[Federal Register Volume 81, Number 117 (Friday, June 17, 2016)]
[Rules and Regulations]
[Pages 39572-39582]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-14127]
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DEPARTMENT OF THE INTERIOR
Bureau of Indian Affairs
25 CFR Part 226
[167A2100DD/AAKC001030/A0A501010.999900]
RIN 1076-AF17
Leasing of Osage Reservation Lands for Oil and Gas Mining
AGENCY: Bureau of Indian Affairs, Interior.
ACTION: Final rule.
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SUMMARY: The Bureau of Indian Affairs (BIA) previously published a
final rule ``Leasing of Osage Reservation Lands for Oil and Gas
Mining'' on May 11, 2015, but due to a court order enjoining the final
rule and subsequent remand, that version of the rule never became
effective. This final rule amends the Code of Federal Regulations to
reinstate the version of the rule that was in effect prior to the 2015
final rule because that prior version of the rule remains operative.
DATES: This final rule is effective as of June 17, 2016.
FOR FURTHER INFORMATION CONTACT: Mr. Eddie Streater, Designated Federal
Officer, BIA, (918) 781-4608.
SUPPLEMENTARY INFORMATION: The BIA published the final rule, ``Leasing
of Osage Reservation Lands for Oil and Gas Mining,'' on May 11, 2015 at
80 FR 26994. The effective date of the final rule was July 10, 2015. On
July 1, 2015, the Osage Minerals Council and Osage Producers
Association filed suit in the U.S. District Court for the Northern
District of Oklahoma, Case No. 15-cv-00367-GKF-PJC, seeking to enjoin
implementation of the final rule. On August 10, 2015, the Court entered
an Order enjoining the final rule. The BIA determined that a voluntary
remand of the final rule was appropriate. On November 19, 2015, the
Court entered the Judgment of Remand. The version of 25 CFR part 226 in
effect prior to publication of the final rule on May 11, 2015, remains
operative. See 55 FR 33116 (Aug. 14, 1990). This final rule reinserts
into the Code of Federal Regulations that version of 25 CFR part 226
that was in effect prior to the May 11, 2015 final rule publication.
Procedural Requirements
A. Regulatory Planning and Review (E.O. 12866 and 13563)
Executive Order 12866 provides that the Office of Information and
Regulatory Affairs in the Office of Management and Budget will review
all significant rules. The Office of Information and Regulatory Affairs
has determined that this rule is not significant.
Executive Order 13563 reaffirms the principles of E.O. 12866 while
calling for improvements in the nation's regulatory system to promote
predictability, to reduce uncertainty, and to use the best, most
innovative, and least burdensome tools for achieving regulatory ends.
The executive order directs agencies to consider regulatory approaches
that reduce burdens and maintain flexibility and freedom of choice for
the public where these approaches are relevant, feasible, and
consistent with regulatory objectives. E.O. 13563 emphasizes further
that regulations must be based on the best available science and that
the rulemaking process must allow for public participation and an open
exchange of ideas. We have developed this rule in a manner consistent
with these requirements.
B. Regulatory Flexibility Act
This document will not have a significant economic effect on a
substantial number of small entities under the Regulatory Flexibility
Act (5 U.S.C. 601 et seq.) because this rule reinstates the existing,
operative rule.
C. Small Business Regulatory Enforcement Fairness Act
This rule is not a major rule under 5 U.S.C. 804(2), the Small
Business Regulatory Enforcement Fairness Act. This rule:
(a) Does not have an annual effect on the economy of $100 million
or more;
(b) Will not cause a major increase in costs or prices for
consumers, individual industries, Federal, State, or local government
agencies, or geographic regions;
(c) Does not have significant adverse effects on competition,
employment, investment, productivity, innovation, or the ability of
U.S.-based enterprises to compete with foreign-based enterprises.
D. Unfunded Mandates Reform Act
This rule does not impose an unfunded mandate on State, local, or
tribal governments or the private sector of more than $100 million per
year. The rule does not have a significant or unique effect on State,
local, or tribal governments or the private sector. A statement
containing the information required by the Unfunded Mandates Reform Act
(2 U.S.C. 1531 et seq.) is not required.
E. Takings (E.O. 12630)
This rule does not affect a taking of private property or otherwise
have taking implications under Executive Order 12630. A takings
implication assessment is not required.
F. Federalism (E.O. 13132)
Under the criteria in section 1 of Executive Order 13132, this rule
does not have sufficient Federalism implications to warrant the
preparation of a Federalism summary impact statement. A Federalism
summary impact statement is not required.
G. Civil Justice Reform (E.O. 12988)
This rule complies with the requirements of Executive Order 12988.
Specifically, this rule:
(a) Meets the criteria of section 3(a) requiring that all
regulations be reviewed to eliminate errors and ambiguity and be
written to minimize litigation; and
(b) Meets the criteria of section 3(b)(2) requiring that all
regulations be written in clear language and contain clear legal
standards.
H. Consultation With Indian Tribes (E.O. 13175 and Departmental Policy)
The Department of the Interior strives to strengthen its
government-to-government relationship with Indian Tribes through a
commitment to consultation with Indian Tribes and recognition of their
right to self-governance and tribal sovereignty. We have evaluated this
rule under the Department's consultation policy and under the criteria
in Executive Order 13175 and have determined that is has no substantial
direct effects on the Osage Nation or other federally recognized Indian
Tribes and that consultation under the Department's tribal consultation
policy is not required.
I. Paperwork Reduction Act
This rule does not contain information collection requirements, and
a submission to the Office of Management and Budget under the Paperwork
Reduction Act (44 U.S.C. 3501 et seq.) is not required. We may not
conduct or sponsor, and you are not required to respond to, a
collection of information unless it displays a currently valid OMB
control number.
J. National Environmental Policy Act
This rule does not constitute a major Federal action significantly
affecting the
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quality of the human environment. A detailed statement under the
National Environmental Policy Act of 1969 (NEPA) is not required
because the rule is covered by a categorical exclusion. This rule is
excluded from the requirement to prepare a detailed statement because
it is a regulation of an administrative nature. (For further
information, see 43 CFR 46.210(i).) We have also determined that the
rule does not involve any of the extraordinary circumstances listed in
43 CFR 46.215 that would require further analysis under NEPA.
K. Effects on the Energy Supply (E.O. 13211)
This rule is not a significant energy action under the definition
in Executive Order 13211. A Statement of Energy Effects is not
required.
L. Clarity of This Regulation
We are required by Executive Orders 12866 (section 1(b)(12)), and
12988 (section 3(b)(1)(B)), and 13563 (section 1(a)), and by the
Presidential Memorandum of June 1, 1998, to write all rules in plain
language. This means that each rule we publish must:
(a) Be logically organized;
(b) Use the active voice to address readers directly;
(c) Use common, everyday words and clear language rather than
jargon;
(d) Be divided into short sections and sentences; and
(e) Use lists and tables wherever possible.
If you feel that we have not met these requirements, send us
comments by one of the methods listed in the ADDRESSES section. To
better help us revise the rule, your comments should be as specific as
possible. For example, you should tell us the numbers of the sections
or paragraphs that you find unclear, which sections or sentences are
too long, the sections where you think lists or tables would be useful,
etc.
M. Administrative Procedure Act
Section 553(b) of the Administrative Procedure Act (APA) provides
that, when an agency for good cause finds that ``notice and public
procedure . . . are impracticable, unnecessary, or contrary to the
public interest,'' the agency may issue a rule without providing notice
and an opportunity for public comment. BIA finds that there is good
cause to promulgate this rule without providing for public comment
because the final rule published in May 2015 never took effect and the
rule being published today remains the operative rule. Accordingly, it
would serve no purpose to provide an opportunity for public comment on
this rule. Thus, notice and public comment is impracticable and
unnecessary.
