This ia a provision that states that any Party receiving a notice proposing to drill a well as provided in Operating Agreement elects not to participate in the proposed operation, then in order to be entitled to the benefits of this Article, the Party or Parties electing not to participate must give notice. Drilling by the parties who choose to participate must begin within 90 days of the notice.
Michigan Farm out by Non-Consenting Party is a specific legal term referring to an agreement between oil and gas operators in the state of Michigan. In this arrangement, a working interest owner, known as the Non-Consenting Party (NCP), who does not wish to participate in the drilling and development of a specific well, can choose to "farm out" their interest to another operator. This agreement allows the NCP to essentially lease their portion of the working interest to a third party, known as the Farmer, who then takes on the responsibility and risks associated with drilling and completion. In a Michigan Farm out by Non-Consenting Party, multiple types can exist depending on the specific terms and conditions negotiated between the NCP and the Farmer. Some common types of Michigan Farm out by Non-Consenting Party include: 1. Traditional Farm out: In this type, the NCP grants the Farmer the right to drill and develop the well in exchange for an agreed share of the production and potentially a cash consideration. The NCP typically retains an overriding royalty interest (ORRIS) or a similar interest in the future production from the farm out area. 2. Carry Agreement: In a carry agreement, the Farmer not only assumes the drilling costs but also covers the entire cost of well operations, including completion. This type of farm out is often more appealing to the NCP as they are not required to contribute financially to the project but still retain their proportional working interest share. 3. Drill to Earn: In this type of farm out, the NCP may be required to retain a smaller interest in the working interest and pay their proportional share of the drilling costs until a predetermined depth or target is reached. Once the NCP fulfills their financial obligations, they can then 'earn' their portion of the working interest, and the Farmer takes on the expenses beyond that point. 4. Time Limited Farm out: Some farm out agreements have specific time limitations, where the Farmer is granted a set period to drill and develop the well. If the Farmer fails to meet the set deadlines or complete the operations within the given timeframe, the working interest reverts to the NCP. Michigan Farm out by Non-Consenting Party agreements are governed by specific legal provisions and are subject to negotiation between the parties involved. It is essential for both the NCP and the Farmer to carefully consider the terms and potential risks associated with the farm out agreement before entering into such an arrangement.
