North Dakota Administrative Code › Title 85 - University and School Lands, Board of › Article 85-06 - Minerals Management › Chapter 85-06-01 - Oil and Gas › Section 85-06-01-15 - Offset obligations for vertical oil and gas wells

Current through Supplement No. 393, July, 2024
1. If a vertical oil and gas well has been
				drilled and is producing in commercial quantities from mineral acreage owned by
				another or from adjacent trust lands leased at a lesser royalty, which vertical
				oil and gas well is within one thousand feet [304.8 meters] of the trust lands,
				the lessee of the trust lands shall, within one hundred twenty days after
				completion of such vertical oil and gas well, exercise one of the following
				options:
a. Diligently begin in good faith the
				drilling of a corresponding offset well on the leased trust lands, or on lands
				pooled therewith;
b. Pay a
				compensatory royalty, as determined by the commissioner, in lieu of the
				drilling of an offset well. If a lessee elects to pay a compensatory royalty,
				the lessee shall submit to the commissioner, within thirty days of the date
				such election, a proposed compensatory royalty agreement based on the estimated
				drainage area of the vertical oil and gas well located within one thousand feet
				[304.8 meters] of the trust lands. Geological, engineering, or other evidence
				in the form of a narrative or maps, or both, which form the basis for the
				offset drainage computation must be included with the proposed
				agreement;
c. Release the leased
				acreage to avoid the offset requisites; or
d. Submit a request to the commissioner for a
				waiver of the offset obligation as follows:
(1) A request for a waiver of the offset
				obligation must be in writing and provide the grounds for the request. If a
				request is made, the lessee shall submit to the commissioner, within thirty
				days of the request, geological, engineering, or other evidence in the form of
				a narrative or maps, or both, which, in the opinion of the lessee, indicates
				that an additional offset well need not be drilled to reasonably develop or
				protect the trust lands from offset drainage due to the vertical oil and gas
				well located within one thousand feet [304.8 meters] on trust land. After a
				review of the evidence required to be submitted, the commissioner may:
(a) Request that the lessee supply additional
				evidence to support:
[1] The request for a
				waiver of the offset obligation; or
[2] The proposed compensatory royalty
				agreement submitted by the lessee.
(b) Grant a waiver of the offset
				obligation;
(c) Approve the
				proposed compensatory royalty agreement of the lessee;
(d) Require the lessee to pay compensatory
				royalties as determined by the commissioner;
(e) Take such other action as the
				commissioner may deem appropriate, including the acceptance of a release either
				in whole or in part as to all or less than all strata included in the lease;
				or
(f) Cancel the lease in
				accordance with section
				85-06-01-10.
(2) A waiver of offset obligation
				is effective from the date of approval by commissioner. The commissioner may
				revoke a waiver of offset obligation if the commissioner determines the action
				is in the best interests of the trusts. If a waiver of offset obligation is
				revoked, the department shall provide notice to the lessee by certified mail.
				In the event of revocation, the lessee shall have one hundred twenty days from
				the date of revocation to exercise one of the options under this
				section.
(3) Lessee shall submit a
				report as to the conditions regarding offset drainage from an offset well every
				five years from the date of approval of waiver of offset obligation. If there
				is a change of conditions regarding offset drainage from an offset well at any
				time, the lessee shall be required to submit a report notifying the department
				of the change within one hundred twenty days of the change of
				conditions.
(4) The commissioner
				shall notify the lessee of the commissioner's decision.