HLS 10RS-1889 ORIGINAL
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are additions.
Regular Session, 2010
HOUSE BILL NO. 1329
BY REPRESENTATIVE HENRY BURNS
MINERALS/LEASES: Provides for the recoupment of unit wells costs and risk charge
AN ACT1
To amend and reenact R.S. 30:10(A)(2)(e), relative to drilling units; to provide for2
recoupment of well costs and risk charge; to provide for payment of certain royalties3
from the nonparticipating owner's share of production; to limit the liability for4
certain payments; and to provide for related matters.5
Be it enacted by the Legislature of Louisiana:6
Section 1. R.S. 30:10(A)(2)(e) is hereby amended and reenacted to read as follows:7
ยง10. Agreements for drilling units; pooling interests; terms and conditions; expenses8
A.9
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(2)11
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(e)(i) The provisions of Paragraph 2(b) above Subparagraph (b) of this13
Paragraph with respect to the risk charge shall not apply to any unleased interest not14
subject to an oil, gas, and mineral lease.15
(ii) Notwithstanding the provisions of Paragraph 2(b) Subparagraph (b) of16
this Paragraph the royalty owner and overriding royalty owner shall receive that17
portion of production due to them under the terms of the contract creating the royalty18
and overriding royalty out of the production produced from the unit well by the19
owners drilling, or the unit operator on behalf of the drilling owners, such20 HLS 10RS-1889 ORIGINAL
HB NO. 1329
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are additions.
nonparticipating owner's leasehold interests of said unit well during the recoupment1
period set forth in Subparagraph 2(b) of this Paragraph of the actual well costs and2
applicable risk charge. Such royalty and overriding interest shall be paid by the3
owners drilling, or the unit operator on behalf of the drilling owners, the4
nonparticipating owner's leasehold interests of said unit well; however, the amount5
of such royalty and overriding royalty interest paid by the drilling owners of the unit6
well shall not exceed thirty percent of 8/8ths of the nonparticipating owner's interest7
in the nonparticipating leasehold's portion of the tract's allocated share of unit8
production.9
(iii) In no event shall the royalty and overriding royalty interests paid by the10
owners drilling, or the unit operator on behalf of the drilling owners, a11
nonparticipating owner's leasehold interest in any single oil, gas and mineral lease12
exceed thirty percent of 8/8ths of the nonparticipating owner's interest in such13
nonparticipating leasehold's portion of the tract's allocated share of unit production.14
In the event either the royalty or royalty and overriding royalty burdens together of15
any single oil, gas, and mineral lease exceed thirty percent of 8/8ths of the16
nonparticipating owner's interest in such nonparticipating leasehold's portion of the17
tract's allocated share of unit production, then the lessor's leasehold royalty interest18
shall be paid first and the overriding royalty interests, if any, shall be paid second in19
the order such overriding royalty interests were recorded; however, such payments20
made by the drilling owners of any single oil, gas, and mineral lease shall not exceed21
the maximum payment limit as set forth and proportionately reduced as provided in22
this Subparagraph.23
(iv) Any such royalty and overriding interests created by contracts recorded24
subsequent to the date on which the written notice was sent set forth in Item(a)(i) of25
this Paragraph or in excess of thirty percent of 8/8ths of such nonparticipating26
leasehold's portion of the nonparticipating tract's allocated share of unit production27
shall be paid by the nonparticipating owner of the oil, gas, and mineral lease or28
contracts creating same.29 HLS 10RS-1889 ORIGINAL
HB NO. 1329
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are additions.
