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.
[Title]: Understanding Oregon Cost Overruns for Non-Operator's Non-Consent Option: Types and Detailed Description [Introduction]: When it comes to oil and gas operations, cost overruns can occur due to various reasons, causing financial strain for the participating parties. In the state of Oregon, there is a specific provision known as the Non-Operator's Non-Consent Option that deals with cost overruns in joint operations. This detailed description aims to explain the concept of Oregon Cost Overruns for Non-Operator's Non-Consent Option, while exploring different types that can occur within this framework. [Body]: 1. Definition of Oregon Cost Overruns for Non-Operator's Non-Consent Option: The Oregon Cost Overruns for Non-Operator's Non-Consent Option refers to the situation where a non-operator in a joint operation fails to consent to additional costs associated with a particular operation, and as a result, they may be subject to certain consequences outlined in the agreement. 2. Types of Oregon Cost Overruns for Non-Operator's Non-Consent Option: a. Drilling Cost Overruns: This type of cost overrun specifically relates to drilling operations. If the non-operator does not consent to additional drilling costs and the project exceeds the agreed budget, they may be subject to penalties, reduced profit share, or even forced withdrawal from the operation depending on the agreement terms. b. Exploration Cost Overruns: Exploration activities involve various tasks such as seismic studies, geophysical surveys, and well testing. If the non-operator doesn't consent to additional exploration costs and the project exceeds the planned budget, they may face consequences such as financial penalties or a reduction in their participation interest. c. Development Cost Overruns: Development costs encompass construction, installation, and infrastructure expenses related to developing a field or reservoir. If the non-operator fails to consent to additional development costs, and the expenses exceed the predetermined budget, they might be liable for specific penalties or a reduction in their share of profits. d. Operating Cost Overruns: Operating costs include ongoing expenses for maintaining and operating the facility or well. If the non-operator does not consent to additional operating costs, exceeding the agreed budget, they could face repercussions such as financial penalties, reduced profit share, or potential legal actions outlined in the agreement. 3. Consequences for Non-Operators: — Financial Penalties: Non-operators who choose not to consent to cost overruns may be subject to financial penalties based on the agreement terms. — Reduced Profit Share: In some cases, non-operators who don't contribute to cost overruns may have their share of profits reduced accordingly. — Forced Withdrawal: Depending on the agreement, non-operators who repeatedly refuse to consent or fund cost overruns may face forced withdrawal from the joint operation. 4. Importance of Agreement Terms and Negotiations: It is vital for all participants in a joint operation in Oregon to carefully review and negotiate the terms of the agreement, especially those related to cost overruns. Clear and specific provisions can provide clarity and protection for all parties involved, ensuring a fair and equitable resolution in case of cost overruns. [Conclusion]: Understanding Oregon Cost Overruns for Non-Operator's Non-Consent Option is crucial for participants in joint operations within the state. This concept addresses situations where a non-operator fails to consent to additional costs, leading to potential penalties, reduced profit share, or forced withdrawal. By carefully negotiating the agreement terms and recognizing the different types of cost overruns, participants can mitigate risks and foster a successful oil and gas operation in Oregon.