List of Subjects in 25 CFR Part 226
Indians--lands.
For the reasons stated in the preamble, the Department of the
Interior, Bureau of Indian Affairs, amends Title 25 of the Code of
Federal Regulations by revising part 226 to read as follows:
PART 226--LEASING OF OSAGE RESERVATION LANDS FOR OIL AND GAS MINING
Sec.
226.1 Definitions.
Leasing Procedure, Rental and Royalty
226.2 Sale of leases.
226.3 Surrender of lease.
226.4 Form of payment.
226.5 Leases subject to current regulations.
226.6 Bonds.
226.7 Provisions of forms made a part of the regulations.
226.8 Corporation and corporate information.
226.9 Rental and drilling obligations.
226.10 Term of lease.
226.11 Royalty payments.
226.12 Government reserves right to purchase oil.
226.13 Time of royalty payments and reports.
226.14 Contracts and division orders.
226.15 Unit leases, assignments and related instruments.
Operations
226.16 Commencement of operations.
226.17 How to acquire permission to begin operations on a restricted
homestead allotment.
226.18 Information to be given surface owners prior to commencement
of drilling operations.
226.19 Use of surface of land.
226.20 Settlement of damages claimed.
226.21 Procedure for settlement of damages claimed.
226.22 Prohibition of pollution.
226.23 Easements for wells off leased premises.
226.24 Lessee's use of water.
226.25 Gas well drilled by oil lessees and vice versa.
226.26 Determining cost of well.
226.27 Gas for operating purposes and tribal use.
Cessation of Operations
226.28 Shutdown, abandonment, and plugging of wells.
226.29 Disposition of casings and other improvements.
Requirements of Lessees
226.30 Lessees subject to Superintendent's orders; books and records
open to inspection.
226.31 Lessee's process agents.
226.32 Well records and reports.
226.33 Line drilling.
226.34 Wells and tank batteries to be marked.
226.35 Formations to be protected.
226.36 Control devices.
226.37 Waste of oil and gas.
226.38 Measuring and storing oil.
226.39 Measurement of gas.
226.40 Use of gas for lifting oil.
226.41 Accidents to be reported.
Penalties
226.42 Penalty for violation of lease terms.
226.43 Penalties for violation of certain operating regulations.
Appeals and Notices
226.44 Appeals.
226.45 Notices.
226.46 Information collection.
Authority: Sec. 3, 34 Stat. 543; secs. 1, 2, 45 Stat. 1478;
sec. 3, 52 Stat. 1034, 1035; sec. 2(a), 92 Stat. 1660.
Sec. 226.1 Definitions.
As used in this part 226, terms shall have the meanings set forth
in this section.
(a) Secretary means the Secretary of the Interior or his authorized
representative acting under delegated authority.
(b) Osage Tribal Council means the duly elected governing body of
the Osage Nation or Tribe of Indians of Oklahoma vested with authority
to lease or take other actions on oil and gas mining pertaining to the
Osage Mineral Estate.
(c) Superintendent means the Superintendent of the Osage Agency,
Pawhuska, Oklahoma, or his authorized representative acting under
delegated authority.
(d) Oil lessee means any person, firm, or corporation to whom an
oil mining lease is made under the regulations in this part.
(e) Gas lessee means any person, firm, or corporation to whom a gas
mining lease is made under the regulations in this part.
(f) Oil and gas lessee means any person, firm, or corporation to
whom an oil and gas mining lease is made under the regulations in this
part.
(g) Primary term means the basic period of time for which a lease
is issued during which the lease contract may be kept in force by
payment of rentals.
(h) Major purchaser means any one of the minimum number of
purchasers taking 95 percent of the oil in Osage County, Oklahoma. Any
oil purchased by a purchaser from itself, its subsidiaries,
partnerships, associations, or other corporations in which it has a
financial or management interest shall be excluded from the
determination of a major purchaser.
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(i) Casinghead gas means gas produced from an oil well as a
consequence of oil production from the same formation.
(j) Natural gas means any fluid, either combustible or
noncombustible, recovered at the surface in the gaseous phase and/or
hydrocarbons recovered at the surface as liquids which are the result
of condensation caused by reduction of pressure and temperature of
hydrocarbons originally existing in a reservoir in the gaseous phase.
(k) Authorized representative of an oil lessee, gas lessee, or oil
and gas lessee means any person, group, or groups of persons,
partnership, association, company, corporation, organization or agent
employed by or contracted with a lessee or any subcontractor to conduct
oil and gas operations or provide facilities to market oil and gas.
(l) Oil well means any well which produces one (1) barrel or more
of crude petroleum oil for each 15,000 standard cubic feet of natural
gas.
(m) Gas well means any well which:
(1) Produces natural gas not associated with crude petroleum oil at
the time of production or
(2) Produces more than 15,000 standard cubic feet of natural gas to
each barrel of crude petroleum oil from the same producing formation.
Leasing Procedure, Rental and Royalty
Sec. 226.2 Sale of leases.
(a) Written application, together with any nomination fee, for
tracts to be offered for lease shall be filed with the Superintendent.
(b) The Superintendent, with the consent of the Osage Tribal
Council, shall publish notices for the sale of oil leases, gas leases,
and oil and gas leases to the highest responsible bidder on specific
tracts of the unleased Osage Mineral Estate. The Superintendent may
require any bidder to submit satisfactory evidence of his good faith
and ability to comply with all provisions of the notice of sale.
Successful bidders must deposit with the Superintendent on day of sale
a check or cash in an amount not less than 25 percent of the cash bonus
offered as a guaranty of good faith. Any and all bids shall be subject
to the acceptance of the Osage Tribal Council and approval of the
Superintendent. Within 20 days after notification of being the
successful bidder, and said bidder must submit to the Superintendent
the balance of the cash bonus, a $10 filing fee, and the lease in
completed form. The Superintendent may extend the time for the
completion and submission of the lease form, but no extension shall be
granted for remitting the balance of moneys due. If the bidder fails to
pay the full cash consideration within said period or fails to file the
completed lease within said period or extention thereof, or if the
lease is rejected through no fault of the Osage Tribal Council or the
Superintendent, 25 percent of the cash bonus bid will be forfeited for
the use and benefits of the Osage Tribe. The Superintendent may reject
a lease made on an accepted bid, upon evidence satisfactory to him of
collusion, fraud, or other irregularity in connection with the notice
of sale. The Superintendent may approve oil leases, gas leases, and oil
and gas leases made by the Osage Tribal Council in conformity with the
notice of sale, regulations in this part, bonds, and other instruments
required.
(c) Each oil and/or gas lease and activities and installations
associated therewith subject to these regulations shall be assessed and
evaluated for its environmental impact prior to its approval by the
Superintendent.
(d) Lessee shall accept a lease with the understanding that a
mineral not covered by his lease may be leased separately.
(e) No lease, assignment thereof, or interest therein will be
approved to any employee or employees of the Government and no such
employee shall be permitted to acquire any interest in leases covering
the Osage Mineral Estate by ownership of stock in corporations having
leases or in any other manner.
(f) The Osage Tribal Council may utilize the following procedures
among others, in entering into a mining lease. A contract may be
entered into through competitive bidding as outlined in Sec. 226.2(b),
negotiation, or a combination of both. The Osage Tribal Council may
also request the Superintendent to undertake the preparation,
advertisement and negotiation. The Superintendent may approve any such
contract made by the Osage Tribal Council.
Sec. 226.3 Surrender of lease.
