Or. Admin. Code § 632-010-0161

Current through Register Vol. 63, No. 11, November 1, 2024

Section 632-010-0161 - Compulsory Integration Orders

(1) Definitions. For purposes of this rule:

(a) "Costs" include:

(A) "Drilling costs," which means all reasonable costs and expenses of drilling, redrilling, reworking, deepening, plugging back, testing, and completing the well; and

(B) "Production costs," which means all reasonable on-site costs and expenses of production and production equipment for the well, including wellhead, but not pipeline costs and not overhead.

(b) "Participating owner" means each owner in the spacing unit who, prior to commencement of drilling operations, entered into a written agreement with the operator to share costs, production, and entitlements. However, where no such agreement has been reached, an owner, who prior to drilling tendered the operator a written agreement to pay not less than the owner's pro rata share of costs attributable to the owner's interest, as computed in section (2) of this rule, in the spacing unit in exchange for a share of production and entitlements, will be considered to be a participating owner and to have entered into a constructive agreement to that effect.

(2) Timing. In the absence of a voluntary integration agreement for the entire spacing unit, the board will enter an order integrating all mineral rights ownership interests in a spacing unit pursuant to ORS 520.220(2), at any time following the entry of an order establishing the spacing unit for a pool pursuant to ORS 520.210.

(3) Determination of Interests. A compulsory integration order determines the interest of each mineral rights owner in the spacing unit by dividing:

(a) The number of surface acres subject to an owner's mineral rights located in the spacing unit; by

(b) The total number of surface acres in the spacing unit.

(4) Content. The compulsory integration order will provide for the drilling, if necessary, and operation of the well on the spacing unit for the sharing of production and for the payment of costs.

(5) Effective Date. The compulsory integration order becomes effective on the date of initial production, unless the board establishes another date.

(6) Allocation of Costs and Earnings:

(a) The compulsory integration order will treat the operator and participating owners as a single entity. The operator-participating owners' entity is entitled to share production and pay costs, both in proportion to the total interest, as computed under section (2) of this rule, of the operator-participating owners' entity in the spacing unit. The express and constructive agreements between the operator and participating owner(s) control the allocations of production and costs attributable to the operator-participating owners' entity; and

(b) The compulsory integration order will allocate each non-participating owner a full share in production in proportion to the owner's interest in the spacing unit subject to royalty obligations, if any.

(c) The compulsory integration order will authorize the operator-participating owners' entity to withhold from each nonparticipating owner's share of production a pro rata share of drilling and production costs. The pro-rata share of costs may also be subject to a multiplier established by the Board to compensate the operator-participating owners assumption of risks associated with production.

Or. Admin. Code § 632-010-0161

GMI 3-1982, f. & ef. 8-16-82; GMI 4-1985, f. & ef. 11-20-85; GMI 6-1990, f. & cert. ef. 12-5-90; GMI 2-1995, f. & cert. ef. 3-10-95; DGMI 1-2013, f. & cert. ef. 3-21-13

Stat. Auth.: ORS 520

Stats. Implemented: ORS 520.095