§ 40-11-10 — Amalgamation of interests -- Board may order amalgamation -- Payment of costs and interests -- Accounting.

(1) Two or more owners of contiguous pore space may bring together the owners' interests for the development of a storage facility.
(2) (2)(a) In the absence of a written agreement for amalgamation, including a joint operating agreement, the board may enter an order combining all interests in the contiguous pore space for the development of a storage facility.
(2)(b) The order shall be made upon terms and conditions that are just and reasonable.
(2)(c) The board may adopt terms appearing in a joint operating agreement:
(2)(c)(i) for the storage facility that is in effect between the consenting owners;
(2)(c)(ii) submitted by any party to the proceeding; or
(2)(c)(iii) submitted by the board on the board's own motion.
(3) Operations incident to the construction or operation of a storage facility upon any portion of an area included in an amalgamation order shall be deemed for all purposes to be the conduct of the operations upon each separately owned tract in the area by the several orders.
(4) (4)(a) (4)(a)(i) Each amalgamation order shall provide for the payment of just and reasonable costs incurred in the construction and operation of the storage facility, including:

(4)(a)(i)(A) the costs of constructing, marketing, completing, and operating the storage facility;
(4)(a)(i)(B) reasonable charges for the administration and supervision of operations; and
(4)(a)(i)(C) other costs customarily incurred in the industry.
(4)(a)(ii) An owner is not liable under an amalgamation order for costs or losses resulting from the gross negligence or willful misconduct of the operator.
(4)(b) Each amalgamation order shall provide for reimbursement to the consenting owners for any nonconsenting owner's share of the costs of operation of the storage facility attributable to the nonconsenting owner's tract.
(4)(c) Each amalgamation order shall provide that each consenting owner shall own and be entitled to receive, subject to taxes, fees, fines, and other obligations:
(4)(c)(i) the share of the profits of the storage facility applicable to the consenting owner's interest in the storage facility; and
(4)(c)(ii) unless the consenting owner has agreed otherwise, the consenting owner's proportionate part of the nonconsenting owner's share of the profits until the recovery of costs provided for in Subsection (4)(d).
(4)(d) (4)(d)(i) Each amalgamation order shall provide that each nonconsenting owner shall be entitled to receive, subject to obligations, the share of the profits from the storage facility applicable to the nonconsenting owner's interest in the storage facility after the consenting owners have recovered from the nonconsenting owner's share of the profits the following amounts less any cash contributions the nonconsenting owner has made:

(4)(d)(i)(A) 100% of the nonconsenting owner's share of the cost of storage facility construction and maintenance;
(4)(d)(i)(B) 100% of the nonconsenting owner's share of the estimated cost to close the storage facility as the board determines;
(4)(d)(i)(C) 100% of the nonconsenting owner's share of the cost of operation of the storage facility commencing with the first injection of carbon dioxide and continuing until the consenting owners have recovered all costs; and
(4)(d)(i)(D) 100% of the nonconsenting owner's share of the costs of preparing the storage facility, rights-of-way, and equipment.
(4)(d)(ii) The nonconsenting owner's share of the costs specified in Subsection (4)(d)(i) is that interest which would have been chargeable to the nonconsenting owner had the nonconsenting owner initially agreed to pay the nonconsenting owner's share of the costs of the storage facility from commencement of the operation.
(4)(d)(iii) The board may include a reasonable interest charge if the board finds it appropriate.
(4)(e) The board shall determine the proper costs to resolve any dispute about costs.
(5) The operator of a storage facility under an amalgamation order in which there is a nonconsenting owner shall furnish the nonconsenting owner with monthly statements specifying:

(5)(a) costs incurred; and
(5)(b) profit realized.
(6) Each amalgamation order shall provide that when the consenting owners recover from a nonconsenting owner's relinquished interest the amounts provided for in Subsection (4)(d):

(6)(a) the relinquished interest of the nonconsenting owner shall automatically revert to the nonconsenting owner;
(6)(b) the nonconsenting owner shall from that time:
(6)(b)(i) own the same interest in the storage facility; and
(6)(b)(ii) be liable for the further costs of the operation as if the nonconsenting owner had participated in the initial drilling and operations; and
(6)(b)(iii) costs are payable out of profits unless otherwise agreed between the nonconsenting owner and the operator.
(7) Each amalgamation order shall provide that in any circumstance where the nonconsenting owner has relinquished the nonconsenting owner's share of profits to consenting owners or at any time fails to take the nonconsenting owner's share of benefits when the nonconsenting owner is entitled to do so, the nonconsenting owner is entitled to:

(7)(a) an accounting of the profits applicable to the nonconsenting owner's relinquished share of the storage facility; and
(7)(b) payment of the profits applicable to that share of the profits not taken in-kind, net of costs.
(8) A nonconsenting owner who does not take the nonconsenting owner's share of the profits is not liable for the costs described in Subsection (4)(d) and is not liable for any actions the operator takes with respect to the storage facility.

Legislative History

Enacted by Chapter 62, 2022 General Session