30 CFR § 203.42
What conditions and limitations apply to royalty relief for deep wells and phase 1 ultra-deep wells?
July 29, 2020
The conditions and limitations in the following table apply to royalty relief under §203.41.
Open Table
| If . . . | Then . . . |
|---|---|
| (a) Your lease has produced gas or oil from a well with a perforated interval the top of which is 18,000 feet TVD SS or deeper, | your lease cannot earn an RSV under §203.41 as a result of drilling any subsequent deep wells or phase 1 ultra-deep wells. |
| (b) You determine RSV under §203.41 for the first qualified deep well or qualified phase 1 ultra-deep well on your lease (whether an original well or a sidetrack) because you drilled and produced it within the time intervals set forth in the definitions for qualified wells, | that determination establishes the total RSV available for that drilling depth interval on your lease (i.e., either 15,000-18,000 feet TVD SS, or 18,000 feet TVD SS and deeper), regardless of the number of subsequent qualified wells you drill to that depth interval. |
| (c) A qualified deep well or qualified phase 1 ultra-deep well on your lease is within a unitized portion of your lease, | the RSV earned by that well under §203.41 applies only to production from qualified wells on or allocated to your lease and not to other leases within the unit. |
| (d) Your qualified deep well or qualified phase 1 ultra-deep 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 RSV. However, if the perforated interval crosses a lease line, the lease where the surface of the well is located earns the RSV. |
| (e) You earn an RSV under §203.41, | that RSV is in addition to any RSS for your lease under §203.45 that results from a different wellbore. |
| (f) Your lease earns an RSV under §203.41 and later produces from a well that is not a qualified well, | the RSV is not forfeited or terminated, but you may not apply the RSV under §203.41 to production from the non-qualified well. |
| (g) You qualify for an RSV under paragraphs (b) or (c) of §203.41, | you still owe minimum royalties or rentals in accordance with your lease terms. |
| (h) You transfer your lease, | unused RSVs transfer to a successor lessee and expire with the lease. |
Example to paragraph (b): If your first qualified deep well is a sidetrack with a perforated interval whose top is 16,000 feet TVD SS and earns an RSV of 12.5 BCF, and you later drill a qualified original deep well to 17,000 feet TVD SS, the RSV for your lease remains at 12.5 BCF and does not increase to 15 BCF. However, under paragraph (c) of §203.41, if you subsequently drill a qualified deep well to a depth of 18,000 feet or greater TVD SS, you may earn an additional RSV.
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