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.
Pennsylvania Cost Overruns for Non-Operator's Non-Consent Option refers to a clause in oil and gas leases that outlines the responsibilities and consequences for non-operating interest owners who choose not to participate in drilling operations when cost overruns occur. This provision is specifically relevant in the oil and gas industry in Pennsylvania. In Pennsylvania, the Cost Overruns for Non-Operator's Non-Consent Option is often included in lease agreements to address situations where the cost of drilling or operating a well exceeds the initial estimates provided to non-operating owners. When this happens, non-operating interest owners have the choice to either contribute their share of the additional costs or exercise their non-consent option. The non-consent option allows non-operating interest owners to avoid paying the additional costs and instead retain their interest in the well, but they forfeit their right to receive their share of the production profits until the additional costs are recovered. This provision is designed to protect the interests of both the non-operating owners and the operating party by allowing operations to proceed despite the cost overruns. There are different types or variations of Pennsylvania Cost Overruns for Non-Operator's Non-Consent Option, each with their specific conditions and implications. Some variations include: 1. Strict penalty: In this type, non-operating owners who exercise their non-consent option face strict penalties, such as losing their right to receive any future production revenue until the additional costs are covered. 2. Gradual penalty: This type involves a more gradual reduction in the non-operating owner's share of production revenue until the additional costs are fully recovered. For instance, the non-operating owner may only receive a reduced percentage of their share until recovery is achieved. 3. Time limitations: Some agreements may include specific time limitations on exercising the non-consent option. The non-operating owners must decide within a certain period if they want to participate in covering the cost overruns or exercise their non-consent option. 4. Opt-out window: This variation allows non-operating owners to opt-out of their obligations to pay the additional costs within a specified opt-out window. If they choose not to exercise their non-consent option during this period, they are obligated to contribute their share of the additional costs. It's important for non-operating interest owners in Pennsylvania to carefully review and understand the specific terms and conditions of the Cost Overruns for Non-Operator's Non-Consent Option before entering into an oil and gas lease. Consulting with legal professionals with expertise in oil and gas law is recommended to ensure all parties involved are aware of their rights and responsibilities regarding cost overruns.
