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duction 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 must be cemented throughout its length,

carrying on the necessary work. A proand all strings of casing must be securely

ducible well may be abandoned only after cemented and anchored unless other pro

receipt of written approval by the supercedure 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

§ 250.44 Accidents and fires. to cause damage to or loss of the well, 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 maintain all oil wells in such mechanical

$ 250.45 Workmanlike operations. 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 iessee 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

accumulations as do occur. $ 250.42 Pollution. 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 inspection by the supervisor upon his MEASUREMENT OF PRODUCTION AND request. Nothing in any such contract

COMPUTATION OF ROYALTIES or in any approval thereof by the super

$ 250.60 Measurement of oil. visor as authorized in paragraph (b) of this section shall be construed or ac

The lessee shall gage and measure all cepted as modifying any of the provi

production in accordance with methods sions of the lease, including, but not

approved by the supervisor. The lessee limited to, provisions relating to gas

shall provide tanks suitable for measurwaste, taking royalty in kind, and the

ing accurately the crude oil produced method of computing royalties due as

from the lease (positive copies of 100 based on a minimum valuation and in

percent capacity tank tables to be furaccordance with the regulations applica

nished to the supervisor) or may arrange ble to the lands covered by the contract.

with the supervisor for other acceptable (b) If request for approval of a con

methods of measuring, storing, and retract is made by the seller, the contract

cording production. The quantity and may be approved by the supervisor sub

quality of all production shall be deterject to the conditions provided in para

mined in accordance with the standard graph (a) of this section and to such

practices, procedures, and specifications further conditions as may be prescribed

generally used by the industry. by the supervisor.

$ 250.61 Measurement of gas. (c) Lessee may submit to the Sec

The lessee shall measure all gas proretary, through the supervisor, for approval any long-term contract which

duction in accordance with methods apthe lessee has made or proposes to make

proved by the supervisor, and the measfor the sale of gas produced from a lease

ured volumes shall be adjusted to the or leases. Should the Secretary approve

standard pressure base of 10 ounces above such contract, for the purpose of com

the atmospheric pressure of 14.4 pounds puting royalties on gas sold and delivered per square inch, a standard temperature from the lease or leases under such con

of 60° Fahrenheit, and for deviation from tract, the value of the gas on the leased

Boyle's law. If gas is being disposed of premises shall be the price paid therefor

at a different pressure base, the superunder such contract. Nothing in any

visor may require that gas volumes be

adjusted to conform to such base. such contract, or the approval thereof, shall be construed to limit the right of $ 250.62 Determination of content of the United States to take its royalty in gas. kind.

The content of gas delivered to an $ 250.47 Division orders.

extraction plant treating gas from the

lease shall be determined periodically by The lessee shall file with the supervisor

field tests, as required by the supervisor, not less than 30 days after the effective

to be made at the place and by the date thereof copies of division orders or other instruments granting to transpor- supervision.

methods approved by him and under his tation agencies or purchasers authority to receive products from leased lands. The $ 250.63 Quantity basis for substances supervisor may, upon request, approve

extracted from gas. such orders or other instruments subject

(a) The primary quantity basis for to such conditions as he shall prescribe.

computing monthly royalties on casing$ 250.48 Royalty and rental payments.

head or natural gasoline, butane, pro

pane, or other substances (hereinafter The lessee shall pay all rentals when

called substances in this section) exdue and shall pay in value or deliver in

tracted from gas is the monthly net outproduction all royalties in the amounts

put of the plant at which the substances determined by the supervisor as due un

are manufactured, “net output" being der the terms of the lease. Payments of

defined as the quantity of each substance rentals and royalties in value shall be by

that the plant produces for sale. check or draft on a solvent bank, or by

(b) If the net output of a plant is money order, drawn to the order of the

derived from the gas obtained from United States Geological Survey.

only one lease, the quantity of sub(21 F. R. 4668, June 27, 1956)

stances on which computations of roy

66-067 0-67-23

the term of the lease. No deduction may be made for actual or theoretical transportation losses.

(b) Royalty shall be based on production removed from the lease except that, when conditions so warrant, the supervisor may require such royalty to be based on actual monthly production. Evidence of all shipments shall be filed with the supervisor within five days (or such longer period as the supervisor may approve) after the oil has been run by pipeline or by other means of transportation. Such evidence shall be signed by representatives of the lessee and of the purchaser or the transporter who have witnessed the measurements reported, and the determinations of gravity, temperature, and the percentage of impuri. ties contained in the oil shall be shown.

alty for the lease is based is the net output of the plant.

