per square inch absolute and the standard temperature
			 base shall be 60° Fahrenheit.
DAY
- shall mean a period
			 of twenty-four (24) consecutive hours from 7:00 a.m. one day to 7:00 a.m. the
			 following day.
DEVELOPMENT
- shall mean
			 any work which actively looks toward bringing in production, such as erecting
			 rigs, building tankage, drilling wells, etc.
DIFFERENTIAL PRESSURE
-
			 shall mean the difference between the tubing pressure and the flow-line
			 pressure; the drop flow-line pressure; the drop in pressure of the fluid in
			 passing through the flow-nipple or choke; in the case of an orifice meter, the
			 difference of the pressures on the upstream and the down-stream sides of the
			 orifice; a pressure measured with a differential gauge or with a manometer
			 (U-tube); any difference in pressure.
DISTILLATE
- shall mean a
			 product of distillation of the fluid condensed from the vapor driven off in the
			 still, such as gasoline, naphtha, kerosene, and light lubrication oils, the
			 result of distillation of crude oil. Condensate is commonly referred to as
			 distillate.
DIVISION ORDER
- shall mean
			 a written statement, dated, duly signed by the owners and delivered to the
			 purchaser, certifying and guaranteeing the interests of ownership of the
			 production and directing payments according to those interests.
DRY GAS
- shall mean
			 natural gas obtained from sands that produce gas only; or natural gas obtained
			 which does not contain the heavier fractions which may easily condense under
			 normal atmospheric conditions; not casinghead gas.
EDGE WATER
- shall mean
			 water that holds the oil or gas, or both oil and gas, in higher structural
			 position, usually encroaching on a pool as the oil or gas is removed.
FIELD
- shall mean the
			 general area which is underlaid or appears to be underlaid by at least one
			 pool; and "field" shall include the underground reservoir or reservoirs
			 containing crude petroleum oil or natural gas, or both. The words "field" and
			 "pool" mean the same thing when only one underground reservoir is involved;
			 however, "field" unlike "pool," may relate to two or more pools.
FLOWING WELL
- shall mean a
			 well from which oil or gas flows naturally without pumping or other means of
			 artificial lift.
GAS
- shall mean the
			 natural gas obtained from gas or combination wells regardless of its chemical
			 analysis.
GAS ALLOWABLE
- shall mean
			 the amount of natural gas authorized to be produced by order of the
			 Commission.
GAS ASSESSMENT
- shall mean
			 the assessment on each thousand cubic feet of gas produced from a gas well to
			 pay the costs incident to the administration of the rules of the
			 Commission.
GAS REPRESSURING
- shall
			 mean the introduction of gas or air into a common source of supply by
			 artificial means in order to replenish, replace, or increase the gas energy
			 causing the oil to flow out of the reservoir.
GAS-SOUR
- shall mean gas
			 which contains hydrogen sulfide in sufficient quantities to render it unfit for
			 domestic or commercial use.
GAS-WELL
- shall mean (1) a
			 well which produces natural gas only; (2) any well capable of producing gas in
			 commercial quantities and also producing oil from the same common source of
			 supply but not in commercial quantities; or (3) any well classed as a gas well
			 by the Commission for any reason; (4) a well that contains no liquid
			 hydrocarbons in the reservoir.
GAS-LIFT
- shall mean a
			 method of injecting gas for lifting a liquid from the well to the
			 surface.
GAS-OIL RATIO
- shall mean
			 the number of cubic feet of gas at atmospheric pressure, as produced from an
			 oil well or combination well, divided by the number of barrels (42 gallons) of
			 oil, the unit of time being a day of 24 hours.
ILLEGAL OIL
- shall mean
			 oil which has been produced within the State of Arkansas from any well during
			 any time that well has produced in excess of the amount allowed by any rule or
			 order of the Commission, as distinguished from oil produced within the State of
			 Arkansas from a well not producing in excess of the amount so allowed, which is
			 "legal oil."
ILLEGAL GAS
- shall mean
			 gas which has been produced within the State of Arkansas from any well during
			 any time that well has produced in excess of the amount allowed by any rule or
			 order of the Commission, as distinguished from gas produced within the State of
			 Arkansas from a well not producing in excess of the amount so allowed, which is
			 "legal gas."
ILLEGAL PRODUCT
- shall
			 mean any product of oil or gas, any part of which was processed or derived, in
			 whole or in part, from illegal oil or illegal gas or from any product thereof
			 as distinguished from "legal product," which is a product possessed or derived
			 to no extent from illegal oil or illegal gas.
INDICES OF PRODUCTIVE VALUE
- shall mean the factors to be considered in ascertaining the productivity of
			 all property in a common source of supply for the purpose of fixing the
			 allowable production. These indices can mean, at the discretion of the
			 Commission, acreage, gas oil ratios, static reservoir pressures, flowing
			 pressures, fluid level drawdowns, the well or wells, or any other pertinent
			 factors.
LEASE TANK
- shall mean the
			 tank or other receptacle into which oil is produced either directly from a well
			 or from a well through gas separator, gun barrel or similar equipment.
METER
- shall mean an
			 instrument for measuring and recording the volume of gases or liquids.
MONTH and CALENDAR MONTH
-
			 shall mean the period or interval of time from 7 a.m. on the first day of any
			 month of the calendar to 7 a.m., of the first day of the next succeeding month
			 of the calendar.
MUD-LADEN FLUID
- shall
			 mean any approved mixture of water and clay or other material as the term is
			 commonly used in the industry.
NATURAL GASOLINE
- shall
			 mean gasoline manufactured from casinghead gas or from any natural gas.
OIL
- shall mean crude oil
			 or petroleum.
