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.
Puerto Rico Cost Overruns for Non-Operator's Non-Consent Option is a legal concept that is commonly found in oil and gas leases, specifically concerning the rights of non-operators to decide whether to participate in certain activities that may lead to additional costs or expenses. In Puerto Rico, cost overruns for non-operator's non-consent option refer to the situation where a non-operator (typically a minority interest owner) in an oil or gas project has the choice to either bear their proportionate share of additional costs or opt out of the project altogether. This option is activated when the operator, who is responsible for the day-to-day operations and decision-making, proposes activities that exceed the initial budget or plan. The purpose of the non-operator's non-consent option is to protect minority interest owners from excessive financial burdens and allow them to maintain control over their own investment decisions. By choosing not to consent to additional expenses, non-operators can avoid bearing the financial consequences of unforeseen cost overruns. There are different types of Puerto Rico Cost Overruns for Non-Operator's Non-Consent Option, including: 1. Project-related cost overruns: These occur when unexpected expenses arise during the course of the project, such as drilling issues, equipment failures, or environmental complications. Non-operators can use their non-consent option to avoid absorbing these additional costs. 2. Development cost overruns: These arise when the development of the oil or gas resource requires more funds than initially estimated. Non-operators can exercise their non-consent option if they believe the increased costs are unreasonable or unaffordable. 3. Exploration cost overruns: Exploration activities, such as seismic testing or geophysical surveys, may encounter unforeseen challenges that result in higher costs than initially projected. Non-operators can protect themselves by choosing not to consent to these additional expenses. 4. Production cost overruns: Once a project moves into the production phase, increased costs can arise due to operational issues, market fluctuations, or regulatory changes. Non-operators can utilize their non-consent option to avoid sharing in these extra expenses. It is important for non-operators to carefully review their contractual agreements and understand the specific terms and conditions surrounding cost overruns and the non-consent option. By having a clear understanding of their rights and responsibilities, non-operators in Puerto Rico can protect themselves from unexpected financial burdens while ensuring their investment remains viable.
