§ 23-0503 — Well spacing in oil and natural gas pools and fields

§ 23-0503. Well spacing in oil and natural gas pools and fields.\n 1. Spacing orders are not required for wells drilled, deepened,\nplugged back or converted in oil fields or pools which were discovered,\ndeveloped and operated prior to January first, nineteen hundred\neighty-one. Spacing orders are not required for wells drilled, deepened,\nplugged back or converted in natural gas fields or pools, which were\ndiscovered, developed and operated prior to January first, nineteen\nhundred ninety-five and which are not being extended.\n 2. The department shall issue a permit to drill, deepen, plug back or\nconvert a well, if the proposed spacing unit submitted to the department\npursuant to paragraph a of subdivision 2 of section 23-0501 of this\ntitle conforms to statewide spacing and is of approximately uniform\nshape with other spacing units within the same field or pool, and abuts\nother spacing units in the same pool, unless sufficient distance remains\nbetween units for another unit to be developed. Prior to issuing any\nsuch permit, the department shall publish a notice of intent to issue a\nwell permit in the environmental notice bulletin, which shall include\ninformation concerning the spacing unit associated with the well.\n 3. a. If the proposed spacing unit does not meet the requirements\ndescribed in subdivision two of this section, the department shall\ndetermine if the proposed spacing unit satisfies the policy objectives\nof section 23-0301 of this article.\n b. If the department determines the proposed spacing unit meets the\npolicy objectives of section 23-0301 of this article, the department\nshall issue a notice of intent to issue a permit and spacing order. The\nwell operator shall cause such notice to be published in a form and\nmanner prescribed by the department. If the notice of intent relates to\na proposed spacing unit that is not of a uniform size and shape with\nother spacing units for the field or pool, the department shall, if\nnecessary, make such adjustment of the allowable production from the\nwell to be drilled thereon so that the owners in the spacing unit\nreceive their just and equitable shares of the production from the pool.\nAny such adjustment of the allowables shall be included in the notice of\nintent to issue a permit and spacing order.\n c. Any comments regarding a notice of intent to issue a permit and\nspacing order must be received by the department within thirty days of\nthe date of the notice of intent and must meet the substantive and\nsignificant requirement for establishing an issue for adjudication. Any\nchallenge to a spacing unit must contain (i) a description and a map of\nthe proposed alternative spacing unit; (ii) a technical justification of\nthe proposed alternative spacing unit, which shall include a description\nand analysis of the scientific data intended by the owner to support its\nproposed spacing unit configuration; and (iii) the name, address and\nexperience of any expert witness proposed to support the proposed\nalternative spacing unit configuration. The department may request the\nowner challenging the spacing unit to present its scientific data to the\ndepartment.\n d. The department shall determine whether substantive and significant\nissues have been raised. If the department receives no comments or if\nthe comments do not raise a substantive and significant issue, the\ndepartment shall issue the permit and the final spacing order. If the\ndepartment determines that substantive and significant issues have been\nraised in a timely manner, the department shall schedule an adjudicatory\nhearing.\n 4. The department may issue permits to drill infill wells on a\nreasonably uniform pattern within the spacing unit after an integration\norder has been issued, if required, and only if it determines that\ndrilling infill wells is necessary to satisfy the policy objectives of\nsection 23-0301 of this article. The distances from the unit boundaries\nset forth in paragraph b of subdivision 1 of section 23-0501 of this\ntitle shall apply to any infill wells. For purposes of this section, new\nlateral wellbores drilled from the original wellbore in the unit are not\nconsidered infill wells if they are drilled prior to the first product\nsales from the original surface location. In a spacing unit established\npursuant to clause (vi) of subparagraph 1 of paragraph b of subdivision\n1 of section 23-0501 of this title, infill wells shall be deemed\nnecessary, and the number of infill wells required to satisfy the policy\nobjectives of section 23-0301 of this article must be drilled within\nthree years of the date the first well in the unit commences drilling.\n 5. For wells permitted prior to the effective date of this section\nwhere a spacing order is required but has not been issued, the\ndepartment shall issue a notice of intent to issue a spacing order. The\nwell operator shall cause such notice to be published in a form and\nmanner prescribed by the department. The department may issue an order\nwithout a hearing if the proposed spacing unit complies with the\nrequirements of subdivision two of this section and no substantive and\nsignificant objections to the boundaries of the proposed spacing unit\nare received within thirty days after publication of the notice by the\nwell operator. If the department determines that substantive and\nsignificant issues have been raised in a timely manner, the department\nshall schedule an adjudicatory hearing.\n 6. Unless it is extinguished pursuant to subdivision seven of this\nsection, a spacing unit established by the department shall be binding\nupon all persons and their heirs, successors and assigns. Upon good\ncause shown, an order establishing a spacing unit or a spacing unit\nwhich conforms to statewide spacing may be modified by the department\nwithout conducting a hearing if a finding has been made that no facts\nare in dispute after all affected persons have been provided a\nreasonable opportunity to comment. In a spacing unit established\npursuant to clause (vi) of subparagraph 1 of paragraph b of subdivision\n1 of section 23-0501 of this title, failure to drill infill wells\npursuant to subdivision 4 of this section shall constitute good cause\nfor the department to initiate a modification of the spacing unit. If\nnecessary, upon issuance of an order which changes unit boundaries, the\nwell operator shall adjust the accounts for owners within the original\nand modified units to reflect the modified boundary. Any participation\nby new owners and any adjustment of revenue or royalties resulting from\nparticipation by new owners shall be on a prospective basis only. If the\ninitial risk penalty phase pursuant to title 9 of this article is in\neffect, any new owner added to the unit may elect to be integrated as a\nparticipating owner, a non-participating owner or an integrated royalty\nowner as defined by title 9 of this article. Full well costs shall be\nassessed against new participating owners and non-participating owners\nand included in the risk penalty calculation. If the initial risk\npenalty phase has concluded, any new owner added to the spacing unit may\nelect to be integrated as a participating owner or an integrated royalty\nowner on a prospective basis only.\n 7. Upon the expiration of a well permit or the plugging and\nabandonment of all wells in a spacing unit, the spacing unit shall be\nextinguished. Upon extinguishment, all lands within such spacing unit\nshall be eligible for inclusion in subsequent spacing units.\n 8. The department, without considering correlative rights, may grant a\npermit to those entities described in paragraphs b and c of subdivision\n3 of section 23-1901 of this article for the purposes of natural gas\ndevelopment if the department determines, after notice and hearing, that\nthe natural gas resource would not be developed by any other entity\nwithin twelve months of the close of the hearing record. In the event\nthat the department shall not receive timely notice of appearance prior\nto the scheduled date of hearing, it may dispense with such hearing. In\nmaking its determination the department shall require that the entity\ndescribed in paragraphs b and c of subdivision 3 of section 23-1901 of\nthis article submit a finding made by such entity that such drilling is\nlikely to be economically sound, and that the entity in question utilize\nthe resource for its exclusive use when granting such a permit.\n