OIL ALLOWABLE
- shall mean
			 the amount of oil authorized to be produced by the order of the
			 Commission.
OIL ASSESSMENT
- shall mean
			 the assessment on each barrel of oil produced, from any field or reservoir, to
			 pay the costs incident to the administration of the rules of the
			 Commission.
OIL-PIPELINE
- shall mean
			 oil free from water and basic sediment to the degree that it is acceptable for
			 pipe line transportation and refinery use.
OIL-WELL
- shall mean any
			 well capable of producing oil in paying quantities not a gas well.
OPERATOR
- shall mean any
			 person who, duly authorized, is in charge of the development of a lease or the
			 operation of a producing well.
OVERAGE, OVER-PRODUCTION
-
			 shall mean the oil or gas produced in excess of the allowable as set by the
			 Commission.
OWNER
- shall mean the
			 person who was the right to drill into and produce from any field or reservoir,
			 and to appropriate the production either for himself or for himself and
			 another.
PERIOD, ALLOWABLE
- shall
			 mean the month or day, as designated, in which allowable may be
			 produced.
PERMEABILITY
- shall mean a
			 measure, determined by scientific means, of the ability of fluid or gas to
			 traverse the producing horizon in an oil or gas reservoir.
PERSON
- shall mean any
			 natural person, corporation, association, partnership, receiver, trustee,
			 guardian, executor, administrator, Federal agency, or representative of any
			 kind.
PETROLEUM
- shall mean the
			 natural untreated oil obtained from an oil well.
PIPE LINE
- shall mean any
			 pipes above or below the ground used or to be used for the transportation of
			 oil or gas.
PIPE LINE OIL
- see, Oil,
			 Pipeline
PLUG
- shall mean the
			 abandoning of a producing or non-productive well; the stopping of the flow of
			 water, gas or oil in a well.
POOL
- shall mean an
			 underground reservoir containing a common accumulation of crude petroleum oil
			 or natural gas or both. Each zone of a general structure which is completely
			 separated from any other zone in the structure is covered by the term "Pool" as
			 used herein.
POROSITY
- shall mean the
			 state or quality of being porous; the volume of pore space expressed as a
			 percentage of the total volume of the rock mass; the percentage or pores of
			 interspaces forming the total bulk of the material.
POTENTIAL
- shall mean the
			 actual or properly computed daily ability of a well to produce oil or gas,
			 either or both, as determined by the rules of the Commission.
PRESSURE BASE
- shall mean
			 an absolute pressure agreed upon or set as a base for converting the volume of
			 gas metered to correct volume. The standard pressure base shall be 14.65 pounds
			 per square inch absolute.
PRESSURE MAINTENANCE
-
(1) shall mean the reintroduction
		  (in the early stages of field development) of gas or fluid produced from an
		  oil, gas or combination well to maintain the pressure of the
		  reservoir.
(2) The introduction of
		  gas or fluid for the same purpose but obtained from an outside
		  source.
PRODUCER
- shall mean any
			 person who owns, in whole or in part, a well capable of producing oil or gas or
			 both in paying quantities.
PRODUCT
- means any
			 commodity made from oil or gas, and shall include refined crude oil, crude
			 tops, topped crude, processed crude petroleum, residue from crude petroleum,
			 cracking stock, uncracked fuel oil, fuel oil, treated crude oil, residuum, gas
			 oil, casinghead gasoline, natural gas, gasoline, naphtha, distillate, gasoline,
			 kerosene, benzine, wash oil, waste oil, blended gasoline, lubricating oil,
			 blends or mixture of oil with one or more liquid products or by-products
			 derived from oil or gas, whether herein above enumerated or not.
PRODUCTION, ILLEGAL.
- see
			 Illegal Gas, Illegal Oil
PRODUCTION INTERESTS
-
			 shall mean the right to a specified part of production.
PROVEN OIL OR GAS LAND
-
			 shall mean that area which has been shown by development and geological
			 information to be such that additional wells drilled thereon are reasonably
			 certain to be commercially productive of oil or gas or both.
PURCHASER
- shall mean any
			 person who directly or indirectly purchases, transports, takes or otherwise
			 removes production to his account from a well or lease. Purchaser is usually
			 considered to be the person holding the Division Order.
RATABLE TAKE
- see
			 Controlled Production.
RECOMPLETION
- shall mean
			 completion operations performed in a source of supply that is separate and
			 distinct from the source of supply in which the well was successfully completed
			 prior to the commencement of the current completion operations.
REFINER
- shall mean every
			 person who has any part in the control or management of any operation by which
			 the physical or chemical characteristics of oil or products are changed, but
			 exclusive of the operations of passing oil through separators to remove gas,
			 placing oil in settling tanks to remove basic sediment and water, dehydrating
			 oil, and generally cleaning and purifying oil.
REPRESSURE
- shall mean to
			 increase the reservoir pressure by the introduction of gas or fluid into the
			 reservoir.
RESERVOIR PRESSURE
- see
			 Bottom Hole Pressure
ROCK PRESSURE
- shall mean
			 the well head pressure on a gas well that has been closed long enough to attain
			 a maximum.
ROTARY DRILLING
- shall
			 mean the hydraulic process of drilling, consisting of rotating a column of
			 drill pipe to the bottom of which is attached a rotary drilling bit.
RUN
- shall mean oil or gas
			 removed from the lease.
SEPARATOR
- shall mean an
			 apparatus for separating gas from oil with relative efficiency, as it is
			 produced.
SHUT-IN PRESSURE
- shall
			 mean the pressure noted at the wellhead when the well is completely shut in.
			 Not to be confused with Bottom Hole Pressure
SPUDDING
- shall mean the
			 initial step in drilling.
