Section 43-02-03-16.3 - Recovery of a risk penaltyThe following govern the recovery of the risk penalty pursuant to subsection 3 of North Dakota Century Code section 38-08-08 and subsection 3 of North Dakota Century Code section 38-08-09.4:
1. An owner may recover the risk penalty under the provisions of subsection 3 of North Dakota Century Code section 38-08-08, provided the owner gives, to the owner from whom the penalty is sought, a written invitation to participate in the risk and cost of drilling a well, including reentering a plugged and abandoned well, or the risk and cost of reentering an existing well to drill deeper or a horizontal lateral. If the nonparticipating owner's interest is not subject to a lease or other contract for development, an owner seeking to recover a risk penalty must also make a good-faith attempt to have the unleased owner execute a lease. a. The invitation to participate in drilling must be in writing and contain the following: (1) The approximate surface location of the proposed or existing well, proposed completion and total depth, objective zone, and completion location if other than a vertical well.(2) An itemization of the estimated costs of drilling and completion.(3) The approximate date upon which the well was or will be spudded or reentered.(4) A written election to participate and a statement indicating the invitation or election must be accepted within thirty days of receiving it. Such election to participate must be received by the owner giving the invitation within thirty days of the participating party's receipt.(5) Notice that the participating owners plan to impose a risk penalty and that the nonparticipating owner may object to the risk penalty by either responding in opposition to the petition for a risk penalty, or if no such petition has been filed, by filing an application or request for hearing with the commission.(6) Drilling or spacing unit description.b. An invitation to participate and an election to participate must be served personally, by mail requiring a signed receipt, or by overnight courier or delivery service requiring a signed receipt. Failure to accept mail requiring a signed receipt constitutes service.c. An election to participate is only binding upon an owner electing or declining to participate if the well is spudded or reentry operations are commenced on or before ninety days after the date the owner extending the invitation to participate sets as the date upon which an election response to the invitation is to be received. It also expires if the permit to drill or reenter expires without having been exercised. If an election to participate lapses, a risk penalty can only be collected if the owner seeking it again complies with the provisions of this section.2. An owner may recover the risk penalty under the provisions of subsection 3 of North Dakota Century Code section 38-08-09.4, provided the owner gives, to the owner from whom the penalty is sought, a written invitation to participate in the unit expense. If the nonparticipating owner's interest is not subject to a lease or other contract for development, an owner seeking to recover a risk penalty must also make a good-faith attempt to have the unleased owner execute a lease. a. The invitation to participate in the unit expense must be in writing and contain the following: (1) A description of the proposed unit expense, including the location, objectives, and plan of operation.(2) An itemization of the estimated costs.(3) The approximate date upon which the proposal was or will be commenced.(4) A written election to participate and a statement indicating the invitation or election must be accepted within thirty days of receiving it. Such election to participate must be received by the owner giving the invitation within thirty days of the participating party's receipt.(5) Notice that the participating owners plan to impose a risk penalty and that the nonparticipating owner may object to the risk penalty by either responding in opposition to the petition for a risk penalty, or if no such petition has been filed, by filing an application or request for hearing with the commission.b. An invitation to participate and an election to participate must be served personally, by mail requiring a signed receipt, or by overnight courier or delivery service requiring a signed receipt. Failure to accept mail requiring a signed receipt constitutes service.c. An election to participate is only binding upon an owner electing or declining to participate if the unit expense is commenced within ninety days after the date the owner extending the invitation request to participate sets as the date upon which an election response to the request invitation is to be received. If an election to participate lapses, a risk penalty can only be collected if the owner seeking it again complies with the provisions of this section.d. An invitation to participate in a unit expense covering monthly operating expenses shall be effective for all such monthly operating expenses for a period of five years if the unit expense identified in the invitation to participate is first commenced within ninety days after the date set in the invitation to participate as the date upon which an election response to the invitation to participate must be received. An election to participate in a unit expense covering monthly operating expenses is effective for five years after operations are first commenced. If an election to participate in a unit expense comprised of monthly operating expenses expires or lapses after five years, a risk penalty may only be assessed and collected if the owner seeking the penalty once again complies with this section.3. Upon its own motion or the request of a party, the commission may include in a pooling order requirements relating to the invitation to participate and election to participate, in which case the pooling order will control to the extent it is inconsistent with this section.N.D. Admin Code 43-02-03-16.3
Amended by Administrative Rules Supplement 2014-352, April 2014, effective April 1, 2014. .Amended by Administrative Rules Supplement 376, April 2020, effective 4/1/2020.Amended by Administrative Rules Supplement 2024-392, April 2024, effective 4/1/2024.General Authority: NDCC 38-08-04
Law Implemented: NDCC 38-08-04, 38-08-08