(c) If the net plant output of a substance is derived from gas obtained from several leases producing gas of uniform content of such substance, the proportion of net output of the substance allocable to each lease as a basis for com. puting royalty will be determined by dividing the amount of gas delivered to the plant from each lease by the total amount of gas delivered from all leases.

(d) If the net plant output of a substance is derived from gas obtained from several leases producing gas of diverse content of such substance, the proportion of net output of the substance allocable to each lease as a basis for computing royalty will be determined by multiplying the amount of gas delivered to the plant from the lease by the substance content of the gas and dividing the arithmetical product thus obtained by the sum of the similar arithmetical products separately obtained for all leases from which gas is delivered to the plant. $ 250.64 Value basis for computing

royalties. The value of production, for the purpose of computing royalty, shall be the estimated reasonable value of the product as determined by the supervisor, due consideration being given to the highest price paid for a part or for a majority of production of like quality in the same field or area, to the price received by the lessee, to posted prices, and to other relevant matters. Under no circumstances shall the value of production of any of said substances for the purposes of computing royalty be deemed to be less than the gross proceeds accruing to the lessee from the sale thereof or less than the value computed on such reasonable unit value as shall have been determined by the Secretary. In the absence of good reason to the contrary, value computed on the basis of the highest price paid or offered at the time of production in a fair and open market for the major portion of like-quality products produced and sold from the field or area where the leased lands are situated will be considered to be a reasonable value. $ 250.65 Royalty on oil.

(a) The royalty on crude oil shall be the percentage of the value or amount of the crude oil produced from the leased lands established by law, regulation, or

$ 250.66 Royalty on unprocessed gas.

If gas, either gas-well gas or casinghead gas, is sold without processing for the recovery of constituent products, the royalty thereon shall be the percentage established by the terms of the lease of the value or amount of the gas produced. $ 250.67 Royalty on processed gas.

(a) If gas-well gas is processed for the recovery of constituent products, a royalty as provided in the lease will accrue on the value of all residue gas, and on all natural gasoline, butane, propane, or other substances extracted therefrom.

(b) If casing-head gas is processed for the recovery of constituent products, a royalty as provided in the lease will accrue as follows:

(1) On the full amount of the residue gas remaining after processing.

(2) Unless otherwise provided in the lease, on the value of 50 percent (or the net proceeds received by the lessee if greater than 50 percent) of all natural gasoline, butane, propane, or other substances extracted from the casing-head gas.

(c) In determining the value of natural gasoline, the volume of such gasoline may be corrected when deemed necessary by the supervisor to such standard and by such method as may be approved by the supervisor, in order that volumetric differences between natural gasolines of various specifications may be equitably adjusted.

(d) No allowance shall be made for boosting residue gas or other expenses incidental to marketing.

(e) The lessee, with the approval of upon the submission and acceptance of the supervisor, may establish a gross a bond deemed adequate to indemnify the value per unit of one thousand cubic feet lessor from loss or damage. of gas on the lease or at the wellhead for (b) An appeal to the Director may be the purposes of computing royalty for taken from any order of the supervisor gas-well gas or casing-head gas proc- by filing such appeal with the latter essed for the recovery of constituent officer within 20 days after service of the products.

order. The appeal shall incorporate or

be accompanied by such written showing § 250.68 Commingling production.

and argument on the facts and law as Subject to such conditions as he may the appellant may deem adequate to prescribe for measurement and alloca- justify reversal or modification of the tion of production, the supervisor may order. All statements of fact must be authorize the lessee to move production made under oath. from the lease to a central point for (c) The supervisor shall transmit the purposes of treating, measuring, and appeal and accompanying papers to the storing, and in moving such production, Director with a full report and recomthe lessee may commingle the produc- mendations in the premises, and that tion from different wells, leases, pools, official shall review the record and renand fields, and with production of other der such a decision in the case as he operators. The central point may be on deems proper. shore or at any other convenient place (d) An appeal from any decision of the selected by lessee.

Director may be taken to the Secretary $ 250.69 Measurement of sulphur.

within 30 days after service of the Di

rector's decision. The appeal shall be The measurement of sulphur for the

accompanied by such written showing purpose of computing royalty shall be

and argument on the facts and law as on such basis and shall conform to such

appellant may deem adequate to justify standards as the supervisor may approve. reversal or modification of the decision. PROCEDURE IN CASE OF DEFAULT BY LESSEE

Any statements of fact not submitted to

the Director must be made under oath. $ 250.80 Default.