STORER
- shall mean every
			 person as herein defined who stores, terminals, retains in custody under
			 warehouse or storage agreements or contracts, oil which comes to rest in his
			 tank or other receptacle under control of said storer, but excluding the
			 ordinary lease stock of producers.
TAKER
- see
			 Purchaser.
TENDER
- shall mean a
			 permit or certificate of clearance for the transportation of oil, gas, or
			 products, approved and issued or registered under the authority of the
			 Commission.
TENDERSHIP
- shall mean the
			 production delivered from one person to another.
TOPPING PLANT
- shall mean
			 a refinery designed to remove only the gasoline and kerosene fractions from
			 oil.
TRAP PRESSURE
- shall mean
			 pressure held at the oil and gas separator.
TRANSPORTER
- shall mean
			 and include any common carrier by pipe line, barge, boat or other water
			 conveyance, or truck or other conveyance except railroads, and any person
			 transporting oil by pipeline, barge, boat or other water conveyance, or truck
			 and other conveyance.
TUBING
- shall mean the
			 conduit through which oil or gas is removed from a well.
VACUUM
- shall mean
			 pressure which is reduced below the pressure of the atmosphere.
VOLATILE
- shall mean
			 easily wasting away by evaporation.
WASTE
- in addition to its
			 ordinary meaning, shall mean "physical waste" as that term is generally
			 understood in the oil and gas industry. It shall include:
(1) The inefficient, excessive or improper
		  use or dissipation of reservoir energy; and the locating, spacing, drilling,
		  equipping, operating or producing of any oil or gas well or wells in a manner
		  which results, or tends to result, in reducing the quantity of oil or gas
		  ultimately to be recovered from any pool in this state.
(2) The inefficient storing of oil; and the
		  locating, spacing, drilling, equipping, operating or producing of any oil or
		  gas well or wells in a manner causing, or tending to cause, unnecessary or
		  excessive surface loss or destruction of oil or gas.
(3) Abuse of the correlative rights and
		  opportunities of each owner of oil and gas in a common reservoir due to
		  non-uniform, disproportionate, and unratable withdrawals causing undue drainage
		  between tracts of land.
(4)
		  Producing oil or gas in such manner as to cause unnecessary water channeling or
		  coning.
(5) The operation of any
		  oil well or wells with an inefficient gas-oil ratio.
(6) The drowning with water of any stratum or
		  part thereof capable of producing oil or gas.
(7) Underground waste however caused and
		  whether or not defined.
(8) The
		  creation of unnecessary fire hazards.
(9) The escape into the open air from a well
		  producing both oil and gas, of gas in excess of the amount which is necessary
		  in the efficient drilling or operation of the well.
(10) The use of gas for the manufacture of
		  carbon black.
(11) Permitting gas
		  produced from a gas well to escape into the air.
WATER CONE
- shall mean the
			 creation of irregularly intruding water by allowing a well to produce too
			 rapidly.
WELL LOG
- shall mean an
			 electrical, or any other type of survey, made for the purpose of ascertaining
			 the strata through which a well bore has penetrated.
WILDCAT WELL
- shall mean a well drilled
			 outside the geological confines of proven production.
WORKOVER
- shall mean work of a remedial
			 nature performed within the vertical confines of the same source of
			 supply.
(Source: 1992 rule book)
RULE A-5:
ENFORCEMENT
		  PROCEDURES
a)
		  Definitions:
1) "Commission" shall mean the
		  Arkansas Oil and Gas Commission, on which the Director serves as secretary, but
		  is a non-voting member.
2)
		  "Director" shall mean the Commission Director of Production and
		  Conservation.
3) "Regulated Entity"
		  shall mean all operators, owners, producers or persons subject to Commission
		  regulatory authority.
4) "UIC"
		  shall mean the Underground Injection Control program of the Federal Safe
		  Drinking Water Act.
b)
		  Any regulated entity engaged in the drilling, operation or plugging of any
		  production, injection, or other well or drill hole regulated by the Commission;
		  or the operation of any crude oil or gas production or injection facility; or
		  the operation of any natural gas line or crude oil flowline regulated by the
		  Commission; or transporter by tank truck of any oilfield production or
		  completion fluid; or seismic activity; or any other activity regulated by the
		  Commission, is subject to this rule for violation of any oil, gas and/or brine
		  statutes, or any rule or permit condition of the Commission.
c) In accordance with Ark. Code Ann. §
									15-72-103(c)
		  or §
									15-76-303(c),
		  any person knowingly and willfully aiding or abetting any other person in the
		  violation of any statute relating to the conservation of oil, gas and/or brine,
		  or the violation of any provision of the state oil, gas and/or brine statutes,
		  or any rule, order, or permit condition, shall be subject to the same penalties
		  as are prescribed herein for the regulated entity.
d) Notice of Non-Compliance
1) A Notice of Non-Compliance may be issued
		  when any regulated entity is in noncompliance with any requirement of the
		  Arkansas oil, gas and/or brine statutes, or rules, orders, or any permit
		  condition, and:
A) That the non-compliance was
		  not caused by the regulated entity's deliberate action;
B) That any action necessary to abate the
		  non-compliance was commenced immediately and was or will be completed within a
		  specified date certain, as established by the Director, or his or her designee,
		  not to exceed thirty (30) days from the date of the determination that the
		  regulated entity was determined to be in non-compliance; and
C) That the non-compliance has not caused and
		  cannot reasonably be expected to cause significant environmental harm or damage
		  to property.
2) The
		  notice of non-compliance shall be documented in writing and, delivered via
		  first class mail to the regulated entity or to the regulated entity's
		  representative as reported on the AOGC Form 1 Organization Report. The written
		  notification shall indicate the nature and circumstances of the non-compliance,
		  and the time within which and the means by which the non-compliance is to be
		  abated.
