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for drilling directional well or wells to be bottomed under the leased area, and for producing and reworking such well or wells, and for handling, treating, and storing the production therefrom. Such rights of use or easement if on an area subject to any mineral lease issued or maintained under the act shall be granted only after the lessee under such lease has been notified and afforded an opportunity to voice objections thereto, and any such right shall be exercised only in such manner so as not to interfere unreasonably with operations of the lessee under such lease.

(c) Once a right of use or easement has been exercised by the erection of fixed platforms, structures, or islands, the right shall continue so long as such platforms, structures, or islands are maintained, even beyond the termination of any lease on which they may be situated, and the rights of all subsequent lessees shall be subject to such rights of use and easement by prior lessees. The foregoing right of use and easement shall include the right to lay gathering lines, flow lines, and other pipelines used in connection with any lease operations, for moving production to a central point for purposes of gathering, treating, or storing. The right of use and easement shall not apply to pipelines used for transporting oil, gas, or other production after the same has been treated and measured, such rights-of-way being provided for in regulations under section 5 (c) of the Outer Continental Shelf Lands Act. $ 250.19 Rentals, royalties, and other

payments. The supervisor shall determine pursuant to the lease and regulations the rental' and the amount or value of production accruing to the lessor as royalty, the loss through waste or failure to drill and produce protection wells on the lease, and the compensation due to the lessor as reimbursement for such loss. § 250.20 Suspension of operations and

production. On receipt of an application for suspension of operations or production or for relief from any drilling or producing requirements under a lease, the supervisor shall grant such approval as he may deem warranted in the premises or reject such application, subject to the right of appeal as provided in $ 250.81.

REQUIREMENTS FOR LESSEES $ 250.30 Lease terms, regulations, waste,

damage, and safety. The lessee shall comply with the terms of the lease, with the written orders of the supervisor, and, subject to the provisions of section 5(a) of the act, with the regulations in this part and any amendments thereof. The lessee shall take all reasonable precautions to prevent damage or waste of any natural resource or injury to life or property or the aquatic life of the seas. $ 250.31 Designation of operator.

In all cases where operations are not conducted by the record owner but are to be conducted under authority of an unapproved operating agreement, assignment, or other arrangement, a "designation of operator" shall be submitted to the supervisor, in a manner and form approved by him, prior to commencement of operations. Such designation will be accepted as authority of operator or his local representative to fulfill the obligations of the lessee and to sign any papers or reports required under the regulations in this part. All changes of address and any termination of the authority of the operator shall be immediately reported, in writing, to the supervisor or his representative. In case of such termination or of controversy between the lessee and the designated operator, the operator, if in possession of the lease, will be required to protect the interests of the lessor. $ 250.32 Local agent.

When required by the supervisor, the lessee shall designate a representative empowered to receive notices and comply with orders of the supervisor issued pursuant to the regulations in this part. $ 250.33 Drilling and producing obliga

tions. (a) The lessee shall diligently drill and produce such wells as are necessary to protect the lessor from loss by reason of production on other properties, or in lieu thereof, with the consent of the supervisor, shall pay a sum determined by the supervisor as adequate to compensate the lessor for failure to drill and produce any such well. In the event that the lease is not being maintained in force by other production of oil or gas in paying quantities or by other approved drilling or reworking op

erations, such payments shall be consid- 8 250.34a Extension of leases by drilling ered as the equivalent of production in or well reworking. paying quantities for all purposes of the

(a) The Secretary shall be deemed to lease. (b) The lessee shall promptly drill

have approved, within the meaning of

section 8(b) (2) of the Outer Continental and produce such other wells as the supervisor may reasonably require in order

Shelf Lands Act, drilling or well rethat the lease may be properly and

working operations, conducted on the timely developed and produced in ac

leased area in the following instances: cordance with good operating practices.

