30 C.F.R. § 203.41 If I have a qualified well, what royalty relief will my lease earn?
Title 30 - Mineral Resources
(a) This paragraph and paragraph (b) of this section apply if your lease has not produced gas or oil from a deep well that commenced drilling before March 26, 2003. Subject to the administrative requirements of §203.43, the provisions of §203.44(d), and the price conditions in §203.47, you earn a royalty suspension volume shown in the following table in billions of cubic feet (BCF) or in thousands of cubic feet (MCF) applicable to gas production as prescribed in §203.42: (b) We will suspend royalties on gas volumes produced on or after May 3, 2004, reported on the Oil and Gas Operations Report, Part A (OGOR-A) for your lease under §216.53, as and to the extent prescribed in §203.42. All gas production from qualified wells reported on the OGOR-A, including production that is not subject to royalty (except for production to which a royalty suspension supplement under §§203.44 and 203.45 applies), counts toward the lease royalty suspension volume. Example 1. If you have a qualified well that is an original well with a perforated interval the top of which is 16,000 feet TVD SS, you earn a royalty suspension volume of 15 BCF of gas production from qualified wells on your lease, as prescribed in §203.42. However, if the top of the perforated interval is 18,500 feet TVD SS, the royalty suspension volume is 25 BCF. Example 2. If you have a qualified well that is a sidetrack with a perforated interval the top of which is 16,000 feet TVD SS, that has a sidetrack measured depth of 6,789 feet, we round the distance to 6,800 feet and you earn a royalty suspension volume of 8.08 BCF of gas production from qualified wells on your lease, as prescribed in §203.42. Example 3. If you have a qualified well that is a sidetrack with a perforated interval the top of which is 16,000 feet TVD SS, that has a sidetrack measured depth of 19,500 feet, you earn a royalty suspension volume of 15 BCF of gas production from qualified wells on your lease, as prescribed in §203.42, even though 4 BCF plus 600 MCF per foot of sidetrack measured depth equals 15.7 BCF. (c) This paragraph and paragraph (d) of this section apply if your lease has produced gas or oil from a deep well with a perforated interval the top of which is from 15,000 to less than 18,000 feet TVD SS (regardless of whether drilling began before or after March 26, 2003), and you subsequently have a qualified well on your lease with a perforated interval the top of which is 18,000 feet TVD or deeper. Subject to the administrative requirements of §203.43, the provisions of §203.44(d), and the price conditions in §203.47, you earn a royalty suspension volume specified in the following table, applicable to gas production as prescribed in §203.42. This royalty suspension volume is in addition to any royalty suspension volume your lease already may have earned, if any, as a result of a qualified well with a perforated interval the top of which is from 15,000 to less than 18,000 feet TVD SS. (d) We will suspend royalties on gas volumes produced on or after May 3, 2004, reported on the Oil and Gas Operations Report, Part A (OGOR-A) for your lease under §216.53, as and to the extent prescribed in §203.42. All gas production from qualified wells reported on the OGOR-A, including production that is not subject to royalty (except for production to which a royalty suspension supplement under §§203.44 and 203.45 applies), counts toward the lease royalty suspension volume. Example 1. If you have drilled and produced a well with a perforated interval the top of which is 16,000 feet TVD SS before March 26, 2003 (and therefore, it is not a qualified well and has earned no royalty suspension volume) and later drill:
(i) A well with a perforated interval the top of which is 17,000 feet TVD SS, you earn no royalty suspension volume. (ii) A qualified well that is an original well with a perforated interval the top of which is 19,000 feet TVD SS, you earn a royalty suspension volume of 10 BCF of gas production from qualified wells on your lease, as prescribed in §203.42. (iii) A qualified well that is a sidetrack with a perforated interval the top of which is 19,000 feet TVD SS, that has a sidetrack measured depth of 7,000 feet, you earn a royalty suspension volume of 8.2 BCF of gas production from qualified wells on your lease, as prescribed in §203.42. Example 2. If you have a qualified well (i.e., drilled after March 26, 2003) that is an original well with a perforated interval the top of which is 16,000 feet TVD SS and later drill a second qualified well that is an original well with a perforated interval the top of which is 19,000 feet TVD SS, we increase the total royalty suspension volume for your lease from 15 BCF to 25 BCF, as prescribed in §203.42. Example 3. If you have a qualified well (i.e., drilled after March 26, 2003) that is a sidetrack with a perforated interval the top of which is 16,000 feet TVD SS, that has a sidetrack measured depth of 4,000 feet, and later drill a second qualified well that is a sidetrack with a perforated