Lessee may, with the approval of the Superintendent and payment of
a $10 filing fee, surrender all or any portion of any lease, have the
lease cancelled as to the portion surrendered and be relieved from all
subsequent obligations and liabilities. If the lease, or portion being
surrendered, is owned in undivided interests by more than one party,
then all parties shall join in the application for cancellation:
Provided, That if this lease has been recorded, Lessee shall execute a
release and record the same in the proper office. Such surrender shall
not entitle Lessee to a refund of the unused portion of rental paid in
lieu of development, nor shall it relieve Lessee and his sureties of
any obligation and liability incurred prior to such surrender: Provided
further, That when there is a partial surrender of any lease and the
acreage to be retained is less than 160 acres or there is a surrender
of a separate horizon, such surrender shall become effective only with
the consent of the Osage Tribal Council and approval of the
Superintendent.
Sec. 226.4 Form of payment.
Sums due under a lease contract and/or the regulations in this part
shall be paid by cash or check made payable to the Bureau of Indian
Affairs and delivered to the Osage Agency, Pawhuska, Oklahoma 74056.
Such sums shall be a prior lien on all equipment and unsold oil on the
leased premises.
Sec. 226.5 Leases subject to current regulations.
Leases issued pursuant to this part shall be subject to the current
regulations of the Secretary, all of which are made a part of such
leases: Provided, That no amendment or change of such regulations made
after the approval of any lease shall operate to affect the term of the
lease, rate of royalty, rental, or acreage unless agreed to by both
parties and approved by the Superintendent.
Sec. 226.6 Bonds.
Lessees shall furnish with each lease a corporate surety bond
acceptable to the Superintendent as follows:
(a) A bond on Form D shall be filed with each lease submitted for
approval. Such bond shall be in an amount of not less than $5,000 for
each quarter section or fractional quarter section covered by said
lease: Provided, however, That one bond in the penal sum or not less
than $50,000 may be filed on Form G covering all oil, gas and
combination oil and gas leases not in excess of 10,240 acres to which
Lessee is or may become a party.
(b) In lieu of the bonds required under paragraph (a) of this
section, a bond in the penal sum of $150,000 may be filed on Form 5-
5438 for full nationwide coverage of all leases, without geographic or
acreage limitation, to which the Lessee is or may become a party.
(c) A bond on Form H shall be filed in an amount of not less than
$5,000 covering a lease acquired through assignment where the assignee
does not have a collective bond on form G or nationwide bond, or the
corporate surety does not execute its consent to remain bound under the
original bond given to secure the faithful performance of the terms and
conditions of the lease.
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(d) The right is specifically reserved to increase the amount of
bonds prescribed in paragraphs (a) and (c) of this section in any
particular case when the Superintendent deems it proper. The nationwide
bond may be increased at any time in the discretion of the Secretary.
Sec. 226.7 Provisions of forms made a part of the regulations.
Leases, assignments, and supporting instruments shall be in the
form prescribed by the Secretary, and such forms are hereby made a part
of the regulations.
Sec. 226.8 Corporation and corporate information.
(a) If the applicant for a lease is a corporation, it shall file
evidence of authority of its officers to execute papers; and with its
first application it shall also file a certified copy of its Articles
of Incorporation and, if foreign to the State of Oklahoma, evidence
showing compliance with the corporation laws thereof.
(b) Whenever deemed advisable the Superintendent may require a
corporation to file any additional information necessary to carry out
the purpose and intent of the regulations in this part, and such
information shall be furnished within a reasonable time.
Sec. 226.9 Rental and drilling obligations.
(a) Oil leases, gas leases, and combination oil and gas leases.
Unless Lessee shall complete and place on production a well producing
and selling oil and/or gas in paying quantities on the land embraced
within the lease within 12 months from the date of approval of the
lease, or as otherwise provided in the lease terms, or 12 months from
the date the Superintendent consents to drilling on any restricted
homestead selection, the lease shall terminate unless rental at the
rate of not less than $1 per acre for an oil or gas lease, or not less
than $2.00 per acre for a combination oil and gas lease, shall be paid
before the end of the first year of the lease. The lease may also be
held for the remainder of its primary term without drilling upon
payment of the specified rental annually in advance, commencing with
the second lease year. The lease shall terminate as of the due date of
the rental unless such rental shall be received by the Superintendent,
or shall have been mailed as indicated by postmark on or before said
date. The completion of a well producing in paying quantities shall,
for so long as such production continues, relieve Lessee from any
further payment of rental, except that should such production cease
during the primary term the lease may be continued only during the
remaining primary term of the lease by payment of advance rental which
shall commence on the next anniversary date of the lease. Rental shall
be paid on the basis of a full year and no refund will be made of
advance rental paid in compliance with the regulations in this part:
Provided, That the Superintendent in his discretion may order further
development of any leased acreage or separate horizon if, in his
opinion, a prudent operator would conduct further development. If
Lessee refuses to comply, the refusal will be considered a violation of
the lease terms and said lease shall be subject to cancellation as to
the acreage or horizon the further development of which was ordered:
Provided further, That the Superintendent may impose restrictions as to
time of drilling and rate of production from any well or wells when in
his judgment, such action may be necessary or proper for the protection
of the natural resources of the leased land and the interests of the
Osage Tribe. The superintendent may consider, among other things,
Federal and Oklahoma laws regulating either drilling or production. If
a lessee holds both an oil lease and a gas lease covering the same
acreage, such lessee is subject to the provisions of this section as to
both the oil lease and the gas lease.
(b) The Superintendent may, with the consent of and under terms
approved by the Osage Tribal Council, grant an extension of the primary
term of a lease on which the actual drilling of a well shall have
commenced within the term thereof or for the purpose of enabling Lessee
to obtain a market for his oil and/or gas production.
Sec. 226.10 Term of lease.
Leases issued hereunder shall be for a primary term as established
by the Osage Tribal Council, approved by the Superintendent, and so
stated in the notice of sale of such leases and so long thereafter as
the minerals specified are produced in paying quantities.
Sec. 226.11 Royalty payments.
(a) Royalty on oil--(1) Royalty rate. Lessee shall pay or cause to
be paid to the Superintendent, as royalty, the sum of not less than
162/3 percent of the gross proceeds from sales after deducting the oil
used by Lessee for development and operation purposes on the lease:
Provided, That when the quantity of oil taken from all the producing
wells on any quarter-section or fraction thereof, according to the
public survey, during any calendar month is sufficient to average one
hundred or more barrels per active producing well per day the royalty
on such oil shall be not less than 20 percent. The Osage Tribal Council
may, upon presentation of justifiable economic evidence by Lessee,
agree to a revised royalty rate subject to approval by the
Superintendent, applicable to additional oil produced from a lease or
leases by enhanced recovery methods, which rate shall not be less than
121/2 percent of the gross proceeds from sale of oil produced by
enhanced recovery processes, other than gas injection, after deducting
the oil used by Lessee for development and operating purposes on the
lease or leases.
(2) Unless the Osage Tribal Council, with approval of the
Secretary, shall elect to take the royalty in kind, payment is owing at
the time of sale or removal of the oil, except where payments are made
on division orders, and settlement shall be based on the actual selling
price, but at not less than the highest posted price by a major
purchaser (as defined in Sec. 226.1(h)) in Osage County, Oklahoma, who
purchases production from Osage oil leases.
(3) Royalty in kind. Should Lessor, with approval of the Secretary,
elect to take the royalty in kind, Lessee shall furnish free storage
for royalty oil for a period not to exceed 60 days from date of
production after notice of such election.
(b) Royalty on gas--(1) Oil lease. All casinghead gas shall belong
to the oil Lessee subject to any rights under existing gas leases. All
casinghead gas removed from the lease from which it is produced shall
be metered unless otherwise approved by the Superintendent and be
subject to a royalty of not less than 162/3 percent of the market value
of the gas and all products extracted therefrom, less a reasonable
allowance for manufacture or processing. If an oil Lessee supplies
casinghead gas produced from one lease for operation and/or development
of other leases, either his/hers or others, a royalty of not less than
162/3 percent shall be paid on the market value of all casinghead gas
so used. All casinghead gas not utilized by the oil Lessee may, with
the approval of the Superintendent, be utilized or sold by the gas
Lessee, subject to the prescribed royalty of not less than 162/3
percent of the market value.