3) If abatement was not
		  completed as specified in the written notification, the Director, or his or her
		  designee, may issue a formal Notice of Violation in accordance with
		  subparagraph (e) below.
4) The
		  provisions of this subparagraph (d), shall not apply to the following types of
		  incidents, which may require a Notice of Violation to be issued in accordance
		  with subparagraph (e) below:
A) Conducting
		  any regulated activity specified in paragraph (b) above prior to issuance or
		  re-issuance of the appropriate Commission permit or authority;
B) Operating an annular or casing
		  injection/disposal well or a well with pressure on the annulus;
C) Failure to maintain required performance
		  bond or pay annual well fees;
D)
		  Failure to establish mechanical integrity on any UIC well prior to operation,
		  or failure to repair any UIC well following failure of mechanical
		  integrity;
E) Commencing any work
		  or activity on a well or its related production facility or well site that has
		  been placed in the Abandoned and Orphan Well Plugging Program;
F) Failure to provide emergency response for
		  a crude oil or saltwater spill;
G)
		  Improper discharge or disposal of produced fluids; or
H) Operating a well in violation of spacing
		  requirements or permit conditions,
e) Notice of Violation(s)
1) A Notice of Violation may be issued, by
		  the Director or his or her designee, when any regulated entity is in violation
		  of any requirements of the Arkansas oil, gas, and/or brine statutes, or rules,
		  orders, or any permit conditions of the Commission. Unless otherwise determined
		  by the Commission after notice and a hearing, a regulated entity shall not be
		  held responsible by the Commission for violations of oil, gas and/or brine
		  statutes, or rules, or permit conditions of the Commission in the absence of
		  the issuance of an underlying Notice of Violation.
2) The Notice of Violation shall be in
		  writing and contain:
A) A statement regarding
		  the nature of the violation, including a citation to the specific section of
		  the oil, gas and/or brine statutes, or any rule, order or permit condition of
		  the Commission alleged to have been violated;
B) The suggested action needed to abate the
		  violation including any appropriate remedial measures to prevent future
		  violations;
C) The time within
		  which the violation should be abated; and
D) A notice of any civil penalties, as
		  specified in subparagraph g) below, the Director will request to be issued by
		  the Commission.
E) A notice of any
		  civil penalties for violations of natural gas line regulations under United
		  States Department of Transportation, Office of Pipeline Safety jurisdiction in
		  accordance with appropriate federal regulation specified in
		  49 CFR 190.223,
		  the Director will request to be issued by the Commission.
3) The Notice of Violation may include a
		  well, lease, or unit cessation requirement for the following types of
		  violations:
A) Violation of production
		  allowable;
B) Failure to maintain
		  required well specific performance bond;
C) Drilling or operating, without a
		  Commission permit or permit transfer, a well required to be permitted or
		  transferred;
D) Operating a well
		  that has been determined to be abandoned by the Commission;
E) Failure to plug a leaking well or a well
		  ordered to be plugged by the Commission;
F) Operating an annular or casing
		  injection/disposal well;
G)
		  Operating a UIC Class II or V well with a failed mechanical integrity
		  test;
H) Operating a UIC Class II
		  or V well with pressure on the annulus indicating tubing and/or casing
		  failure;
I) Failure to provide
		  emergency response or remediate a crude oil or produced water spill;
J) Improper disposal or discharge of produced
		  fluids; or
K) Any other violation
		  for which a cessation requirement is authorized by an oil, gas and/or brine
		  statute, or rule, order or permit condition.
4) The Notice of Violation may also include a
		  state-wide cessation requirement for the following types of violations:
A) Failure to maintain required blanket
		  financial assurance as specified in General Rule B-2;
B) Failure to pay annual well fees as
		  specified in General Rule B-2;
C)
		  Failure to pay any monies due the Abandoned and Orphaned Well Plugging Fund as
		  specified in General Rule G-1; or
D) Failure to comply with the provisions of
		  General Rule B-42, or General Rule E- 3.
E) Any other violation for which a state-wide
		  cessation requirement is authorized by an oil, gas and/or brine statute, or
		  rule, order or permit condition.
5) The Director, or his or her designee,
		  shall send via certified mail the Notice of Violation to the regulated entity,
		  or the regulated entity's representative as reported on the AOGC Form 1
		  Organization Report, charged with the violation(s), or provide personal
		  delivery of a copy of the notice to the regulated entity, or the regulated
		  entity's representative.
6) The
		  regulated entity charged with the violation(s) may request a Director's Review
		  of the Notice of Violation and provide the Director, in writing, any
		  information in mitigation of the violation(s) on or before thirty (30) calendar
		  days of the mailing or personal delivery of the original Notice of Violation,
		  unless a shorter time period is specified in the Notice of Violation for
		  instances where there is a condition that creates an imminent danger to the
		  health or safety of the public or threatens significant environmental harm or
		  damage to the property. Such written information may include a proposed
		  alternative to the required action needed to abate the violation(s). Upon
		  receipt of such information from the regulated entity, the Director, shall
		  conduct a review.
7) During the
		  review, the Director may consider any of the following criteria in reaching a
		  Final Director's Decision regarding the violation(s):
A) The regulated entity's history of previous
		  violations, including violations at other locations and under other
		  permits;
B) The seriousness of the
		  violation, including any irreparable harm to the environment or damage to
		  property;
C) The degree of
		  culpability of the regulated entity; and
D) The existence of any additional conditions
		  or factors in aggravation or mitigation of the violation, including information
		  provided by the regulated entity.
