30 C.F.R. § 203.44 If I drill a certified unsuccessful well, what royalty relief will my lease earn?
Title 30 - Mineral Resources
Your lease may earn a royalty suspension supplement. Subject to paragraph (d) of this section, the royalty suspension supplement is in addition to any royalty suspension volume your lease may earn under §203.41. (a) If you drill a certified unsuccessful well and you satisfy the administrative requirements of §203.46 and subject to the price conditions in §203.47, you earn a royalty suspension supplement shown in the following table (in billions of cubic feet of gas equivalent (BCFE) or in thousands of cubic feet of gas equivalent (MCFE)) applicable to oil and gas production as prescribed in §204.45: (b) We will suspend royalties on oil and 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 §203.45. All oil and gas production reported on the OGOR-A, including production that is not subject to royalty (except for production to which a royalty suspension volume under §§203.41 and 203.42 applies), counts toward the lease royalty suspension supplement. Example 1. If you drill a certified unsuccessful well that is an original well to a target 19,000 feet TVD SS, you earn a royalty suspension supplement of 5 BCFE of gas and oil production if your lease has not previously produced from a deep well, or you earn a royalty suspension supplement of 2 BCFE of gas and oil production if your lease has previously produced from a deep well with a perforated interval from 15,000 to less than 18,000 feet TVD SS, as prescribed in §203.45. Example 2. If you drill a certified unsuccessful well that is a sidetrack that reaches a target 19,000 feet TVD SS, that has a sidetrack measured depth of 12,545 feet, and your lease has not produced gas or oil from any deep well, we round the distance to 12,500 feet and you earn a royalty suspension supplement of 2.3 BCFE of gas and oil production as prescribed in §203.45. (c) The conversion from oil to gas for using the royalty suspension supplement is specified in §203.73. (d) Each lease is eligible for up to two royalty suspension supplements. Therefore, the total royalty suspension supplement for a lease cannot exceed 10 BCFE. (1) You may not earn more than one royalty suspension supplement from a single wellbore. (2) If you begin drilling a certified unsuccessful well on one lease but the completion target is on a second lease, the entire royalty suspension supplement belongs to the second lease. However, if the target straddles a lease line, the lease where the surface of the well is located earns the royalty suspension supplement. (e) If the same wellbore that earns a royalty suspension supplement as a certified unsuccessful well later produces from a perforated interval the top of which is 15,000 feet TVD SS or deeper before May 3, 2009, it will become a qualified well subject to the following conditions: (1) Beginning on the date production starts, you must stop applying the royalty suspension supplement earned by that wellbore to your lease production. (2) If the completion of this qualified well is on your lease or, in the case of a directional well, is on another lease, then you must subtract from the royalty suspension volume earned by that qualified well the royalty suspension supplement amounts earned by that wellbore that have already been applied either on your lease or any other lease. The difference represents the royalty suspension volume earned by the qualified well. (f) If the same wellbore that earned a royalty suspension supplement later has a sidetrack drilled from that wellbore, you are not required to subtract any royalty suspension supplement earned by that wellbore from the royalty suspension volume that may be earned by the sidetrack. (g) You owe minimum royalties or rentals in accordance with your lease terms notwithstanding any royalty suspension supplements under this section. [69 FR 3510, Jan. 26, 2004, as amended at 69 FR 24054, 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
§ 203.44 If I drill a certified unsuccessful well, what royalty relief will my lease earn?
------------------------------------------------------------------------ Then, you earn a royalty suspension supplement on this If you have a certified unsuccessful volume of oil and gas well that is . . . production as prescribed in this section and § 203.45:------------------------------------------------------------------------(1) An original well and your lease has 5 BCFE. not produced gas or oil from a deep well.(2) A sidetrack (with a sidetrack 0.8 BCFE plus 120 MCFE times measured depth of at least 10,000 sidetrack measured depth feet) and your lease has not produced (rounded to the nearest 100 gas or oil from a deep well. feet) but no more than 5 BCFE.(3) An original well or a sidetrack 2 BCFE. (with a sidetrack measured depth of at least 10,000 feet) and 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.------------------------------------------------------------------------