(2) Gas lease. Lessee shall pay a royalty of not less than 162/3
percent of the market value of all natural gas and products extracted
therefrom produced and sold from his lease. Natural gas used in the
reasonable and prudent
[[Page 39576]]
operation and development of said lease shall be exempted from royalty
payment.
(3) Combination oil and gas lease. Lessee shall pay royalty as
provided in paragraphs (b)(1) and (2) of this section.
(c) Minimum royalty. In no event shall the royalty paid from
producing leases during any year be less than an amount equal to the
annual rental specified for the lease. Any underpayment of minimum
royalty shall be due and payable within 45 days following the end of
the lease year. After the primary term, Lessee shall submit with his
payment evidence that the lease is producing in paying quantities. The
Superintendent is authorized to determine whether the lease is actually
producing in paying quantities or has terminated for lack of such
production. Payment for any underpayment not made within the time
specified shall be subject to a late charge at the rate of not less
than 11/2 percent per month for each month or fraction thereof until
paid.
Sec. 226.12 Government reserves right to purchase oil.
Any of the executive departments of the U.S. Government shall have
the option to purchase all or any part of the oil produced from any
lease at not less than the highest posted price as defined in Sec.
226.11.
Sec. 226.13 Time of royalty payments and reports.
(a) Royalty payments due may be paid by either purchaser or Lessee.
Unless otherwise provided by the Osage Tribal Council and approved by
the Superintendent, all payments shall be due by the 25th day of each
month and shall cover the sales of the preceding month. Failure to make
such payments shall subject Lessee or purchaser, whoever is responsible
for royalty payment, to a late charge at the rate of not less than 11/2
percent for each month or fraction thereof until paid. The Osage Tribal
Council, subject to the approval of the Superintendent, may waive the
late charges.
(b) Lessee shall furnish certified monthly reports by the 25th of
each following month covering all operations, whether there has been
production or not, indicating therein the total amount of oil, natural
gas, casinghead gas, and other products subject to royalty payment.
(c) Failure to remit payments or reports shall subject Lessee to
further penalties as provided in Sec. Sec. 226.42 and 226.43 and shall
subject the division order to cancellation.
Sec. 226.14 Contracts and division orders.
(a) Lessee may enter into division orders or contracts with the
purchasers of oil, gas, or derivatives therefrom which will provide for
the purchaser to make payment of royalty in accordance with his lease:
Provided, That such division orders or contracts shall not relieve
Lessee from responsibility for the payment of the royalty should the
purchaser fail to pay. No production shall be removed from the leased
premises until a division order and/or contract and its terms are
approved by the Superintendent: Provided further, That the
Superintendent may grant temporary permission to run oil or gas from a
lease pending the approval of a division order or contract. Lessee
shall file a certified monthly report and pay royalty on the value of
all oil and gas used off the premises for development and operating
purposes. Lessee shall be responsible for the correct measurement and
reporting of all oil and/or gas taken from the leased premises.
(b) Lessee shall require the purchaser of oil and/or gas from his/
her lease or leases to furnish the Superintendent, no later than the
25th day of each month, a statement reporting the gross barrels of oil
and/or gross Mcf of gas sold during the preceding month. The
Superintendent may authorize an extension of time, not to exceed 10
days, for furnishing this statement.
Sec. 226.15 Unit leases, assignments and related instruments.
(a) Unitization of leases. The Osage Tribal Council and Lessee or
Lessees, may, with the approval of the Superintendent, unitize or
merge, two or more oil or oil and gas leases into a unit or cooperative
operating plan to promote the greatest ultimate recovery of oil and gas
from a common source of supply or portion thereof embracing the lands
covered by such lease or leases. The cooperative or unit agreement
shall be subject to the regulations in this part and applicable laws
governing the leasing of the Osage Mineral Estate. Any agreement
between the parties in interest to terminate a unit or cooperative
agreement as to all or any portion of the lands included shall be
submitted to the Superintendent for his approval. Upon approval the
leases included thereunder shall be restored to their original terms:
Provided, That for the purpose of preventing waste and to promote the
greatest ultimate recovery of oil and gas from a common source of
supply or portion thereof, all oil leases, oil and gas leases, and gas
leases issued heretofore and hereafter under the provisions of the
regulations in this part shall be subject to any unit development plan
affecting the leased lands that may be required by the Superintendent
with the consent of the Osage Tribal Council, and which plan shall
adequately protect the rights of all parties in interest including the
Osage Mineral Estate.
(b) Assignments. Approved leases or any interest therein may be
assigned or transferred only with the approval of the Superintendent.
The assignee must be qualified to hold such lease under existing rules
and regulations and shall furnish a satisfactory bond conditioned for
the faithful performance of the covenants and conditions thereof.
Lessee must assign either his entire interest in a lease or legal
subdivision thereof, or an undivided interest in the whole lease:
Provided, That when an assignment covers only a portion of a lease or
covers interests in separate horizons such assignment shall be subject
to both the consent of the Osage Tribal Council and approval of the
Superintendent. If a lease is divided by the assignment of an entire
interest in any part, each part shall be considered a separate lease
and the assignee shall be bound to comply with all the terms and
conditions of the original lease. A fully executed copy of the
assignment shall be filed with the Superintendent within 30 days after
the date of execution by all parties. If requested within the 30-day
period, the Superintendent may grant an extension of 15 days. A filing
fee of $10 shall accompany each assignment.
(c) Overriding royalty. Agreements creating overriding royalties or
payments out of production shall not be considered as an interest in a
lease as such term is used in paragraph (b) of this section. Agreements
creating overriding royalties or payments out of production are hereby
authorized and the approval of the Department of the Interior or any
agency thereof shall not be required with respect thereto, but such
agreements shall be subject to the condition that nothing in any such
agreement shall be construed as modifying any of the obligations of
Lessee under his lease and the regulations in this part. All such
obligations are to remain in full force and effect, the same as if free
of any such royalties or payments. The existence of agreements creating
overriding royalties or payments out of production, whether or not
actually paid, shall not be considered in justifying the shutdown or
abandonment of any well. Agreements creating overriding royalties or
payments out of production need not be filed with the Superintendent
unless incorporated in assignments or instruments required to be filed
[[Page 39577]]
pursuant to paragraph (b) of this section. An agreement creating
overriding royalties or payment out of production shall be suspended
when the working interest income per active producing well is equal to
or less than the operational cost of the well, as determined by the
Superintendent.
(d) Drilling contracts. The Superintendent is authorized to approve
drilling contracts with a stipulation that such approval does not in
any way bind the Department to approve subsequent assignments that may
be provided for in said contracts. Approval merely authorizes entry on
the lease for the purpose of development work.
(e) Combining leases. The lessee owning both an oil lease and gas
lease covering the same acreage is authorized to convert such leases to
a combination oil and gas lease.
Operations
Sec. 226.16 Commencement of operations.
(a) No operations shall be permitted upon any tract of land until a
lease covering such tract shall have been approved by the
Superintendent: Provided, That the Superintendent may grant authority
to any party under such rules, consistent with the regulations in this
part that he deems proper, to conduct geophysical and geological
exploration work.
(b) Lessee shall submit applications on forms to be furnished by
the Superintendent and secure his approval before:
(1) Well drilling, treating, or workover operations are started on
the leased premises.
(2) Removing casing from any well.
(c) Lessee shall notify the Superintendent a reasonable time in
advance of starting work, of intention to drill, redrill, deepen, plug,
or abandon a well.
Sec. 226.17 How to acquire permission to begin operations on a
restricted homestead allotment.