8) Upon completion of the review, the
		  Director shall issue a Final Director's Decision to:
A) affirm the violation; or
B) vacate the violation; or
C) amend or modify the type of violation and
		  abatement requirements specified in the violation; or
D) establish probationary or permanent
		  modification or conditions to any underlying permit related to the violation,
		  which may include special monitoring or reporting requirements; or
E) enter into a settlement agreement to
		  extend the amount of time provided to complete remedial actions necessary to
		  abate the violations or reduce the amount of the requested assessed civil
		  penalty.
9) The Final
		  Director's Decision shall be delivered to the regulated entity, or the
		  regulated entity's representative, as reported on the AOGC Form 1 Organization
		  Report, via first class mail. The Final Director's Decision may be appealed to
		  the Commission by filing an application in accordance with General Rule A-2,
		  A-3, and other applicable hearing procedures. The application to appeal the
		  Final Director's Decision is required to be received by the Director within
		  thirty (30) days of the mailing of the Final Director's Decision. The
		  application shall state the reason for the appeal and shall be scheduled to be
		  heard by the Commission in accordance with General Rule A-2, A-3, and other
		  applicable hearing procedures.
10)
		  A Notice of Violation for which a Director's Review has not been requested,
		  shall become a final administrative decision of the Commission thirty (30) days
		  following the mailing of the Notice of Violation.
11) A Final Director's Decision not appealed
		  to the Commission within thirty (30) days of mailing of the Final Director's
		  Decision shall become a final administrative decision of the
		  Commission.
12) All violations
		  specified in a Notice of Violation(s) which have become a final administrative
		  decision in accordance with subparagraph e) 10), a Final Director's Decision
		  which has become a final administrative decision of the Commission in
		  accordance with subparagraph e) 11), or by Order of the Commission, shall be
		  fully abated within the time frame specified in the original Notice of
		  Violation, Final Director's Decision, or Order of the Commission. No further
		  permits or authorities shall be issued to the regulated entity until all
		  outstanding violations specified in a Notice of Violation which has become a
		  final administrative decision in accordance with subparagraph e) 10), a Final
		  Director's Decision which has become a final administrative decision of the
		  Commission in accordance with subparagraph e) 11), or by Order of the
		  Commission have been fully abated.
f) In addition to the issuance of a Notice of
		  Violation(s), the Director may initiate further enforcement proceedings, as
		  provided for in statute, as follows:
1)
		  Assessment of a civil penalty as provided in Ark. Code Ann. §
										15-71-114,
		  §
										15-72-103,
		  §
										15-72-202,
		  or §
										15-76-303;
2) The revocation of a certificate of
		  clearance on a state-wide basis, as provided for in Ark. Code Ann. §
										15-71-110(11);
3) The filing of a civil complaint in a court
		  of competent jurisdiction in the County where the violation occurred, as
		  provided for in Ark. Code Ann. §
										15-72-108
		  or §
										15-76-304;
4) The filing of a criminal complaint in any
		  court of competent jurisdiction, as provided for in Ark. Code Ann. §
										15-71-114,
		  §
										15-72-104
		  or §
										15-76-303.
g) Civil Penalties
1) The Director shall determine whether to
		  request the assessment of civil penalties based on failure to comply with the
		  applicable abatement requirements for violations issued under subparagraphs (g)
		  (2) and (3) below. The Director shall determine whether to request the
		  assessment of civil penalties for violations issued under subparagraphs (g) (4)
		  and (5) below. If a civil penalty is requested by the Director, the Regulated
		  Entity may voluntarily agree to the assessment and pay the civil penalty as
		  requested or modified by the Director, or the Director or his designee may file
		  an application, in accordance with General Rule A-2, A-3, and other applicable
		  hearing procedures, to request the issuance of the requested civil penalty by
		  the Commission. The maximum amount of the Director's requested civil penalty
		  shall be computed as provided in subparagraphs (g) (2) through (5) below.
		  However, the Commission is not bound by the Director's request, or the amounts
		  provided below, and may impose civil penalties of up to the maximum amounts
		  permitted by law.
2) Administrative
		  violations, defined as failure to file required reports and forms and to
		  provide required notices (excluding spill notice), including, but not limited
		  to regulated activities such as, the failure to file production and well
		  reports or other reports required by Commission rules, orders or permit
		  conditions; failure to notify the Commission before the setting of surface
		  casing, or the plugging of a well; failure to maintain required performance
		  bond in force for the wells under permit; or pay annual well fees within the
		  specified time. The Director may request the assessment of up to $1000 per
		  administrative violation and up to $1000 per day for each day the violation
		  remains unabated after the specified compliance date. The per administrative
		  violation civil penalty request shall be calculated as follows:
A) No previous violation of the same rule:
		  $250. One previous violations of the same rule: $500. Two or more previous
		  violations of the same rule: $1000. The fourth and each subsequent violation of
		  the same rule shall be considered a significant violation in accordance with
		  subparagraph g) 4) below.
B) The
		  time frame used for determining previous violations shall be limited to the
		  regulated entity's violation record for the preceding three full calendar years
		  before the issuance of the violation.
3) Operating violations, defined as failure
		  to maintain compliance with Commission rules on well drilling and operation,
		  and production facility, pipeline and seismic operations and/or commencing
		  operations requiring a permit prior to issuance or re-issuance of the required
		  permit or authority. These operations include, but are not limited to regulated
		  activities such as, operating a well or natural gas pipeline system without the
		  proper permit or transfer of ownership, failure to maintain a well or crude oil
		  flow line in a leak-free condition, failure to comply with non-jurisdictional
		  natural gas pipeline requirements, failure to notify of a spill occurrence,
		  failure to maintain containment dikes, or operating an Exploration and
		  Production Fluid Transportation System without a proper permit. Multiple
		  incidents of the same violation against a regulated entity on the same occasion
		  shall not be considered separate violations. The Director may request the
		  assessment of up to $2500 per operating violation and up to $2500 per day for
		  each day the violation remains unabated after the specified compliance date,
		  with the exception that operating violations as specified in Ark. Code Ann.