(1) If, after discovery of oil or gas in

paying quantities has been made on the $ 250.34 Drilling and development pro

leasehold, and within 90 days prior to grams.

expiration of the five-year term or any

extension thereof, or thereafter, the (a) Prior to the beginning of any production thereof shall cease at any operations on the lease, including the

time, or from time to time, from any construction of drilling or production

cause and production is restored or platforms or other structures, the les

drilling or well reworking operations see shall submit to the supervisor for

are commenced within 90 days thereapproval an acceptable plan for the per

after, and such drilling or well reworkformance of such work. Such plan shall

ing operations (whether on the same or include (1) a plan of the drilling or pro

different wells) are prosecuted diligently duction platform or structures, showing the location and major features thereof,

until production is restored in paying

quantities. (2) the proposed well-casing program

(2) If, within 90 days prior to expifor the initial well, (3) the location of

ration of the five-year term or any the initial well (including surface and

extension thereof, or thereafter, at any projected bottom-hole location if the well

time, or from time to time, lessee is is to be directionally drilled), (4) structural interpretations based on available

engaged in drilling or well reworking

operations on the leasehold and there geological and geophysical data, and (5) such other pertinent data as the super

no well on the leasehold capable of visor may prescribe.

producing in paying quantities and the (b) After a discovery has been made

lessee diligently prosecutes such oper

ations (whether on the same or different on the lease, the lessee shall submit to

wells) with no cessation of more than the supervisor a plan of development for the lease or field including (1) the num

90 days. ber and location of the proposed wells (b) The Secretary may approve such (including the projected bottom-hole lo- other operations for drilling or reworkcation for directionally drilled wells) ing upon application of lessee. and the approximate time for drilling (c) Nothing in this section obviates each, (2) amendments or additions to the necessity of obtaining the Superthe structural interpretations, (3 plans visor's approval of a plan or notice of for additional drilling or producing plat- intention to drill or of complying with forms or other structures, (4) the well- the other provisions of this part. casing program for the field or area, and [24 F.R. 9527, Nov. 28, 1959] (5) such other data as the supervisor may prescribe. Such program must be

$ 250.35 Subsequent well operations. approved by the supervisor and may be After completion of all operations conmodified from time to time as conditions templated under any previously apmay warrant.

proved notice or plan, the lessee shall (c) In order to protect the interests not begin to redrill, repair, deepen, plug of the lessee, geological and geophysical back, shoot, or plug and abandon any interpretations required by this section well, make water shutoff, alter the casing shall, upon request of the lessee, be clas- or liner, stimulate production by acid, sified as not available for public inspec- gas, air, water injection, or any other tion until such time as the supervisor method, change the method of recoverdetermines the release of such informa- ing production, or use any formation or tion is required and necessary for the well for gas storage or water disposal proper development of the field or area. without first notifying the supervisor of his plan and intention and receiving location, designation, and status of all written approval prior to commencing wells on the leased lands, together with the contemplated work. This require- such other pertinent information as the ment shall not deter the lessee from tak- supervisor may require. ing any action in an emergency to (f) When deemed advisable by the prevent damage.

supervisor, the lessee shall require each $ 250.36 Well designations.

service company to furnish promptly to

the supervisor legible, exact copies of The lessee shall mark promptly each reports on cementing, perforating, aciddrilling platform or structure in a con- izing, or other similar services. spicuous place, showing his name or the name of the operator, the serial number

§ 250.38 Samples, tests, and surveys. of the lease, the identification of the (a) The lessee, when required by the wells, and shall take all necessary means supervisor, shall make adequate tests or and precautions to preserve these mark- surveys in an acceptable manner, withings.

out cost to the lessor, to determine the $ 250.37 Well records.

reservoir energy; the presence, quantity,

and quality of oil, gas, sulphur, other (a) The lessee shall keep on the lease, mineral deposits, or water; the amount or at his headquarters for the field, or and direction of deviation of any well otherwise conveniently available to the from the vertical; or the formation, cassupervisor, accurate and complete rec- ing, tubing, or other pressures. ords of the production, drilling, redrill- (b) The lessee shall take such formaing, deepening, repairing, cementing, al- tion samples or cores to determine the terations to casing, plugging, abandon- identity and character of any formation ing, and all other well operations, includ- in accordance with reasonable requireing electrical or radioactive well logs and ments of the supervisor prescribed at directional well surveys. The records

the time of approval of the notice to drill shall show all the formations penetrated, or redrill any well. the content and character of oil, gas, other mineral deposits, or water in each

$ 250.39 Directional survey. formation; the kind, weight, size, and (a) An angular deviation and direclanded depth of casing used in drilling tional survey shall be made of the fineach well on the leased lands; and any ished hole of each well directionally other information obtained in the course drilled. of well operations.