(a) Lessee may conduct operations within or upon a restricted
homestead selection only with the written consent of the
Superintendent.
(b) If the allottee is unwilling to permit operations on his
homestead, the Superintendent will cause an examination of the premises
to be made with the allottee and lessee or his representative. Upon
finding that the interests of the Osage Tribe require that the tract be
developed, the Superintendent will endeavor to have the parties agree
upon the terms under which operations on the homestead may be
conducted.
(c) In the event the allottee and lessee cannot reach an agreement,
the matter shall be presented by all parties before the Osage Tribal
Council, and the Council shall make its recommendations. Such
recommendations shall be considered as final and binding upon the
allottee and lessee. A guardian may represent the allottee. Where no
one is authorized or where no person is deemed by the Superintendent to
be a proper party to speak for a person of unsound mind or feeble
understanding, the Principal Chief of the Osage Tribe shall represent
him.
(d) If the allottee or his representative does not appear before
the Osage Tribal Council when notified by the Superintendent, or if the
Council fails to act within 10 days after the matter is referred to it,
the Superintendent may authorize lessee to proceed with operations in
conformity with the provisions of his lease and the regulations in this
part.
Sec. 226.18 Information to be given surface owners prior to
commencement of drilling operations.
Except for the surveying and staking of a well, no operations of
any kind shall commence until the lessee or his/her authorized
representative shall meet with the surface owner or his/her
representative, if a resident of and present in Osage County, Oklahoma.
Unless waived by the Superintendent or otherwise agreed to between the
lessee and surface owner, such meeting shall be held at least 10 days
prior to the commencement or any operations, except for the surveying
and staking of the well. At such meeting lessee or his/her authorized
representative shall comply with the following requirements:
(a) Indicate the location of the well or wells to be drilled.
(b) Arrange for route of ingress and egress. Upon failure to agree
on route ingress and egress, said route shall be set by the
Superintendent.
(c) Impart to said surface owners the name and address of the party
or representative upon whom the surface owner shall serve any claim for
damages which he may sustain from mineral development or operations,
and as to the procedure for settlement thereof as provided in Sec.
226.21.
(d) Where the drilling is to be on restricted land, lessee or his
authorized representative in the manner provided above shall meet with
the Superintendent.
(e) When the surface owner or his/her representative is not a
resident of, or is not physically present in, Osage County, Oklahoma,
or cannot be contacted at the last known address, the Superintendent
may authorize lessee to proceed with operations.
Sec. 226.19 Use of surface of land.
(a) Lessee or his/her authorized representative shall have the
right to use so much of the surface of the land within the Osage
Mineral Estate as may be reasonable for operations and marketing. This
includes but is not limited to the right to lay and maintain pipelines,
electric lines, pull rods, other appliances necessary for operations
and marketing, and the right-of-way for ingress and egress to any point
of operations. If Lessee and surface owner are unable to agree as to
the routing of pipelines, electric lines, etc., said routing shall be
set by the Superintendent. The right to use water for lease operations
is established by Sec. 226.24. Lessee shall conduct his/her operations
in a workmanlike manner, commit no waste and allow none to be committed
upon the land, nor permit any unavoidable nuisance to be maintained on
the premises under his/her control.
(b) Before commencing a drilling operation, Lessee shall pay or
tender to the surface owner commencement money in the amount of $25 per
seismic shot hole and commencement money in the amount of $300 for each
well, after which Lessee shall be entitled to immediate possession of
the drilling site. Commencement money will not be required for the
redrilling of a well which was originally drilled under the currently
lease. A drilling site shall be held to the minimum area essential for
operations and shall not exceed one and one-half acres in area unless
authorized by the Superintendent. Commencement money shall be a credit
toward the settlement of the total damages. Acceptance of commencement
money by the surface owner does not affect his/her right to
compensation for damages as described in Sec. 226.20, occasioned by
the drilling and completion of the well for which it was paid. Since
actual damage to the surface from operations cannot necessarily be
ascertained prior to the completion of a well as a serviceable well or
dry hole, a damage settlement covering the drilling operation need not
be made until after completion of drilling operations.
(c) Where the surface is restricted land, commencement money shall
be paid to the Superintendent for the landowner. All other surface
owners shall be paid or tendered such commencement money direct. Where
such surface owners are not residents of Osage County nor have a
representative
[[Page 39578]]
located therein, such payment shall be made or tendered to the last
known address of the surface owner at least 5 days before commencing
drilling operation on any well: Provided, That should lessee be unable
to reach the owner of the surface of the land for the purpose of
tendering the commencement money or if the owner of the surface of the
land shall refuse to accept the same, lessee shall deposit such amount
with the Superintendent by check payable to the Bureau of Indian
Affairs. The superintendent shall thereupon advise the owner of the
surface of the land by mail at his last known address that the
commencement money is being held for payment to him upon his written
request.
(d) Lessee shall also pay fees for tank sites not exceeding 50 feet
square at the rate of $100 per tank site or other vessel: Provided,
That no payment shall be due for a tank temporarily set on a well
location site for drilling, completing, or testing. The sum to be paid
for a tank occupying more than 50 feet square shall be agreed upon
between the surface owner and lessee or, on failure to agree, the same
shall be determined by arbitration as provided by Sec. 226.21.
Sec. 226.20 Settlement of damages claimed.
(a) Lessee or his authorized representative or geophysical
permittee shall pay for all damages to growing crops, any improvements
on the lands, and all other surface damages as may be occasioned by
operations. Commencement money shall be a credit toward the settlement
of the total damages occasioned by the drilling and completion of the
well for which it was paid. Such damages shall be paid to the owner of
the surface and by him apportioned among the parties interested in the
surface, whether as owner, surface lessee, or otherwise, as the parties
may mutually agree or as their interests may appear. If lessee or his
authorized representative and surface owner are unable to agree
concerning damages, the same shall be determined by arbitration.
Nothing herein contained shall be construed to deny any party the right
to file an action in a court of competent jurisdiction if he is
dissatisfied with the amount of the award.
(b) Surface owners shall notify their lessees or tenants of the
regulations in this part and of the necessary procedure to follow in
all cases of alleged damages. If so authorized in writing, surface
lessees or tenants may represent the surface owners.
(c) In settlement of damages on restricted land all sums due and
payable shall be paid to the Superintendent for credit to the account
of the Indian entitled thereto. The Superintendent will make the
apportionment between the Indian landowner or owners and surface Lessee
of record.
(d) Any person claiming an interest in any leased tract or in
damages thereto, must furnish to the Superintendent a statement in
writing showing said claimed interest. Failure to furnish such
statement shall constitute a waiver of notice and estop said person
from claiming any part of such damages after the same shall have been
disbursed.
Sec. 226.21 Procedure for settlement of damages claimed.
Where the surface owner or his lessee suffers damage due to the oil
and gas operations and/or marketing of oil or gas by lessee or his
authorized representative, the procedure for recovery shall be as
follows:
(a) The party or parties aggrieved shall, as soon as possible after
the discovery of any damages, serve written notice to Lessee or his
authorized representative as provided by Sec. 226.18. Written notice
shall contain the nature and location of the alleged damages, the date
of occurrence, the names of the party or parties causing said damages,
and the amount of damages. It is not intended by this requirement to
limit the time within which action may be brought in the courts to less
than the 90-day period allowed by section 2 of the Act of March 2, 1929
(45 Stat. 1478, 1479).
(b) If the alleged damages are not adjusted at the time of such
notice, Lessee or his authorized representative shall try to adjust the
claim with the party or parties aggrieved within 20 days from receipt
of the notice. If the claimant is the owner of restricted property and
a settlement results, a copy of the settlement agreement shall be filed
with the Superintendent. If the settlement agreement is approved by the
Superintendent, payment shall be made to the Superintendent for the
benefit of said claimant.