(e) Oral argument in any case pendWhenever the owner of a lease fails ing before the supervisor, the Director, to comply with the provisions of the or the Secretary will be allowed on moregulations in this part, the supervisor tion in the discretion of such officer and is authorized to give 30-day notice of at a time to be fixed by him. such default by registered letter to the

$ 250.82 Judicial review. lessee at his record post office address as provided in section 5(b) (1) of the Nothing contained in this part shall be act and to recommend to the Secretary,

construed to prevent any interested party through the Director, lease cancellation

from seeking judicial review as authorpursuant to section 5(b) (1) and (2) of

ized by law. the act, appropriate action under the

REPORTS TO BE MADE BY ALL LESSEES penalty provisions of section 5(a) (2) of

(INCLUDING OPERATORS) the act, or the exercise of such other legal or equitable remedy as the lessor may

$ 250.90 General requirements. have.

Information required to be submitted $ 250.81 Appeals.

in accordance with the regulations in this

part shall be furnished in the manner (a) An appeal from any order issued

and form prescribed in the regulations under authority of the regulations in in this part or as directed by the superthis part may be filed as set forth in

visor. Copies of forms can be obtained this section. Compliance with any such from the supervisor and must be filled order shall not be suspended by reason out completely and filed punctually with of an appeal having been taken unless that official. such suspension is authorized in writing by the Director or the Secretary (de

$ 250.91 Sundry notices and reports on

wells. pendent upon the officer with whom the appeal is pending) and then only upon Form 9-150 covers all notices of ina determination that such suspension tention and all subsequent reports perwill not be detrimental to the lessor or taining to individual wells except those

for which special blanks are provided. The forms may be use for any of the purposes listed thereon, or a special heading may be inserted in the blank to adapt it for use for similar purposes. Any written notice of intention to do work which has not been approved and for which approval is required or to change plans previously approved must be filed in triplicate, unless otherwise directed, and must reach the supervisor and receive his approval before the work is begun. The lessee is responsible for receipt of the notice by the supervisor in ample time for proper consideration and action. The following paragraphs illustrate some of the uses to which Form 9-150 may be put and indicate the requirements with respect to each use.

(a) Notice of intention to drill. (1) The notice of intention to drill a well must be filed in triplicate on Form 9–150 with the supervisor and approval received before the work is begun. This notice, in addition to the requirements contained in $ 250.34, must give the surface location and projected bottom-hole location in feet from the lease boundaries; elevation of the derrick floor; proposed depth to which the well will be drilled; the bottom-hole location; estimated depths to the top of important markers; estimated depths at which water, oil, gas, and mineral deposits are expected; the proposed casing program, including the size and weight of casing, the depth at which each string is to be set, and the amount of cement and mud to be used. Information also shall be furnished relative to the proposed plan for drilling other proposed wells from the same platform, coring at specified depths, and plans for electrical logging, together with any other information which may be required by the supervisor.

(2) Each copy of the application shall be accompanied by a plat drawn on a scale of not less than 2,000 feet to the inch, showing surface and subsurface location of the well to be drilled and all wells theretofore drilled.

(b) Notice of intention to change the condition of a well. Before repairing (other than work incidental to ordinary well operation), acidizing or stimulating production by other methods, deepening, perforating, plugging back, sidetracking, squeezing with mud or cement, or commencing any operations that will alter the condition of a completed well or productive horizon other than previously

reported, a detailed written statement of the plan of work must be filed in triplicate with the supervisor on Form 9–150 and approval obtained before the work is started. This requirement shall not deter any operator from taking immediate action in an emergency to prevent damage.

(c) Subsequent report of changing the condition of a well. Within 30 days after the completion of any work described in paragraph (b) of this section, a detailed report of the work done and the results obtained shall be filed in duplicate with the supervisor. Such report shall show the amount of production of oil, gas, and water before and after the work was completed and shall also include a complete statement of the work accomplished and the methods employed, including all dates. Reports of work done by service companies, unless previously furnished the supervisor, shall be submitted with subsequent reports.

(d) Notice of intention to abandon well.

Before beginning abandonment work on any well, whether a drilling well, a depleted producing well, or a dry hole, notice of intention to abandon shall be filled in triplicate with the supervisor, and approval obtained before the work is started. The notice, as to a producible well, must show the reason for abandonment and the amount and date of last production, and as to any well must give a detailed statement of the proposed werk, including such information as kind, location, and length of plugs (by depths), and plans for mudding, cementing, shooting, testing, removing casing, and other pertinent information.

(e) Subsequent report of abandonment. After a well is abandoned or plugged, a subsequent record of work done must be filed with the supervisor. This report shall be filled separately within 30 days after the work is done. The report shall give a detailed account of the manner in which the abandon. ment or plugging work was carried out, including the nature and quantities of materials used in plugging and the location and extent (by depths) of the plugs of different materials; records of any tests or measurements made and of the amount, size, and location (by depths) of casing left in the well; and a detailed statement of the volume of mud fluid used and the pressure attained in mud.

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