(b) The supervisor, at the request of (b) The lessee shall, within 30 days an offset lessee made prior to completion after the completion of any well and of a well, may require a lessee of an within 30 days after the completion of adjoining lease to make or furnish a diany further operations on it, transmit to rectional survey of any hole, at the risk the supervisor copies of the records of and expense of the offset lessee making such work on forms furnished by or ac- such request. A copy of such directional ceptable to him.

survey shall be furnished to the super(c) The lessee shall, within 30 days visor and the offset lessee. If it is deafter the completion of electrical or ra- termined that such well is closer to the dioactive well-logging operations or di- line of the offset lease than one-half (42) rectional well surveys, transmit to the the required distance from such line supervisor copies of such logs or charts. fixed by an approved spacing program Such logs or charts may be either field or by special field rules, the risk and copies of individual runs or composite expense of making such directional surlogs of more than one run.

vey shall be borne by the offending (d) The lessee shall also submit such lessee; and, unless and until the hole is other reports and records of operations promptly straightened to correct the as may be required and in the manner offense, the supervisor may reduce the and form prescribed by the supervisor. allowable production from the well to

(e) Upon request and in the manner prevent its draining unduly the offset and form prescribed by the supervisor, leased area. Neither the imposition of the lessee shall furnish a copy of the any penalty or of the costs of such surdaily drilling report, a plat showing the vey upon the offending lessee nor the reduction of the allowable production from $ 250.43 Well abandonment. the well is intended to prejudice any

The lessee shall promptly plug and other remedy which the affected parties

abandon any well on the leased land that may have.

is not used or useful, but no productive $ 250.40 Control of wells.

well shall be abandoned until its lack of (a) The lessee shall take all reason

capacity for further profitable producable precautions for keeping all wells

tion of oil, gas, or sulphur has been demunder control at all times and shall pro

onstrated to the satisfaction of the suvide at the time any well is started the

pervisor. Before abandoning a produci

ble well, the lessee shall submit to the proper high-pressure fittings and equipment as the supervisor may prescribe or

supervisor a statement of reasons for approve. A conductor string of casing

abandonment and his detailed plans for

carrying on the necessary work. A promust be cemented throughout its length,

ducible well may be abandoned only after and all strings of casing must be securely

receipt of written approval by the supercemented and anchored unless other procedure is authorized or prescribed by the

visor. No well shall be plugged and

abandoned until the manner and method supervisor.

of plugging shall be approved or pre(b) The lessee shall take all reason

scribed by the supervisor. Equipment able precautions to prevent any well

shall be removed, and premises at the from blowing open and shall take im

well-site shall be properly conditioned mediate steps and exercise due diligence

immediately after plugging operations to bring under control any such well.

are completed on any well when directed Storm chokes or similar safety devices

by the supervisor. Drilling equipment shall be installed in any well capable of

shall not be removed from any suspended flowing oil or gas: Provided, That if in

drilling well without taking adequate the opinion of the Supervisor, upon a

measures to protect the natural reclear showing by the lessee, a storm choke

sources. or similar safety device is not needed for the protection of the well or is likely to cause damage to or loss of the well,

§ 250.44 Accidents and fires. the Supervisor is authorized to waive The lessee shall take all reasonable this requirement.

precautions to prevent accidents and (19 F.R. 2656, May 8, 1954, as amended at fires, shall immediately notify the super25 F.R. 637, Jan. 26, 1960)

visor of any serious accident or fire on $ 250.41 Emulsion and dehydration.

the leasehold, and shall submit a full

report thereon within 10 days. (a) The lessee shall complete and

$ 250.45 Workmanlike operations. maintain all oil wells in such mechanical condition and operate them in such The lessee shall carry on all operations manner as to prevent, so far as possible, and maintain the property at all times in the formation of emulsion and basic a safe and workmanlike manner, having sediment.

due regard for the preservation and the (b) The lessee shall put in marketable conservation of the property and for the condition, if commercially feasible, all health and safety of employees. The products produced from the leased land lessee shall take reasonable steps to preand pay royalty thereon without recourse vent accumulations of oil or other mato the lessor for deductions on account terials deemed to be fire hazards and of costs of treatment.

shall promptly remove such hazardous $ 250.42 Pollution.

accumulations as do occur. The lessee shall not pollute the waters

§ 250.46 Sales contracts. of the high seas or damage the aquatic (a) The lessee shall file with the superlife of the sea or allow extraneous mat- visor not less than 30 days after the effecter to enter and damage any mineral- tive date thereof copies of all contracts or water-bearing formation. The lessee for the disposal of lease products; proshall dispose of all useless liquid products vided that the supervisor may relieve the of wells in a manner acceptable to the lessee of this requirement, in which event supervisor.

