(1)The deposit for
incremental drilling costs required under section 24-65.5-103.3 (1)(b)(III)(C) shall be
an amount for each well in an approved oil and gas operations area that is required
to be drilled directionally in order to access a bottom-hole location in one of the five
drilling windows permitted by the commission under its greater Wattenberg rule, 2
CCR 404-1, rule 318A, as in effect on August 3, 2007, excluding directional wells
required by the commission's greater Wattenberg rule, 2 CCR 404-1, rule 318A (e),
as such rule was in effect on December 31, 2006, to be drilled at the operator's
expense, up to a total of four wells per governmental quarter section, and shall be
determined in accordance with the following criteria:
(a)The amount deposited by the applicant fo
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(1) The deposit for
incremental drilling costs required under section 24-65.5-103.3 (1)(b)(III)(C) shall be
an amount for each well in an approved oil and gas operations area that is required
to be drilled directionally in order to access a bottom-hole location in one of the five
drilling windows permitted by the commission under its greater Wattenberg rule, 2
CCR 404-1, rule 318A, as in effect on August 3, 2007, excluding directional wells
required by the commission's greater Wattenberg rule, 2 CCR 404-1, rule 318A (e),
as such rule was in effect on December 31, 2006, to be drilled at the operator's
expense, up to a total of four wells per governmental quarter section, and shall be
determined in accordance with the following criteria:
(a) The amount deposited by the applicant for incremental drilling costs
shall be eighty-seven thousand five hundred dollars per well, which amount shall be
increased or decreased on July 1 of each year in accordance with corresponding
percentage increases or decreases in the Denver-Aurora-Lakewood consumer price
index, or its applicable predecessor or successor index, published by the United
States department of labor, bureau of labor statistics.
(b) As a condition of obtaining approval to record the final plat, the applicant
shall provide confirmation to the local government that the applicant has deposited
into an escrow account maintained at a commercial financial institution approved
by the commission the amount determined under paragraph (a) of this subsection (1)
to defray incremental drilling costs to be incurred by mineral estate owners for
drilling wells to prospective formations accessible from the oil and gas operations
area that could otherwise have been vertically drilled within drilling windows
established by the commission that are not included in such oil and gas operations
area. As an alternative to such deposit, the applicant may post a letter of credit or
other security for such costs in such manner as the commission shall determine to
be adequate. An applicant's failure to make such deposit shall not otherwise
rescind, curtail, abrogate, or restrict any final approval of an application for
development. If a directional well is commenced within the oil and gas operations
area after final plat approval by the local government and before recordation of the
final plat, the operator shall give written notice to the applicant of such
commencement and the applicant shall be required to make the escrow deposit
required under this section within ten days after the commencement for each well
that is so commenced.
(c) At the end of three years after recording the plat, subject to extension for
a period of up to one year during the pendency of any federal, state, or local drilling
permit filed within such three-year period, any funds in escrow or posted as security
for which a claim has not been made by a mineral estate owner shall be released or
returned to the applicant or its designated successor.
(d) A mineral estate owner that begins to drill a well pursuant to a drilling
permit approved no later than three years after final plat approval, as such period
may be extended as provided in paragraph (c) of this subsection (1), is entitled to
draw on the incremental drilling cost account the amount of its actual incremental
drilling costs up to eighty-seven thousand five hundred dollars per directional well,
as such amount may be adjusted pursuant to paragraph (a) of this subsection (1)
and by allocation of earned interest, by presenting to the commission confirmation
that the well has been drilled directionally and confirmation regarding the amount
of incremental drilling costs it has incurred with respect to such well. Incremental
drilling costs eligible for reimbursement shall not include a mark-up for overhead,
administrative, or managerial costs in excess of the actual costs directly incurred
as the result of directional drilling of wells within oil and gas operations areas. No
mineral estate owner is entitled to recover more than the amount of incremental
drilling costs initially deposited in the escrow account, plus its proportionate share
of accrued interest, divided by the number of wells for which the deposit was
initially made. Upon the commission's approval of such information, the commission
shall issue a directive to the escrow account holder or security holder to release the
designated incremental drilling costs for such well to such mineral estate owner.
(e) Exhaustion of the incremental drilling funds in an escrow account or
termination of the account shall not modify the availability of designated oil and
gas operations areas for further drilling and other oil and gas operations or the
protection afforded well sites, tanks, access roads, flowlines, and pipelines
pursuant to section 24-65.5-103.5. The commission shall resolve disputes between
the applicant and a mineral estate owner regarding the amount of incremental
drilling costs to be deposited in escrow or the amount of such costs for which
reimbursement is sought.