This form provides that when Operator, in good faith, believes or determines that the actual costs for any Drilling, Reworking, Sidetracking, Deepening, or Plugging Back operation conducted under this Agreement will exceed a designated of the costs estimated for the operation on the approved AFE, the Operator will give prompt notice by telephone to the other Parties participating in the operation, as well as delivering a supplemental AFE estimating the costs necessary to complete the operation. Each Party receiving the supplemental AFE shall have forty-eight from receipt of the notice to elect to approve Operators recommendation or propose an alternative operation.
Illinois Cost Overruns for Non-Operator's Non-Consent Option refers to a specific provision in oil and gas agreements that addresses the cost implications when a non-operator decides not to participate in drilling or development activities on a lease or well in Illinois. This provision ensures that non-operators are still liable for their share of any cost overruns incurred during the project, even if they did not actively participate or give their consent. Typically, oil and gas agreements in Illinois have different types of Cost Overruns for Non-Operator's Non-Consent Option clauses. Some commonly encountered variations include: 1. Joint Operating Agreement (JOB) Overruns: Under a JOB, cost overruns for non-operators who choose not to participate are often termed as "JOB cost overruns." This provision ensures that non-operators must contribute their share of additional costs incurred during drilling or development operations. 2. Non-Consent Penalty: Another type of Cost Overruns for Non-Operator's Non-Consent Option is a penalty or surcharge imposed on non-operators who do not consent to a proposed operation. This penalty could be a percentage or fixed amount, intended to compensate the operator for the additional financial burden resulting from the non-operator's decision. 3. Cost Recovery Provision: Some agreements may include a specific cost recovery provision that allows the operator to recover cost overruns from non-operators through future revenue generated from the lease or well. This provision ensures that the operator can recoup any additional expenses incurred due to a non-operator's non-consent. 4. Time Limit for Non-Consent: In certain cases, agreements may specify a time limit within which non-operators must declare their non-consent to participate in drilling or development activities. If the non-operator fails to communicate their non-consent within the specified timeframe, they may be responsible for cost overruns that occur thereafter. 5. Arbitration for Disputes: In the event of a disagreement or dispute regarding cost overruns for non-operators' non-consent, the agreement may require arbitration as the preferred method of resolving the issue. This ensures a fair and impartial evaluation of the circumstances and helps streamline conflict resolution. It is important for both operators and non-operators in Illinois to have a clear understanding of Cost Overruns for Non-Operator's Non-Consent Option clauses in their agreements. These provisions help maintain financial accountability and prevent one party from shouldering an unfair burden of additional costs resulting from non-participation or non-consent in oil and gas operations.