(c) If the parties fail to adjust the claim within the 20 days
specified, then within 10 days thereafter each of the interested
parties shall appoint an arbitrator who immediately upon their
appointment shall agree upon a third arbitrator. If the two arbitrators
shall fail to agree upon a third arbitrator within 10 days, they shall
immediately notify the parties in interest. If said parties cannot
agree upon a third arbitrator within 5 days after receipt of such
notice, the Superintendent shall appoint the third arbitrator.
(d) As soon as the third arbitrator is appointed, the arbitrators
shall meet; hear the evidence and arguments of the parties; and examine
the lands, crops, improvements, or other property alleged to have been
injured. Within 10 days they shall render their decision as to the
amount of the damage due. The arbitrators shall be disinterested
persons. The fees and expenses of the third arbitrator shall be borne
equally by the claimant and Lessee or his authorized representative.
Each Lessee or his authorized representative and claimant shall pay the
fee and expenses for the arbitrator appointed by him.
(e) When an act of an oil or gas lessee or his authorized
representative results in injury to both the surface owner and his
lessee, the parties aggrieved shall join in the appointment of an
arbitrator. Where the injury complained of is chargeable to one or more
oil or gas Lessee, or his authorized representative, such lessee or
said representative shall join in the appointment of an arbitrator.
(f) Any two of the arbitrators may make a decision as to the amount
of damage due. The decision shall be in writing and shall be served
forthwith upon the parties in interest. Each party shall have 90 days
from the date the decision is served in which to file an action in a
court of competent jurisdiction. If no such action is filed within said
time and the award is against Lessee or his/her authorized
representative, he/she shall pay the same, together with interest at an
annual rate established for the Internal Revenue Service from date of
award, within 10 days after the expiration of said period for filing an
action.
(g) Lessee or his authorized representative shall file with the
Superintendent a report on each settlement agreement, setting out the
nature and location of the damage, date, and amount of the settlement,
and any other pertinent information.
Sec. 226.22 Prohibition of pollution.
(a) All operators, contractors, drillers, service companies, pipe
pulling and salvaging contractors, or other persons, shall at all times
conduct their operations and drill, equip, operate, produce, plug and
abandon all wells drilled for oil or gas, service wells or exploratory
wells (including seismic, core and stratigraphic holes) in a manner
that will prevent pollution and the migration of oil, gas, salt water
or other substance from one stratum into another, including any fresh
water bearing formation.
(b) Pits for drilling mud or deleterious substance used in the
drilling, completion, recompletion, or workover of any well shall be
constructed and maintained to prevent pollution of
[[Page 39579]]
surface and subsurface fresh water. These pits shall be enclosed with a
fence of at least four strands of barbed wire, or an approved
substitute, stretched taut to adequately braced corner posts, unless
the surface owner, user, or the Superintendent gives consent to the
contrary. Immediately after completion of operations, pits shall be
emptied and leveled unless otherwise requested by surface owner or
user.
(c) Drilling pits shall be adequate to contain mud and other
material extracted from wells and shall have adequate storage to
maintain a supply of mud for use in emergencies.
(d) No earthen pit, except those used in the drilling, completion,
recompletion or workover of a well, shall be constructed, enlarged,
reconstructed or used without approval of the Superintendent. Unlined
earthen pits shall not be used for the continued storage of salt water
or other deleterious substances.
(e) Deleterious fluids other than fresh water drilling fluids used
in drilling or workover operations, which are displaced or produced in
well completion or stimulation procedures, including but not limited to
fracturing, acidizing, swabbing, and drill stem tests, shall be
collected into a pit lined with plastic of at least 30 mil or a metal
tank and maintained separately from above-mentioned drilling fluids to
allow for separate disposal.
Sec. 226.23 Easements for wells off leased premises.
The Superintendent, with the consent of the Osage Tribal Council,
may grant commercial and noncommercial easements for wells off the
leased premises to be used for purposes associated with oil and gas
production. Rental payable to the Osage Tribe for such easements shall
be an amount agreed to by Grantee and the Osage Tribal Council subject
to the approval of the Superintendent. Grantee shall be responsible for
all damages resulting from the use of such wells and settlement
therefor shall be made as provided in Sec. 226.21.
Sec. 226.24 Lessee's use of water.
Lessee or his contractor may, with the approval of the
Superintendent, use water from streams and natural water courses to the
extent that same does not diminish the supply below the requirements of
the surface owner from whose land the water is taken. Similarly, Lessee
or his contractor may use water from reservoirs formed by the
impoundment of water from such streams and natural water courses,
provided such use does not exceed the quantity to which they originally
would have been entitled had the reservoirs not been constructed.
Lessee or his contractor may install necessary lines and other
equipment within the Osage Mineral Estate to obtain such water. Any
damage resulting from such installation shall be settled as provided in
Sec. 226.21.
Sec. 226.25 Gas well drilled by oil lessees and vice versa.
Prior to drilling, the oil or gas lessee shall notify the other
lessees of his/her intent to drill. When an oil lessee in drilling a
well encounters a formation or zone having indications of possible gas
production, or the gas lessee in drilling a well encounters a formation
or zone having indication of possible oil production, he/she shall
immediately notify the other lessee and the Superintendent. Lessee
drilling the well shall obtain all information which a prudent operator
utilizes to evaluate the productive capability of such formation or
zone.
(a) Gas well to be turned over to gas lessee. If the oil lessee
drills a gas well, he/she shall, without removing from the well any of
the casing or other equipment, immediately shut the well in and notify
the gas lessee and the Superintendent. If the gas lessee does not,
within 45 days after receiving notice and cost of drilling, elect to
take over such well and reimburse the oil lessee the cost of drilling,
including all damages paid and the cost in-place of casing, tubing, and
other equipment, the oil lessee shall immediately confine the gas to
the original stratum. The disposition of such well and the production
therefrom shall then be subject to the approval of the Superintendent.
In the event the oil lessee and gas lessee cannot agree on the cost of
the well, such cost shall be apportioned between the oil and gas lessee
by the Superintendent. If such apportionment is not accepted, the well
shall be plugged by the oil and gas lessee who drilled the well.
(b) Oil well to be turned over to oil lessee. If the gas lessee
drills an oil well, he/she must immediately, without removing from the
well any of the casing or other equipment, notify the oil lessee and
the superintendent.
(1) If the oil lessee does not, within 45 days after receipt of
notice and cost of drilling, elect to take over the well, he/she must
immediately notify the gas lessee. From that point, the superintendent
must approve the disposition of the well, and any gas produced from it.
(2) If the oil lessee chooses to take over the well, he/she must
pay to the gas lessee:
(i) The cost of drilling the well, including all damages paid; and
(ii) The cost in place of casing and other equipment.
(3) If the oil lessee and the gas lessee cannot agree on the cost
of the well, the superintendent will apportion the cost between the oil
and gas lessees. If the lessees do not accept the apportionment, the
oil or gas lessee who drilled the well must plug the well.
(c) Lands not leased. If the gas lessee shall drill an oil well
upon lands not leased for oil purposes or vice versa, the
Superintendent may, until such time as said lands are leased, permit
the lessee who drilled the well to operate and market the production
therefrom. When said lands are leased, the lessee who drilled and
completed the well shall be reimbursed by the oil or gas lessee, for
the cost of drilling said well, including all damages paid and the cost
in-place of casing, tubing, and other equipment. If the lessee does not
elect to take over said well as provided above, the disposition of such
well and the production therefrom shall be determined by the
Superintendent. In the event the oil lessee and gas lessee cannot agree
on the cost of the well, such cost shall be apportioned between the oil
and gas lessee by the Superintendent. If such apportionment is not
accepted, the well shall be plugged by the oil and gas lessee who
drilled the well.
Sec. 226.26 Determining cost of well.