interval the top of which is 19,000 feet TVD SS, that has a sidetrack measured depth of 8,000 feet, we increase the total royalty suspension volume for your lease from 6.4 BCF to 15.2 BCF, as prescribed in §203.42. The difference of 8.8 BCF represents the royalty suspension volume earned by the second sidetrack. (e) After your lease has produced gas or oil from a deep well with a perforated interval the top of which is 18,000 feet TVD SS or deeper, your lease cannot earn a royalty suspension volume as a result of drilling any subsequent qualified wells. (f) The royalty suspension volume determined under this section for the first qualified well on your lease (whether an original well or a sidetrack) establishes the total royalty suspension volume available for that drilling depth interval on your lease, regardless of the number of subsequent qualified wells you drill to that depth interval. Example to paragraph (f): If your first qualified well is a sidetrack with a perforated interval the top of which is 16,000 feet TVD SS and earns a royalty suspension volume of 12.5 BCF, and you later drill a qualified original well to 17,000 feet TVD SS, the royalty suspension volume for your lease remains at 12.5 BCF and does not increase to 15 BCF. However, under paragraph (b) of this section, if you subsequently drill a qualified well to another depth interval 18,000 feet or greater TVD SS, you may earn an additional royalty suspension volume. (g) If a qualified well on your lease is within a unitized portion of your lease, the royalty suspension volume earned by that well under this section applies only to your lease and not to other leases within the unit. (h) If your qualified well is a directional well (either an original well or a sidetrack) drilled across a lease line, the lease with the perforated interval that initially produces earns the royalty suspension volume. However, if the perforated interval crosses a lease line, the lease where the surface of the well is located earns the royalty suspension volume. (i) Any royalty suspension volume earned under this section is in addition to any royalty suspension supplement for your lease under §203.44 that results from a different wellbore. (j) If your lease earns a royalty suspension volume under this section and later produces from a deep well that is not a qualified well, the royalty suspension volume is not forfeited or terminated. However, you may not apply the royalty suspension volume under this section to production from the deep well that is not a qualified well, even if it begins producing after your first qualified well. (k) You owe minimum royalties or rentals in accordance with your lease terms notwithstanding any royalty suspension volumes allowed under paragraphs (a) and (b) of this section. [69 FR 3510, Jan. 26, 2004, as amended at 69 FR 24053, Apr. 30, 2004]
Title 30: Mineral Resources
PART 203—RELIEF OR REDUCTION IN ROYALTY RATES
Subpart B—OCS Oil, Gas, and Sulfur General
Royalty Relief for Drilling Deep Gas Wells on Leases Not Subject to Deep Water Royalty Relief
§ 203.41 If I have a qualified well, what royalty relief will my lease earn?
------------------------------------------------------------------------ Then you earn a royalty suspension volume on this If you have a qualified well that is . amount of gas production, as . . prescribed in this section and § 203.42:------------------------------------------------------------------------(1) An original well with a perforated 15 BCF. interval the top of which is from 15,000 to less than 18,000 feet TVD SS.(2) A sidetrack with a perforated 4 BCF plus 600 MCF times interval the top of which is from sidetrack measured depth 15,000 to less than 18,000 feet TVD SS. (rounded to the nearest 100 feet) but no more than 15 BCF.(3) An original well with a perforated 25 BCF. interval the top of which is 18,000 feet TVD SS or deeper.(4) A sidetrack with a perforated 4 BCF plus 600 MCF times interval the top of which is 18,000 sidetrack measured depth feet TVD SS or deeper. (rounded to the nearest 100 feet) but no more than 25 BCF.------------------------------------------------------------------------
------------------------------------------------------------------------ If your lease has produced gas or oil from a deep well with a perforated Then, you earn a royalty interval the top of which is from suspension volume on this15,000 to less than 18,000 feet TVD SS, amount of gas production, as and you subsequently have a qualified prescribed in this section and well that is . . . § 203.42------------------------------------------------------------------------(1) An original well or a sidetrack 0 BCF. with a perforated interval the top of which is from 15,000 to less than 18,000 feet TVD SS.(2) An original well with a perforated 10 BCF. interval the top of which is 18,000 feet TVD SS or deeper.(3) A sidetrack with a perforated 4 BCF plus 600 MCF times interval the top of which is 18,000 sidetrack measured depth feet TVD SS or deeper. (rounded to the nearest 100 feet) but no more than 10 BCF.------------------------------------------------------------------------