		  §
										15-76-303
		  are limited to a maximum of $1,000 per operating violation. The per operating
		  violation civil penalty shall be calculated as follows:
A) No previous violation of the same rule
		  $500. One previous violation of the same rule, $750; two or more previous
		  violations of the same rule, $1000. The fourth and each subsequent violation of
		  the same rule shall be considered a significant violation in accordance with
		  subparagraph g) 4) below.
B) The
		  time frame used for determining previous violations shall be limited to the
		  regulated entity's violation record for the preceding three full calendar years
		  before the issuance of the violation; plus
C) If the violation had a low degree of
		  probability to cause environmental impact to soil and/or land surface,
		  vegetation or crops, surface water, groundwater, livestock or wildlife, add
		  $250; or, if the violation had a high degree of probability to cause
		  environmental impact to soil and/or land surface, vegetation or crops, surface
		  water, groundwater, livestock or wildlife, add $500; or, if the violation
		  caused environmental impact to soil and/or land surface, vegetation or crops,
		  surface water, groundwater, livestock or wildlife, add $1000, or
D) If the violation created a hazard to the
		  safety of any person, such as the contamination of a potable water well or
		  emission of hydrogen sulfide gas, add $2000.
4) Except as limited in Ark. Code Ann. §
										15-76-303,
		  or as otherwise provided in subparagraphs g) 5) or 6) below, significant
		  violations may result in a request by the Director or his or her designee, of a
		  civil penalty of up to $2500 per violation and up to $2500 per day for each day
		  of the violation for the following types of violations: failure to comply with
		  the provisions of General Rule A-7, failure to comply with well spacing
		  provisions, operating a UIC well without a proper permit, operating an annular
		  or casing injection/disposal well, operating a UIC well prior to establishing
		  mechanical integrity, operating a UIC well with a failed mechanical integrity
		  test, operating a UIC well with pressure on the annulus, failure to provide
		  emergency response or remediate a crude oil or produced water spill, or the
		  improper disposal or discharge of produced fluids. The per violation civil
		  penalty shall be computed as follows:
A) An
		  initial amount of $ 1000; plus
B)
		  One or more previous violations of the same type: add $500 per violation;
		  plus
C) If the violation caused
		  environmental impact to surface water, ground water or wildlife: add $1000, or
		  if the violation created a hazard to the safety of any person, such as the
		  contamination of a potable water well or emission of hydrogen sulfide gas: add
		  $1500.
D) The time frame used for
		  determining previous violations shall be limited to the regulated entity's
		  violation record for the preceding three full calendar years before the
		  issuance of the violation.
5) In accordance with Ark. Code Ann. §
										15-72-103, the
		  Director, or his or her designee, may request a civil penalty of up to $100,000
		  for any person who transports a liquid or other substance and violates a rule
		  or order of the commission by dumping or disposing of the liquid or other
		  substance improperly or without authorization at a well or well site.
6) The Director, or his or her designee, may
		  request any amount in civil penalties authorized by applicable federal law for
		  violations of the United States Department of Transportation, Office of
		  Pipeline Safety jurisdictional natural gas line
		  requirements.
h) All
		  civil penalties assessed and paid to the Commission shall be deposited in the
		  Commission operating fund. Additionally, all civil penalties assessed and paid,
		  for violations specified in Ark. Code Ann. §
									15-72-202
		  shall be turned into the general fund of the county where the violation
		  occurred to be used on roads, bridges, and highways at the discretion of the
		  county court.
(Source: new rule September 14, 2008; amended July 17, 2009;
			 amended October 24, 2009; amended July 29, 2011; amended February 17, 2012;
			 amended January 20, 2014)
RULE
		  A-6:
RESERVED
Reserved for Future Use
RULE A-7:
DETERMINATION OF
		  NATURAL GAS WELL CATEGORIES FOR SEVERANCE TAX PURPOSES
a) Applicability
In accordance with Ark. Code Ann. §
										26-58-128,
			 the Director of the Oil and Gas Commission shall determine the well categories
			 for all gas production wells, which will be used by the Arkansas Department of
			 Finance and Administration to determine the appropriate severance tax rate for
			 each well. All gas production wells under the jurisdiction of the Oil and Gas
			 Commission are subject to the provisions of this rule.
b) Definitions:
1) "Commission" shall mean the Arkansas Oil
		  and Gas Commission, on which the Director serves as secretary, but is a
		  non-voting member.
2) "Conventional
		  Gas Well" means a gas well that is not classified as a high cost gas
		  well.
3) "Director" means the Oil
		  and Gas Commission Director of Production and Conservation.
4) "High Cost Gas Well" means a gas well
		  that:
A) Produces gas from any shale
		  formation, including but not limited to the Fayetteville Shale, Woodford Shale,
		  Moorefield Shale and the Chattanooga Shale, or their stratigraphic equivalents
		  as described in published stratigraphic nomenclature recognized by the Arkansas
		  Geologic Survey; or
B) Produces gas
		  from any completion that is located at a depth of more than 12,500 feet below
		  the surface of the earth, where the term "depth" means the length of the
		  maximum continuous drilling string of drill pipe used between the drill bit
		  face and the drilling rig's Kelly bushing; or
C) Produces gas from a tight gas formation
		  which is defined as a formation which:
i) Has
		  previously been determined to be a low permeability formation by Commission
		  Orders or field rules for Booneville and Chismville ( 84-2003-07 ), Gragg (
		  89-2004-07 ), Waveland ( 86-2004-07 ), Rich Mountain ( 304-2006-09 ), Mansfield
		  ( 28-2003-03 ), Witcherville and Excelsior ( 103-2005-07 ); and General Rule
		  B-44; or
ii) Is determined by the
		  Director to have an estimated in situ permeability of one-tenth millidarcy (0.1
		  mD) or less; or
iii) Is determined
		  to be a tight gas formation by field rule, general rule or orders approved by
		  the Commission and issued by the Director.
