| (iv) for gas valued from $2.51 to $3.00 per Mcf of
gas, the board may reduce a royalty rate to 40%.
(C) Definition of value. For purposes of this paragraph,
the value of the gas is defined as the highest market price paid or
offered for gas of comparable quality in the general area where produced
and when run, or the gross price paid is offered to the producer,
whichever is greater.
(D) Request for reduction. A lessee seeking the approval
of SLB for a temporary reduction in gas royalty rates must make written
request for an application to the Minerals Leasing Division, General
Land Office, 1700 North Congress Avenue, Room 640, Austin, Texas 78701-1495.
The application should be completed and returned to the Minerals Leasing
Division of the GLO.
(i) The applicant must submit an affidavit and documentation
in support of its request for a temporary reduction of gas royalty
rates. The affidavit will attest to the fact that the requirements
set out in this paragraph have been satisfied. The accompanying documentation
will contain pertinent lease data, production and reserve data, gas
price data, development data, and any other information which may
be required to support the application, including the reason for requesting
a royalty reduction.
(ii) SLB will consider the request for temporary reduction
in gas royalty rates based upon lessee's affidavit, documents in support
thereof, and the recommendation of the Minerals Leasing Division.
(iii) SLB may reevaluate the temporary reduction in
gas royalty rates at any time.
(E) Verification of gas valuation. The gas valuation
information submitted by the lessee will be subject to verification
by the Royalty Audit Division.
(F) Effective dates for reduced royalty rates. The
reduced royalty rates shall be effective beginning the first day of
the next month following approval by SLB. Royalty rates on gas produced
after September 1, 1990, will not be subject to reduction under this
section.
(G) No retroactive effect. The reduced royalty rates
will not be applied retroactively for previous months' production.
(c) Marginal Properties Royalty Incentive Program.
(1) Definitions. The following words and terms, when
used in this subsection, shall have the following meanings, unless
the context clearly indicates otherwise.
(A) Active well--Any well on the qualifying property
as defined in subparagraph (H) of this paragraph in actual use either
as a producing well or an injection well as defined in subparagraph
(D) of this paragraph during at least six months of the qualifying
period as defined in subparagraph (G) of this paragraph.
(B) Average daily per well production--
(i) Un-pooled leases: For a given reservoir, the total
oil, condensate, and/or natural gas production from the lease for
the qualifying period, in BOE as defined in subparagraph (C) of this
paragraph, divided by the product of 365 and the number of the reservoir's
active wells on the lease. Average daily per well production is calculated
in BOE/day and is rounded down to the next whole number.
(ii) Pooled leases: For a given reservoir, the total
oil, condensate, and/or natural gas production from the unit for the
qualifying period, in BOE, divided by the product of 365 and the number
of the reservoir's active wells in the unit. Average daily per well
production is calculated in BOE/day and is rounded down to the next
whole number.
(C) Barrel of oil equivalent (BOE)--One 42-gallon barrel
of crude oil, or the greater of 6,000 cubic feet (6 Mcf) of natural
gas available for sale off the lease or unit or a volume of natural
gas available for sale off the lease or unit with a minimum heating
value of 6,000,000 British thermal units (6,000 MBtu).
(D) Injection well--Any well approved by the RRC for
use in the injection of gas or fluids in a secondary or tertiary enhanced
recovery or pressure maintenance operation, excluding disposal wells.
(E) Mcf--Thousand cubic feet.
(F) Price--The five-day average spot price of West
Texas Intermediate crude oil at the Midland, Texas, oil terminal as
reported in The Oil Daily.
(G) Qualifying period--The 12-month period immediately
preceding the most recent month of production.
(H) Qualifying property--Land subject to a State of
Texas oil and gas lease issued pursuant to Texas Natural Resources
Code, Chapter 32, Chapter 51, Subchapter E, or Chapter 52. Land subject
to a free royalty reserved by the state under Texas Natural Resources
Code, §51.054 or its predecessor statutes cannot be qualifying
property.
(I) Qualifying Gulf of Mexico property--Land described
in Texas Natural Resources Code, §52.011(2), that is subject
to a State of Texas oil and gas lease issued pursuant to Texas Natural
Resources Code, Chapter 52, Subchapter B.
(J) Qualifying reservoir--A reservoir underlying a
qualifying property or a reservoir within a pooled unit that includes
qualifying property, having average daily per well production during
the qualifying period equal to or less than 15 BOE/day. Unless specified
or unless the context clearly requires a different interpretation,
the term "qualifying reservoir" includes a "qualifying Gulf of Mexico
reservoir."
(K) Qualifying Gulf of Mexico (GOM) reservoir--A reservoir
underlying a qualifying GOM property or a reservoir within a pooled
unit that includes qualifying GOM property, having average daily per
well production during the qualifying period equal to or less than
50 BOE/day.
(L) Reservoir--A "common reservoir" as defined in Texas
Natural Resources Code, Chapter 86, Subchapter A, §86.002.
(2) Qualification for Royalty Reduction.
(A) The SLB may consider a lease for a royalty reduction
if:
(i) the average of the daily price of oil during the
qualifying period was equal to or less than $25 per barrel; and
(ii) the applicant submits a sworn application to the
SLB which includes:
(I) proof that the applicant is the lease operator
as shown by the most current RRC records;
(II) proof that the land is qualifying property;
(III) proof that the reservoir is a qualifying reservoir,
including proof of the reservoir's volume of oil, condensate, and/or
natural gas produced from, or attributable to, the lease during the
qualifying period;
(IV) a representation that the lease is in force and
effect; and
(V) such additional information as may be required
upon written request by GLO staff.
(B) GLO staff will review the application and submit
it and a recommendation to the SLB. The staff shall include in the
recommendation information regarding any other royalty interests in
the tract, including royalty interests held by owners of the soil
(or their successors in interest) of Relinquishment Act lands, as
defined in §9.1 of this title (relating to Definitions). Thereafter,
if the SLB finds that all requirements under subparagraph (A) of this
paragraph are met, the SLB may approve the application or may condition
approval on specified requirements. In determining whether to grant
a reduction in the royalty rate, the SLB may consider whether the
qualifying property or qualifying Gulf of Mexico property is being
operated efficiently, including whether the property is pooled or
has reasonable potential for the application of secondary or tertiary
recovery techniques. If a qualifying reservoir for which a royalty
rate reduction is sought under this section is included in a unit
subject to SLB authority, the SLB may modify the terms and conditions
for the unit as a condition of approving the requested reduction in
the royalty rate. The SLB has the sole discretion to grant final approval.
SLB approval of a reduced royalty applies only to the qualifying reservoir.
The effective date of the royalty rate reduction is the first day
of the month following SLB approval of the application. A reduced
royalty under this incentive program is available only for a lease
issued or approved by the state that is in effect on, or takes effect
on or after, the effective date of this subsection.
(C) The approval of an application shall not constitute
a finding that a lease has been maintained in force and effect or
otherwise ratify or revive any lease.
(3) Royalty Rate. After the SLB approves an application:
(A) the SLB will determine the qualifying reservoir's
applicable royalty rate according to the published reduced royalty
schedules. The SLB may not set the royalty at a rate less than the
lowest rate provided by statute for the category of property for which
application is made.
Attached Graphic
(B) Except as provided in subparagraph (C) of this
paragraph, the royalty rate may not be reduced to less than 6.25%
of 100% (one-sixteenth of eight-eighths).
(C) Royalty rate under specific types of leases:
Cont'd... |
