drilling unit. (1) Two or more owners within a brine production drilling unit may bring together their interests for the development and operation of the brine production drilling unit. (2) (a) In the absence of a written agreement for pooling, including an operating agreement, the board may enter an order pooling all interests in the brine production drilling unit for the development and operation of the brine production drilling unit. (b) The board shall make the order upon terms and conditions that are just and reasonable. (c) The board may adopt terms appearing in an operating agreement: (i) for the brine production drilling unit that is in effect between the consenting owners; (ii) submitted by any party to the proceeding; or (iii) submitted by the board's own motion. (3) (a) Operations incident to the drilling of a brine well upon any portion of a brine production drilling unit covered by a pooling order are considered for all purposes to be the conduct of the brine mining operations upon each separately owned tract in the brine production drilling unit by the several owners. (b) The portion of the production allocated or applicable to a separately owned tract included in a brine production drilling unit covered by a pooling order shall, when produced, be considered for all purposes to have been produced from that tract by a brine well drilled on the tract. (4) (a) (i) A pooling order shall provide for the payment of just and reasonable costs incurred in the drilling and operating of the brine production drilling unit, including: (A) the costs of drilling, completing, equipping, producing, gathering, transporting, processing, marketing, and storage facilities; (B) reasonable charges for the administration and supervision of brine mining operations; and (C) other costs customarily incurred in the industry. (ii) An owner is not liable under a pooling order for costs or losses resulting from the gross negligence or willful misconduct of the operator. (b) A pooling order shall provide for reimbursement to the consenting owners for any nonconsenting owner's share of the costs out of production from the brine production drilling unit attributable to the nonconsenting owner's tract. (c) A pooling order shall provide that each consenting owner shall own and is entitled to receive, subject to royalty or similar obligations: (i) the share of the production of the brine well applicable to the consenting owner's interest in the brine production drilling unit; and (ii) unless the consenting owner has agreed otherwise, the consenting owner's proportionate part of the nonconsenting owner's share of the production until costs are recovered as provided in Subsection (4)(d). (d) (i) A pooling order shall provide that each nonconsenting owner is entitled to receive, subject to royalty or similar obligations, the share of the production of the brine well applicable to the nonconsenting owner's interest in the brine production drilling unit after the consenting owners have recovered from the nonconsenting owner's share of production the following amounts less any cash contributions made by the nonconsenting owner: (A) 100% of the nonconsenting owner's share of the cost of surface equipment beyond the wellhead connections, including stock tanks, separators, treaters, pumping equipment, and piping; (B) 100% of the nonconsenting owner's share of the estimated cost to plug and abandon the brine well as determined by the board; (C) 100% of the nonconsenting owner's share of the cost of brine mining operations of the brine well commencing with first production and continuing until the consenting owners have recovered all costs; and (D) 300% on the first brine well and 150% for each subsequent brine well of the nonconsenting owner's share of the costs of staking the location, wellsite preparation, rights-of-way, rigging up, drilling, reworking, recompleting, deepening or plugging back, testing, and completing, and the cost of equipment in the brine well to and including the wellhead connections. (ii) The nonconsenting owner's share of the costs specified in Subsection (4)(d)(i) is that interest that would have been chargeable to the nonconsenting owner had the nonconsenting owner initially agreed to pay the nonconsenting owner's share of the costs of the brine well from commencement of the brine mining operation. (iii) A reasonable interest charge may be included if the board finds the interest charge appropriate. (e) If there is a dispute about costs, the board shall determine the proper costs. (5) If a nonconsenting owner's tract in the brine production drilling unit is subject to a lease, mining claim, or contract for the development of minerals within the brine, the pooling order shall provide that the consenting owners shall pay any royalty interest or other interest in the tract not subject to the deduction of the costs of production from the production attributable to that tract. (6) (a) If a nonconsenting owner's tract in the brine production drilling unit is not subject to a lease, mining claim, or contract for the development of minerals within the brine production drilling unit, the pooling order shall provide that the nonconsenting owner shall receive as a royalty: (i) the acreage weighted average royalty based on each leased fee and privately owned tract within the brine production drilling unit, proportionately reduced by the percentage of the nonconsenting owner's interest in the brine production drilling unit; or (ii) if there is no leased fee or privately owned tract within the brine production drilling unit other than the one owned by the nonconsenting owner, 7-1/2% proportionately reduced by the percentage of the nonconsenting owner's interest in the brine production drilling unit. (b) The royalty shall be: (i) determined as of the day drilling is commenced; and (ii) paid from production attributable to each tract until the consenting owners have recovered the costs specified in Subsection (4)(d). (7) Once the consenting owners have recovered the costs, as described in Subsection (6)(b)(ii), the royalty is merged back into the nonconsenting owner's working interest and is terminated. (8) The operator of a brine well under a pooling order in which there is a nonconsenting owner shall furnish the nonconsenting owner with monthly statements specifying: (a) costs incurred; (b) the total volume of production of brine and the volumes extracted therefrom; and (c) the amount of brine proceeds realized from the sale of the production during the preceding month. (9) A pooling order shall provide that when the consenting owners recover from a nonconsenting owner's relinquished interest the amounts provided for in Subsection (4)(d): (a) the relinquished interest of the nonconsenting owner shall automatically revert to the nonconsenting owner; (b) the nonconsenting owner shall from that time: (i) own the same interest in the brine well and the production from the brine well; and (ii) be liable for the further costs of the brine mining operation as if the nonconsenting owner had participated in the initial drilling and operation; and (c) costs are payable out of production unless otherwise agreed between the nonconsenting owner and the operator. (10) A pooling order shall provide that in any circumstance where the nonconsenting owner has relinquished the nonconsenting owner's share of production to consenting owners or at any time fails to take the nonconsenting owner's share of production in-kind when the nonconsenting owner is entitled to do so, the nonconsenting owner is entitled to: (a) an accounting of the brine proceeds applicable to the nonconsenting owner's relinquished share of production; and (b) payment of the brine proceeds applicable to that share of production not taken in-kind, net of costs.
‹ Prev All Utah sections Next ›
Lexace provides legal information, not legal advice, and no attorney–client relationship is created. Statute text is provided for general information and may not reflect the most recent amendments; verify against the official state code.