Relating to oil and gas production, including filing requirements, the authority of the department of natural resources, confidential information, and pooling orders

The bill grants the director the authority to issue variances to any of the department’s rules, regulations, or orders. A variance may be granted without a hearing. The application for a variance must demonstrate a good faith effort or inability to comply with specific requirements. A variance request must be approved within days and shall be made public. The bill allows an owner to make information submitted to the department confidential for five years, unless otherwise extended by the director for good cause. The bill provides procedures to make information confidential and includes examples of types of information that may be determined confidential. The bill allows the department to establish an exploratory spacing unit to drill one or more exploratory wells to establish the existence of a pool and the appropriate size and shape of the spacing unit if it is unable to determine the existence of a pool and the appropriate acreage and shape to be embraced within a spacing unit based on the evidence introduced at hearing. The bill requires each pooling order to provide for the drilling and operation of a well in the spacing unit and for payment of the cost incurred. The bill authorizes the director to ensure the producers are entitled to all production from the well after payment of royalties and other obligations. The bill requires the director to determine costs if there is a dispute. The bill provides that the pooling order must determine the interest of each owner in the unit, including the owner’s share of cost, unless otherwise agreed, and entitles the owners the share of production of the well applicable to the tract of the nonconsenting owner, subject to royalties and other obligations. Owners who do not agree to the pooling order are entitled to a share of the production applicable to the owner’s interest after the producer has recovered a certain amount specified in the bill, which includes costs attributed to newly acquired surface equipment beyond the wellhead connections, operation, drilling, reworking, deepening or plugging back, testing, and completing, and newly acquired equipment in the well, up to and including the wellhead connections.5 percent during the time of drilling or operating a well pursuant to the pooling order. After the producer has fully recovered costs as described in the bill, the producer must send a notice within days to any nonconsenting owner to offer participation as a working interest owner under the pooling order. The nonparticipating owner has days after receipt of the notice to accept the offer or may elect to continue receiving the default royalty. If the nonparticipating owner does not respond, the nonparticipating owner will be deemed to have elected to continue receiving the default royalty. The producer must inform the director of the nonparticipating owner’s decision within five business days of receiving an answer or the expiration of time allowed to respond. The bill provides minimum requirements for an application for compulsory pooling and any associated hearing. Under current law, the department has the authority to determine market demand for oil and gas for each marketing district and to regulate the amount of production. The bill eliminates this authority from the department.