the contracts shall be made available for will be allowed for submission to the Unit represent them in any action to be taken Operator of any objections.

hereunder. (c) Upon expiration of the 30-day period The resignation of Unit Operator shall not provided in the preceding item (b) hereof, release Unit Operator from any liability for Unit Operator shall file with the Super- any default by it hereunder occurring prior visor evidence of malling of the notice of to the effective date of its resignation. expansion or contraction and a copy of any The Unit Operator may, upon default or objections thereto which have been fled with failure in the performance of its duties or the Unit Operator.

obligations hereunder, be subject to removal (d) After due consideration of all perti- by the same percentage vote of the owners nent Information, the expansion or contrac- of working interests determined in like mantion shall, upon approval by the Director, ner as herein provided for the selection of a become effective as of the date prescribed new Unit Operator. Such removal shall be in the notice thereof.

effective upon notice thereof to the Director. All land committed to this agreement shall The resignation or removal of Unit Operaconstitute land referred to herein as "unit- ·tor under this agreement shall not terminate ized land” or “land subject to this agree- its right, title, or interest as the owner of a ment."

working interest or other interest in unitized 3. Unitized substances. All oil and gas in substances, but upon the resignation or reany and all formations of the unitized land moval of Unit Operator becoming effective, are unitized under the terms of this agree- such Unit Operator shall deliver possession ment and herein are called “unitized sub- of all equipment, materials, and appurtestances."

nances used in conducting the unit opera4. Unit operator.

is tions and owned by the working interest hereby designated as Unit Operator and by owners to the new duly qualified successor signature hereto as Unit Operator agrees and Unit Operator or to the owners thereof if no consents to accept the duties and obliga- such new Unit Operator is elected, to be used tions of Unit Operator for the discovery, de- for the purpose of conducting unit operations velopment, and production of unitized hereunder. Nothing herein shall be consubstances as herein provided. Whenever ref- strued as authorizing removal of any mateerence is made herein to the Unit Operator, rial, equipment and appurtenances needed such reference means the Unit Operator for the preservation of any wells. acting in that capacity and not as an owner

6. Successor unit operator. Whenever the of interest in unitized substances, and the

Unit Operator shall tender his or its resignaterm working interest owner" when used

tion as Unit Operator or shall be removed as herein shall include or refer to Unit Operator

herein-above provided, the owners of the as the owner of a working interest when such working interests in the participating area an interest is owned by it.

or areas according to their respective acreage 5. Resignation or removal of unit opera- Interests in such participating area or areas, tor. Unit Operator shall have the right to

or, until a participating area shall have been resign at any time prior to the establish- established, the owners of the working interment of a participating area or areas here- ests according to their respective acreage under, but such resignation shall not become Interests in all unitized land, shall by maeffective so as to release Unit Operator from jority vote select a successor Unit Operator: the duties and obligations of Unit Operator Provided, That, if a majority but less than and terminate Unit Operator's rights as such 75 per cent of the working interests qualified for a period of 6 months after notice of inten- to vote are owned by one party to this agreetion to resign has been served by Unit Op- ment, a concurring vote of one or more addierator on all working interest owners and tional working interest owners shall be the Director, and until all wells then drilled required to select a new operator. Such hereunder are placed in a satisfactory condi- selection shall not become effective until (a) tion for suspension or abandonment which- a Unit Operator so selected shall accept in ever is required by the Supervisor, unless a writing the duties and responsibilities of new Unit Operator shall have been selected Unit Operator, and (b) the selection shall and approved and shall have taken over and have been approved by the Director. If no assumed the duties and obligations of Unit successor Unit Operator is selected and quallOperator prior to the expiration of said pe- fied as herein provided, the Director at his riod.

election may declare this unit agreement Unit Operator shall have the right to re- terminated. sign in like manner and subject to like 7. Accounting provisions and unit operatlimitations as above provided at any time a ing agreement. If the Unit Operator is not participating area established hereunder is the sole owner of working interests, costs in existence, but until a successor unit op- and expenses incurred by Unit Operator in erator is selected and approved as herein- conducting unit operations bereunder shall after provided, the working interest owners he paid and apportioned among and borne shall be jointly responsible for performance by the owners of working interests, all in of the duties of unit operator, and shall not accordance with the agreement or agreelater than 30 days before such resignation ments entered into by and between the Unit becomes effective appoint a common agent to Operator and the owners of working interests,

66-067 0-67-21

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