D) Produces gas from a geopressured brine;
		  or
E) Produces occluded gas from a
		  coal seam.
5) "Marginal
		  Conventional Gas Well" shall mean a conventional gas well which is incapable of
		  producing more than 250 Mcf per day, from all zones producing in such well, as
		  determined by the sum of the individual deliverability rates for each zone,
		  using one of the current wellhead deliverability rate methodologies described
		  in subparagraph h) below.
6)
		  "Marginal High Cost Gas Well" shall mean a high cost gas well which is
		  incapable of producing more than 100 Mcf per day, from all zones producing in
		  such well, as determined by the sum of the individual deliverability rates for
		  each zone, using one of the current wellhead deliverability rate methodologies
		  described in subparagraph h) below.
7) "New Discovery Gas Well" shall mean any
		  conventional gas well for the period commencing on the date of first production
		  and ending on the date that is 24 consecutive calendar months following the
		  date of first production.
c) On or before January 1, 2009, the Director
		  shall determine the initial well category for each existing gas producing well
		  in the State. If a well contains two or more separately metered producing zones
		  (sources of supply), and one or more of the producing zones are different
		  categories, the well category shall be based on which zone in the well produces
		  the larger percentage of the total well production, based on the most recent
		  back pressure test methodology specified in General Rule D-16. On or before
		  January 1, 2009 the Director shall notify each permit holder of each existing
		  wells determination as a:
1) High Cost Gas
		  Well, including whether it is a high cost gas well producing gas from the date
		  of first production and for a minimum period of 36 consecutive calendar months
		  following the date of first production, unless a longer time period is granted
		  by the Department of Finance and Administration in accordance with Ark Code
		  Ann. §
										26-58-127;
		  or
2) Marginal Conventional Gas
		  Well; or
3) Marginal High Cost Gas
		  Well; or
4) New Discovery Gas Well;
		  or
5) A Conventional Gas
		  Well.
d) After January 1,
		  2009 the Director shall determine, at the time of permitting each new well, the
		  appropriate well category as specified in subparagraph c) above, which shall be
		  effective the date of first production from the well. This well category
		  determination, made at the time of the initial new well permit issuance or as
		  amended in accordance with this subparagraph or subparagraph g) below, shall
		  determine the well category throughout the life of that well. Once a permit is
		  issued, if a well is completed in two or more separately metered producing
		  zones (sources of supply), and one or more of the producing zones are different
		  categories, with respect to a Conventional Gas Well or a High Cost Gas Well,
		  the well category shall be based on which zone in the well produces the larger
		  percentage of the total well production, based on the initial back pressure
		  tests required by General Rule D-16. The well category determination, shall
		  determine the category for that well throughout the life of that well,
		  regardless if other zones are produced within the well at a later date, until
		  such time as the well qualifies as a Marginal Conventional Gas Well or a
		  Marginal High Cost Gas Well.
e)
		  Following the well category determination for all existing wells on January 1,
		  2009, and the ongoing categorization for all new wells after January 1, 2009,
		  the permit holder may request at any time, on a form prescribed by the
		  Director, another well category determination with respect to the well category
		  definitions specified in subparagraph b) above, in accordance with the
		  application procedures specified in subparagraph i) below.
f) Upon submission of the application and
		  supporting documentation or other required information, the Director shall make
		  a determination within fifteen (15) calendar days from the receipt of such
		  application.
1) The effective date of the well
		  category determination request shall automatically be the first day of the next
		  month following the postmark date the application was mailed to the Director or
		  date of the Director's Office date stamp, if delivered in person to the
		  Director.
2) If approved by the
		  Director, the application shall be sent via first class mail to the permit
		  holder and a copy forwarded to the Department of Finance and Administration
		  ("DFA").
3) If the application is
		  denied by the Director, the permit holder may appeal the Director's
		  determination to the Commission by filing an application in accordance with
		  General Rule A-2, A-3, and other applicable hearing procedures. If the permit
		  holder does not appeal the denial, and the date of the Director's denial occurs
		  after the effective date of the well determination request as defined in
		  subparagraph f) 1) above, the permit holder may be subject to additional
		  payment provisions in accordance with DFA procedures. If the permit holder
		  appeals the denial, the effective date of the well categorization request shall
		  remain in effect pending the outcome of the appeal.
g) If following a review of completion
		  reports, monthly production reports, the applicable wellhead deliverability
		  rate, utilizing one of the current methodologies specified in subparagraph h)
		  below, or other information, the Director determines a well is not correctly
		  categorized, the Director shall determine the correct well category and notify
		  the permit holder. The corrected well category determination shall become
		  effective on the first day of the month following the month in which the
		  Director notifies the permit holder of the corrected well category
		  determination, unless the permit holder files an appeal of the Director's
		  decision in accordance with General Rule A-2, A-3, and other applicable hearing
		  procedures.
h) All existing well
		  category determinations under subparagraph c) and all new well category
		  determinations under subparagraph d) shall be made on the basis of one of the
		  following current wellhead deliverability rate methodologies:
1) Establishing cumulative deliverability of
		  the well utilizing test methodologies specified in General Rule D-16;
		  or
2) Calculating the cumulative
		  deliverability of the well utilizing the most recent six month average daily
		  rate of production for the well under actual operating conditions by dividing
		  the total gas reported for the well by the number of days the well produced
		  during the applicable six month period. However, this well category
		  determination method is not applicable for wells subject to an exceptional
		  location penalty.
i) Well
		  Category Determination and Application Procedures
1) High Cost Gas Well.
