No. 41868 (Amendment): Section R649-2-9. Refusal to Agree

(Amendment)

DAR File No.: 41868
Filed: 06/30/2017 01:53:25 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

This filing will clarify the existing Section R649-2-9 by specifying timeframes and supplying other information required by a recent statutory change. The statutory enactment requiring modification of Section R649-2-9 took effect on 05/09/2017. In order to timely implement the required rule modification, the Board of Oil, Gas and Mining adopted an emergency rule on that date. The Board is presently engaged in ongoing public outreach activities, and analysis, under Board Docket No. 2017-013, Cause No. RO&G-2017-01, concerning what the final rule should provide. The Board anticipates concluding its analysis and publishing a proposed final rule amendment, in late fall of 2017. The presently governing emergency rule will expire, however, on 09/06/2017. The purpose of the present filing is to formally, but temporarily, adopt the terms of the emergency rule to avoid any "gap" between expiration of the emergency rule in September and adoption of a final rule amendment at a later date. The Board therefore intends the language proposed in the present filing to govern only for a few months until the Board concludes its proceedings in Docket No. 2017-013, Cause No. RO&G-2017-01, at which time the Board will submit a new filing setting forth the final proposed amendment language. (Editor's Note: The 120-day (emergency) rule was published in the June 1, 2017, Bulletin under Filing No. 41614 and is effective as of 05/09/2017.)

Summary of the rule or change:

This rule amendment specifies the manner in which an owner must consent to the drilling and operation of a well and agree to bear that owner's proportionate share of the costs of the drilling, testing, completion and equipping of that well, as well as the timeframe within which such consent must be given. Specifying these details in rule is contemplated by the recently amended Subsections 40-6-2(4) and 40-6-2(11). Under the submitted rule amendment, consent must be given in writing within thirty days of written notice being received. As noted above, the language proposed in this filing is intended to govern only for a few months during the pendency of the Board's ongoing proceedings concerning a final amendment to this same rule. The final amendment will be made in late 2017.

Statutory or constitutional authorization for this rule:

• Subsection 40-6-2(4)
• Section 40-6-6.5
• Subsection 40-6-2(11)

Anticipated cost or savings to:

the state budget:

The rule specifies the manner in which owners must consent to the drilling and operation of wells. There are no anticipated changes in costs or savings to the Division or Board under this rule. This rule is also not expected to have any budgetary impacts on other state agencies or have any other direct or indirect costs to the state.

local governments:

This rule is not expected to create any costs or savings for counties, cities, towns, school districts, special districts, or any other form of local government. The rule only clarifies existing regulations in certain respects which do not implicate costs and will therefore have no effect on anticipated costs or savings.

small businesses:

Small businesses are not expected to be impacted by this rule. This rule only clarifies existing regulations in certain respects which do not implicate costs and will therefore have no effect on anticipated costs or savings for small businesses.

persons other than small businesses, businesses, or local governmental entities:

Persons other than small businesses, businesses, or local government entities are not expected to be impacted by this rule because the rule only clarifies existing provisions of the current statutory and regulatory scheme concerning compulsory pooling.

Compliance costs for affected persons:

Mineral interest owners and operators would not experience any increase in compliance costs under this rule. These types of parties could potentially experience a reduction in their attorney and legal fees relating to costs of appearing before the Board of Oil Gas and Mining. The Division and Board do not have access to industry expenditures for Board hearings, so a specific costs savings could not be reasonably estimated.

Comments by the department head on the fiscal impact the rule may have on businesses:

After conducting a thorough analysis, it was determined that this proposed rule will not result in a fiscal impact to business as it only clarifies existing provisions of the current statutory and regulatory scheme concerning compulsory pooling.

Michael Styler, Executive Director

The full text of this rule may be inspected, during regular business hours, at the Office of Administrative Rules, or at:

Natural Resources
Oil, Gas and Mining; Oil and GasRoom 1210
1594 W NORTH TEMPLE
SALT LAKE CITY, UT 84116-3154

Direct questions regarding this rule to:

• Michael Johnson at the above address, by phone at 801-538-7484, by FAX at , or by Internet E-mail at [e-mail]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

08/15/2017

Interested persons may attend a public hearing regarding this rule:

• 08/23/2017 10:00 AM, Natural Resources, 1594 W North Temple, Room 1040, Salt Lake City, UT

This rule may become effective on:

08/24/2017

Authorized by:

John Baza, Director

RULE TEXT

R649. Natural Resources; Oil, Gas and Mining; Oil and Gas.

R649-2. General Rules.

R649-2-9. Refusal to Agree.

1. An owner shall be deemed to have refused to agree to bear his proportionate share of the costs of the drilling and operation of a well under Section 40-6-6.5 if:

1.1. The operator of the proposed well has, in good faith, attempted to reach agreement with such owner for the leasing of the owner's mineral interest or for that owner's voluntary participation in the drilling of the well.

1.2. The owner and the operator have been unable to agree upon terms for the leasing of the owner's interest or for the owner's participation in the drilling of the well. For purposes of Utah Code Sections 40-6-2(4) and -2(11), the consent and agreement required of an owner shall be manifested by the owner agreeing in writing, within thirty (30) days from the date the notice required by Utah Code Section 40-6-2(11) is received, to bear that owner's proportionate share of the costs of drilling, testing, completion, equipping and operation of the well.

2. If the operator of the proposed well shall fail to attempt, in good faith, to reach agreement with the owner for the leasing of that owner's mineral interest or for voluntary participation by that owner in the well prior to the filing of a Request for Agency Action for involuntary pooling of interests in the drilling unit under Section 40-6-6.5 then, upon written request and after notice and hearing, the hearing on the Request for Agency Action for involuntary pooling may, at the discretion of the board or its designated hearing examiner, be delayed for a period not to exceed 30 days, to allow for negotiations between the operator and the owner.

 

KEY: oil[and gas law], pooling, nonconsenting, consenting

Date of Enactment or Last Substantive Amendment: [June 2, 1998]2017

Notice of Continuation: August 26, 2016

Authorizing, and Implemented or Interpreted Law: 40-6-1 et seq.

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