The term ``cost of drilling'' as applied where one lessee takes
over a well drilled by another, shall include all reasonable, usual,
necessary, and proper expenditures. A list of expenses mentioned in
this section shall be presented to proposed purchasing lessee within 10
days after the completion of the well. In the event of a disagreement
between the parties as to the charges assessed against the well that is
to be taken over, such charges shall be determined by the
Superintendent.
Sec. 226.27 Gas for operating purposes and tribal use.
(a) Gas to be furnished oil lessee. Lessee of a producing gas lease
shall furnish the oil lessee sufficient gas for operating purposes at a
rate to be agreed upon, or on failure to agree the rate shall be
determined by the Superintendent: Provided, That the oil lessee shall
at his own expense and risk, furnish and install the necessary
connections to the gas lessee's well or pipeline. All such
[[Page 39580]]
connections shall be reported in writing to the Superintendent.
(b) Use of gas by Osage Tribe. (1) Gas from any well or wells shall
be furnished any Tribal-owned building or enterprise at a rate not to
exceed the price less royalty being received or offered by a gas
purchaser: Provided, That such requirement shall be subject to the
determination by the Superintendent that gas in sufficient quantities
is available above that needed for lease operation and that no waste
would result. In the absence of a gas purchaser the rate to be paid by
the Osage Tribe shall be determined by the Superintendent based on
prices being paid by purchasers in the Osage Mineral Estate. The Osage
Tribe is to furnish all necessary material and labor for such
connection with Lessee's gas system. The use of such gas shall be at
the risk of the Osage Tribe at all times.
(2) Any member of the Osage Tribe residing in Osage County and
outside a corporate city is entitled to the use at his own expense of
not to exceed 400,000 cubic feet of gas per calendar year for his
principal residence at a rate not to exceed the amount paid by a gas
purchaser plus 10 percent: Provided, That such requirement shall be
subject to the determination by the Superintendent that gas in
sufficient quantities is available above that needed for lease
operation and that no waste would result. In the absence of a gas
purchaser the amount to be paid by the Tribal member shall be
determined by the Superintendent. Gas to Tribal members is not royalty
free. The Tribal member is to furnish all necessary material and labor
for such connection to Lessee's gas system, and shall maintain his own
lines. The use of such gas shall be at the risk of the Tribal member at
all times.
(3) Gas furnished by Lessee under paragraphs (b)(1) and (2) of this
section may be terminated only with the approval of the Superintendent.
Written application for termination must be made to the Superintendent
showing justification.
Cessation of Operations
Sec. 226.28 Shutdown, abandonment, and plugging of wells.
No productive well shall be abandoned until its lack for further
profitable production of oil and/or gas has been demonstrated to the
satisfaction of the Superintendent. Lessee shall not shut down,
abandon, or otherwise discontinue the operation or use of any well for
any purpose without the written approval of the Superintendent. All
applications for such approval shall be submitted to the Superintendent
on forms furnished by him/her.
(a) Application for authority to permanently shut down or
discontinue use or operation of a well shall set forth justification,
probable duration the means by which the well bore is to be protected,
and the contemplated eventual disposition of the well. The method of
conditioning such well shall be subject to the approval of the
Superintendent.
(b) Prior to permanent abandonment of any well, the oil lessee or
the gas lessee, as the case may be, shall offer the well to the other
for his recompletion or use under such terms as may be mutually agreed
upon but not in conflict with the regulations. Failure of the Lessee
receiving the offer to reply within 10 days after receipt thereof shall
be deemed as rejection of the offer. If, after indicating acceptance,
the two parties cannot agree on the terms of the offer within 30 days,
the disposition of such well shall be determined by the Superintendent.
(c) The Superintendent is authorized to shut in a lease when the
lessee fails to comply with the terms of the lease, the regulations,
and/or orders of the Superintendent.
Sec. 226.29 Disposition of casings and other improvements.
(a) Upon termination of lease, permanent improvements, unless
otherwise provided by written agreement with the surface owner and
filed with the Superintendent, shall remain a part of said land and
become the property of the surface owner upon termination of the lease,
other than by cancellation. Exceptions include personal property not
limited to tools, tanks, pipelines, pumping and drilling equipment,
derricks, engines, machinery, tubing, and the casings of all wells:
Provided, That when any lease terminates, all such personal property
shall be removed the word ``terminates''; and in the last sentence of
the paragraph, within 90 days or such reasonable extension of time as
may be granted by the Superintendent. Otherwise, the ownership of all
casings shall revert to Lessor and all other personal property and
permanent improvements to the surface owner. Nothing herein shall be
construed to relieve lessee of responsibility for removing any such
personal property or permanent improvements from the premises if
required by the Superintendent and restoring the premises as nearly as
practicable to the original state.
(b) Upon cancellation of lease. When there has been a cancellation
for cause, Lessor shall be entitled and authorized to take immediate
possession of the lease premises and all permanent improvements and all
other equipment necessary for the operation of the lease.
(c) Wells to be abandoned shall be promptly plugged as prescribed
by the Superintendent. Applications to plug shall include a statement
affirming compliance with Sec. 226.28(b) and shall set forth reasons
for plugging, a detailed statement of the proposed work including kind,
location, and length of plugs (by depth), plans for mudding and
cementing, testing, parting and removing casing, and any other
pertinent information: Provided, That the Superintendent may give oral
permission and instructions pending receipt of a written application to
plug a newly drilled hole. Lessee shall remit a fee of $15 with each
written application for authority to plug a well. This fee will be
refunded if permission is not granted.
(d) Lessee shall plug and fill all dry or abandoned wells in a
manner to confine the fluid in each formation bearing fresh water, oil,
gas, salt water, and other minerals, and to protect it against invasion
of fluids from other sources. Mud-laden fluid, cement, and other plugs
shall be used to fill the hole from bottom to top: Provided, That if a
satisfactory agreement is reached between Lessee and the surface owner,
subject to the approval of the Superintendent, Lessee may condition the
well for use as a fresh water well and shall so indicate on the
plugging record. The manner in which plugging material shall be
introduced and the type of material so used shall be subject to the
approval of the Superintendent. Within 10 days after plugging, Lessee
shall file with the Superintendent a complete report of the plugging of
each well. When any well is plugged and abandoned, Lessee shall, within
90 days, clean up the premises around such well to the satisfaction of
the Superintendent.
Requirements of Lessees
Sec. 226.30 Lessees subject to Superintendent's orders; books and
records open to inspection.
Lessee shall comply with all orders or instructions issued by the
Superintendent. The Superintendent or his representative may enter upon
the leased premises for the purpose of inspection. Lessee shall keep a
full and correct account of all operations, receipts, and disbursements
and make reports thereof, as required. Lessee's
[[Page 39581]]
books and records shall be available to the Superintendent for
inspection.
Sec. 226.31 Lessee's process agents.
(a) Before actual drilling or development operations are commenced
on leased lands, Lessee or Assignee, if not a resident of the State of
Oklahoma, shall appoint a local or resident representative within the
State of Oklahoma on whom the Superintendent may serve notice or
otherwise communicate in securing compliance with the regulations in
this part, and shall notify the Superintendent of the name and post
office address of the representative appointed.
(b) Where several parties own a lease jointly, one representative
or agent shall be designated whose duties shall be to act for all
parties concerned. Designation of such representative should be made by
the party in charge of operations.
(c) In the event of the incapacity or absence from the State of
Oklahoma of such designated local or resident representative, Lessee
shall appoint a substitute to serve in his stead. In the absence of
such representative or appointed substitute, any employee of Lessee
upon the leased premises or person in charge of drilling or related
operations thereon shall be considered the representative of Lessee for
the purpose of service of orders or notices as herein provided.
Sec. 226.32 Well records and reports.