A) The High Cost Gas Well category shall be
		  assigned to all existing wells on January 1, 2009, which satisfy the definition
		  of a High Cost Gas Well in accordance with subparagraph b) 4) above. If on that
		  date the High Cost Gas Well has a reported date of first production on or after
		  January 1, 2006, the well shall automatically qualify for a cost recovery
		  period for a period of 36 consecutive calendar months following the date of
		  first production, unless a longer time period is granted by the Department of
		  Finance and Administration in accordance with Ark Code Ann. §
											26-58-127.
B) On or after January 1, 2009, the High Cost
		  Gas Well category shall be assigned to all newly permitted wells that satisfy
		  the definition of a High Cost Gas Well in accordance with subparagraph b) 4)
		  above at the time of well categorization in accordance with subparagraphs d)
		  and g) above. The well shall automatically qualify for a cost recovery period
		  for a period of 36 consecutive calendar months following the date of first
		  production, unless a longer time period is granted by the Department of Finance
		  and Administration in accordance with Ark Code Ann. §
											26-58-127.
C) At the conclusion of the cost recovery
		  period, specified in subparagraph i) 1) A) and B) above, the well shall
		  automatically be re-classified as a High Cost Gas Well no longer subject to the
		  tax rate for the cost recovery period, and shall be subject to the applicable
		  severance tax rate specified in Ark Code Ann. §
											26-58-111(5)(D)
		  unless an application is made for classification as a Marginal High Cost Gas
		  Well in accordance with subparagraph i) 3) B) below. The effective date of the
		  automatic re-classification shall be the first day of the month following the
		  month in which the specified recovery period expired.
2) New Discovery Gas Well
A) The New Discovery Gas Well category shall
		  be assigned to all existing conventional wells on January 1, 2009, which as of
		  that date, have a reported date of first production on or after January 1,
		  2007.
B) The New Discovery Gas Well
		  category shall be automatically assigned to all newly permitted conventional
		  wells on or after January 1, 2009 at the time of well categorization in
		  accordance with subparagraphs d) and g) above. The well category determination
		  shall remain in effect for 24 consecutive calendar months following the date of
		  first production.
C) At the
		  conclusion of the 24 consecutive calendar months following the date of first
		  production, the New Discovery Gas Well determination shall automatically
		  terminate. The effective date of the automatic termination shall be the first
		  day of the month following the month in which the actual date of termination
		  occurred. The well shall be automatically re-classified as a Conventional Gas
		  Well subject to the applicable severance tax rate specified in Ark Code Ann.
		  §
											26-58-111(5)(D),
		  unless application is made for classification as a Marginal Conventional Gas
		  Well in accordance with subparagraph i) 3) B) below.
3) Marginal Conventional Gas Well and
		  Marginal High Cost Gas Well
A) The applicable
		  Marginal Gas well category shall be assigned to all existing Conventional Gas
		  Wells and High Cost Gas Wells on January 1, 2009, that qualify as either a
		  Marginal Conventional Gas Well or a Marginal High Cost Gas Well and, which as
		  of that date do not qualify as either a New Discovery Gas Well during the cost
		  recovery period set forth in subparagraphs i) 2) A), and B) above, or a High
		  Cost Gas Well during the cost recovery period set forth in subparagraphs i) 1)
		  A) and B) above.
B) When a
		  Conventional Gas Well qualifies as a Marginal Conventional Gas Well, or a High
		  Cost Gas Well qualifies as a Marginal High Cost Gas Well, a permit holder may
		  apply to the Director, for a Marginal Conventional Gas Well or Marginal High
		  Cost Gas Well category determination. The request shall be on a form prescribed
		  by the Director and shall include a copy of the most recent well head
		  deliverability rate determination for all producing zones based on one of the
		  current wellhead deliverability rate methodologies specified in subparagraph h)
		  above.
C) The effective date of the
		  applicable Marginal Gas well determination shall be the first day of the month
		  following the month in which the permit holder's application was received in
		  accordance with subparagraph f) above.
D) A permit holder shall immediately notify
		  the Director in writing when a well, which has been previously determined to be
		  a Marginal Conventional Gas Well no longer qualifies as a Marginal Conventional
		  Gas Well, or a Marginal High Cost Gas Well no longer qualifies as a Marginal
		  High Cost Gas Well. When a previously determined Marginal Conventional Gas Well
		  becomes capable of producing more than 250 Mcf per day over a 30 day period or
		  a well previously determined to be a Marginal High Cost Gas Well becomes
		  capable of producing more than 100 Mcf per day over a 30 day period, the permit
		  holder shall submit a copy of the most recent well-head deliverability rates
		  for each producing zone in the well, based on one of the current wellhead
		  deliverability rate methodologies specified in subparagraph h) above, along
		  with the required written notice to the Director.
4) Wells not classified as a High Cost Gas
		  Well, New Discovery Gas Well, Marginal Conventional Gas Well or Marginal High
		  Cost Gas Well, as described above, shall be automatically classified as a
		  Conventional Gas Well subject to the severance tax rate specified in Ark Code
		  Ann. §
										26-58-111(5)(D).
j) Failure to comply with any provision of
		  this rule may result in the initiation of enforcement actions in accordance
		  with General Rule A-5, including the assessment of a civil penalty not to
		  exceed two thousand five hundred dollars ($2500) per day for each day of the
		  violation.
(Source: new rule November 16, 2008; amended June 5, 2009)
RULE A-8:
REPEALED
Rule Repealed Effective July 1, 2016