(v) The owners drilling, or the unit operator on behalf of the owners drilling,1
such nonparticipating owner's leasehold interests of said unit well during the2
recoupment period set forth in Subparagraph (b) of this Paragraph shall not be liable3
for and shall be held harmless from any and all claims and demands for payments4
due royalty or overriding interests created by contracts recorded subsequent to the5
date on which the written notice was sent set forth in Item (a)(i) of this Paragraph or6
that exceed thirty percent of 8/8ths of such nonparticipating leasehold's portion of7
the nonparticipating tract's allocated share of unit production. Further, the owners8
drilling, or the unit operator on behalf of the owners drilling, such nonparticipating9
owner's leasehold interests of said unit well during the recoupment period set forth10
in Subparagraph (b) of this Paragraph shall not be liable to any nonparticipating11
owner for erroneous or incorrect payments of the royalty or overriding royalty12
interests attributable to such nonparticipating owners' leasehold interest unless such13
erroneous or incorrect payments result from gross negligence or willful misconduct.14
(vi) Actual well costs and the applicable risk charge of the unit well15
attributable to a nonparticipating or nonpaying owner's interest in an oil, gas, and16
mineral lease covering a tract shall be recouped out of the nonparticipating owner's17
"net revenue interest" attributable to the nonparticipating tract on the date on which18
the written notice is sent as set forth in Item(a)(i) of this Paragraph. "Net revenue19
interest" shall mean the leasehold's portion of the tract's allocated share of unit20
production less the leasehold's royalty and overriding royalty interests as limited and21
set forth in this Subparagraph.22
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DIGEST
The digest printed below was prepared by House Legislative Services. It constitutes no part
of the legislative instrument. The keyword, one-liner, abstract, and digest do not constitute
part of the law or proof or indicia of legislative intent. [R.S. 1:13(B) and 24:177(E)]
Henry Burns HB No. 1329
Abstract: Provides for the payment of royalties and overriding royalties on a nonoperating,
nonparticipating mineral interest owner's tract in a unit well. HLS 10RS-1889 ORIGINAL
HB NO. 1329
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are additions.
Present law authorizes the commissioner of conservation to establish drilling units to prevent
waste and to avoid drilling unnecessary wells. The cost of development and operation of the
unit is chargeable to the tracts of land within the unit. The commissioner is required to send
notice to the owners and an opportunity to elect to participate in the risk and expense of the
unit. If an owner elects not to participate or elects to participate and fails to pay his share,
the expenses of the unit, including drilling, testing, completing, equipping, and operating,
and a risk charge are recoverable from that tract's share of production. The risk charge is
equal to 200% of the nonparticipating or nonpaying tract's allocated share of the expenses.
Proposed law retains present law.
Present law provides that the risk charge is not applicable to unleased oil, gas, and mineral
interest. Proposed law retains present law.
Present law provides that royalty owners and overriding royalty owners receive their portion
of production of the unit well as provided in the contract creating the royalty.
Proposed law provides that while the unit well costs and applicable risk charge are being
recouped from the nonparticipating mineral interest owner, the royalty and overriding
royalty owners of that tract shall be paid by the owners or operator drilling the unit well.
Such payment shall be limited to 30% of the nonparticipating mineral interest owner's share
of production.
Proposed law provides that if the royalty or overriding royalty exceeds the 30% limit,
payments from the drilling owners or operator are prioritized as royalty interest shall be paid
first, then overriding royalty interests in the order they were recorded. Such payments shall
not exceed the 30% of the nonparticipating mineral interest owner's share of production.
Proposed law provides the nonparticipating owner shall pay the royalty and overriding
royalty interests recorded after the commissioner's notice to participate is sent and those in
excess of the 30% of the nonparticipating mineral interest owner's share of production.
Proposed law provides the owners drilling or their operator are not liable for payments to
royalty or overriding royalty owners that exceed 30% of the nonparticipating mineral interest
owner's share of production or were recorded after the commissioner's notice was sent.
Likewise, they are not liable for errors in payments unless the error results from gross
negligence or willful misconduct.
Proposed law provides the actual well costs and the applicable risk charge of the unit well
attributable to a nonparticipating or nonpaying owner's interest shall be recouped out of the
nonparticipating owner's "net revenue interest" attributable to the nonparticipating tract on
the date on which commissioner's notice was sent. Proposed law defines "net revenue
interest" as the leasehold's portion of the tract's allocated share of unit production less the
leasehold's royalty and overriding royalty interests as limited by proposed law.
(Amends R.S. 30:10(A)(2)(e))