(a) Lessee shall keep accurate and complete records of the
drilling, redrilling, deepening, repairing, treating, plugging, or
abandonment of all wells. These records shall show all the formations
penetrated, the content and character of oil, gas, or water in each
formation, and the kind, weight, size, landed depth and cement record
of casing used in drilling each well; the record of drill-stem and
other bottom hole pressure or fluid sample surveys, temperature
surveys, directional surveys, and the like; the materials and procedure
used in the treating or plugging of wells or in preparing them for
temporary abandonment; and any other information obtained in the course
of well operation.
(b) Lessee shall take such samples and make such tests and surveys
as may be required by the Superintendent to determine conditions in the
well or producing reservoir and to obtain information concerning
formations drilled, and shall furnish reports thereof as required by
the Superintendent.
(c) Within 10 days after completion of operations on any well,
Lessee shall transmit to the Superintendent the applicable information
on forms furnished by the Superintendent; a copy of electrical,
mechanical or radioactive log, or other types of survey of the well
bore; and core analysis obtained from the well. Lessee shall also
submit other reports and records of operations as may be required and
in the manner and form prescribed by the Superintendent.
(d) Lessee shall measure production of oil, gas, and water from
individual wells at reasonably frequent intervals to the satisfaction
of the Superintendent.
(e) Upon request and in the manner and form prescribed by the
Superintendent, Lessee shall furnish a plat showing the location,
designation, and status of all wells on the leased lands, together with
such other pertinent information as the Superintendent may require.
Sec. 226.33 Line drilling.
Lessee shall not drill within 300 feet of boundary line of leased
lands, nor locate any well or tank within 200 feet of any public
highway, any established watering place, or any building used as a
dwelling, granary, or barn, except with the written permission of the
Superintendent. Failure to obtain advance written permission from the
Superintendent shall subject lessee to cancellation of his/her lease
and/or plugging of the well.
Sec. 226.34 Wells and tank batteries to be marked.
Lessee shall clearly and permanently mark all wells and tank
batteries in a conspicuous place with number, legal description,
operator, and telephone number, and shall take all necessary
precautions to preserve these markings.
Sec. 226.35 Formations to be protected.
Lessee shall, to the satisfaction of the Superintendent, take all
proper precautions and measures to prevent damage or pollution of oil,
gas, fresh water, or other mineral bearing formations.
Sec. 226.36 Control devices.
In drilling operations in fields where high pressures, lost
circulation, or other conditions exist which could result in blowouts,
lessee shall install an approved gate valve or other controlling device
which is in proper working condition for use until the well is
completed. At all times preventative measures must be taken in all well
operations to maintain proper control of subsurface strata.
Sec. 226.37 Waste of oil and gas.
Lessee shall conduct all operations in a manner that will prevent
waste of oil and gas and shall not wastefully utilize oil or gas. The
Superintendent shall have the authority to impose such requirements as
he deems necessary to prevent waste of oil and gas and to promote the
greatest ultimate recovery of oil and gas. Waste as applied herein
includes, but is not limited to, the inefficient excessive or improper
use or dissipation of reservoir energy which would reasonably reduce or
diminish the quantity of oil or gas that might ultimately be produced,
or the unnecessary or excessive surface loss or destruction, without
beneficial use, of oil and/or gas.
Sec. 226.38 Measuring and storing oil.
All production run from the lease shall be measured according to
methods and devices approved by the Superintendent. Facilities suitable
for containing and measuring accurately all crude oil produced from the
wells shall be provided by Lessee and shall be located on the leasehold
unless otherwise approved by the Superintendent. Lessee shall furnish
to the Superintendent a copy of 100-percent capacity tank table for
each tank. Meters and installations for measuring oil must be approved,
and tests of their accuracy shall be made when directed by the
Superintendent.
Sec. 226.39 Measurement of gas.
All gas, required to be measured, shall be measured by meter
(preferably of the orifice meter type) unless otherwise agreed to by
the Superintendent. All gas meters must be approved by the
Superintendent and installed at the expense of Lessee or purchaser at
such places as may be agreed to by the Superintendent. For computing
the volume of all gas produced, sold or subject to royalty, the
standard of pressure shall be 14.65 pounds to the square inch, and the
standard of temperature shall be 60 degrees F. All measurements of gas
shall be adjusted by computation to these standards, regardless of the
pressure and temperature at which the gas was actually measured, unless
otherwise authorized in writing by the Superintendent.
Sec. 226.40 Use of gas for lifting oil.
Lessee shall not use natural gas from a distinct or separate
stratum for the purpose of flowing or lifting the oil, except where
said Lessee has an approved right to both the oil and the gas, and then
only with the approval of the Superintendent of such use and of the
manner of its use.
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Sec. 226.41 Accidents to be reported.
Lessee shall make a complete report to the Superintendent of all
accidents, fires, or acts of theft and vandalism occurring on the
leased premises.
Penalties
Sec. 226.42 Penalty for violation of lease terms.
Violation of any of the terms or conditions of any lease or of the
regulations in this part shall subject the lease to cancellation by the
Superintendent, or Lessee to a fine of not more than $500 per day for
each day of such violation or noncompliance with the orders of the
Superintendent, or to both such fine and cancellation. Fines not
received within 10 days after notice of the decision shall be subject
to late charges at the rate of not less than 11/2 percent per month for
each month or fraction thereof until paid. The Osage Tribal Council,
subject to the approval of the Superintendent, may waive the late
charge.
Sec. 226.43 Penalties for violation of certain operating regulations.
In lieu of the penalties provided under Sec. 226.42, penalties may
be imposed by the Superintendent for violation of certain sections of
the regulations of this part as follows:
(a) For failure to obtain permission to start operations required
by Sec. 226.16(b), $50 per day until permission is obtained.
(b) For failure to file records required by Sec. 226.32, $50 per
day until compliance is met.
(c) For failure to mark wells and tank batteries as required by
Sec. 226.34, $50 for each well and tank battery.
(d) For failure to construct and maintain pits as required by Sec.
226.22, $50 for each day after operations are commenced on any well
until compliance is met.
(e) For failure to comply with Sec. 226.36 regarding valve or
other approved controlling device, $100.
(f) For failure to notify Superintendent before drilling,
redrilling, deepening, plugging, or abandoning any well, as required by
Sec. Sec. 226.16(c) and 226.25, $200.
(g) For failure to properly care for and dispose of deleterious
fluids as provided in Sec. 226.22, $500 per day until compliance is
met.
(h) For failure to file plugging reports as required by Sec.
226.29 and for failure to file reports as required by Sec. 226.13, $50
per day for each violation until compliance is met.
(i) For failure to perform or start an operation within 5 days
after ordered by the Superintendent in writing under authority provided
in this part, if said operation is thereafter performed by or through
the Superintendent, the actual cost of performance thereof, plus 25
percent.
(j) Lessee or his/her authorized representative is hereby notified
that criminal procedures are provided by 18 U.S.C. 1001 for knowingly
filing fraudulent reports and information.
Appeals and Notices
Sec. 226.44 Appeals.
Any person, firm or corporation aggrieved by any decision or order
issued by or under the authority of the Superintendent, by virtue of
the regulations in this part, may appeal pursuant to 25 CFR part 2.
Sec. 226.45 Notices.
Notices and orders issued by the Superintendent to the
representative and/or operator shall be binding on the lessee. The
Superintendent may in his/her discretion increase the time allowed in
his/her orders and notices.
Sec. 226.46 Information collection.
The Office of Management and Budget has determined that the
information collection requirements contained in this part need not be
submitted for clearance pursuant to 44 U.S.C. 3501 et seq.
Dated: June 6, 2016.
Lawrence S. Roberts,
Acting Assistant Secretary--Indian Affairs.
[FR Doc. 2016-14127 Filed 6-16-16; 8:45 am]
BILLING CODE 4337-15-P