DAR File No. 41614

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

Section R649-2-9

Refusal to Agree

Notice of 120-Day (Emergency) Rule

DAR File No.: 41614
Filed: 05/09/2017 01:51:57 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

The purpose of this filing is to set timeframes and supply other information required by a recent statutory change. The statutory change arises from S.B. 191 from the 2017 General Session.

Summary of the rule or change:

This emergency rule 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 required by the recently amended Subsections 40-6-2(4) and 40-6-2(11). Consent must be given in writing within 30 days of written notice being received.

Emergency rule reason and justification:

Regular rulemaking procedures would place the agency in violation of federal or state law.

Justification: Regular rulemaking (which is presently being carried out) will not provide the detail concerning the manner and timeframe within which an owner must consent to a well required by the recently amended Subsections 40-6-2(4) and 40-6-2(11) by the 05/09/2017 effective date of that provision. Without this emergency rule, as of 05/09/2017, the operative provisions of the statute, which are critical to the functioning of the compulsory pooling procedures set forth in Section 40-6-6.5, and which depend upon these details concerning manner and timeframe of consent being spelled out in regulation, will become impossible to enforce and apply as of 05/09/2017. Reliance solely on the ongoing regular rulemaking process would therefore place the agency in violation of the requirements of state law.

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 of Oil, Gas and Mining 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 emergency 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 emergency rule. This emergency 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:

Landowners 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 does 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:

This emergency rule will have no fiscal impact on businesses 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:

• James Owen at the above address, by phone at 801-538-5328, by FAX at , or by Internet E-mail at [email protected]

This rule is effective on:

05/09/2017

Authorized by:

John Baza, Director

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 Section 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

Date of Enactment or Last Substantive Amendment: May 9, 2017

Notice of Continuation: August 26, 2016

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