This lease rider form may be used when you are involved in a lease transaction, and have made the decision to utilize the form of Oil and Gas Lease presented to you by the Lessee, and you want to include additional provisions to that Lease form to address specific concerns you may have, or place limitations on the rights granted the Lessee in the “standard” lease form.
North Dakota Offset Well Protection and Payment of Compensatory Royalty Description: North Dakota Offset Well Protection: North Dakota Offset Well Protection refers to the regulations and measures implemented by the North Dakota Oil and Gas Division to safeguard the interests of mineral owners who have existing wells near newly drilled offset wells. The primary goal is to prevent the drainage of hydrocarbons from existing wells due to the extraction activities of nearby offset wells. This protection ensures that operators compensate mineral owners for such drainage through the payment of compensatory royalty. Payment of Compensatory Royalty: The Payment of Compensatory Royalty is a mechanism in North Dakota that ensures fair compensation for mineral owners who experience the loss of hydrocarbon production due to the extraction activities of offset wells. When an offset well draws hydrocarbons from an existing well's reservoir, resulting in decreased production, the operator of the offset well is required to pay a compensatory royalty as a form of compensation to the impacted mineral owner. Different Types of North Dakota Offset Well Protection and Payment of Compensatory Royalty: 1. Mandatory Offset Well Protection: Mandatory Offset Well Protection in North Dakota imposes compulsory measures on operators to prevent the drainage of hydrocarbons from existing wells. Operators are required to adhere to specific guidelines and practices, such as strategically placing offset wells, using modern drilling techniques, and employing advanced reservoir engineering methods to minimize drainage. 2. Voluntary Offset Well Protection: Voluntary Offset Well Protection includes initiatives undertaken by responsible operators to protect existing wells voluntarily, even if not mandated by regulations. These operators adopt best practices and employ cutting-edge technologies to preserve the hydrocarbon integrity of existing reservoirs. This proactive approach demonstrates environmental and social responsibility, ensuring the fair treatment of mineral owners. 3. Compensatory Royalty Payment: Under the Compensatory Royalty Payment system, operators are obligated to compensate mineral owners whose wells suffer a decrease in production due to drainage caused by offset wells. This payment is determined based on the volume of production loss and prevailing market prices of hydrocarbons. Operators calculate and pay compensatory royalties on a periodic basis to ensure equitable compensation for mineral owners. In conclusion, North Dakota Offset Well Protection and Payment of Compensatory Royalty are crucial aspects of the state's oil and gas regulations. They aim to protect the interests of mineral owners by preventing drainage caused by offset wells and ensuring fair compensation through the payment of compensatory royalty. Understanding and implementing these measures facilitate responsible and sustainable oil and gas extraction practices in North Dakota's energy industry.
