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.
Utah Offset Well Protection: Utah Offset Well Protection is a legal provision enacted to safeguard the interests and rights of operators of oil and gas wells in the state of Utah. This regulation ensures that neighboring wells are subjected to certain restrictions and obligations to prevent reservoir drainage or any unfair competitive advantage. Under Utah Offset Well Protection, operators are required to notify and obtain consent from the Utah Division of Oil, Gas and Mining (DOG) before drilling and completing a well within a specified distance from an existing producing well. The purpose of this notification is to allow the DOG to evaluate the potential impact of the new well on the existing well and make necessary determinations to protect the economic viability of the existing well. Furthermore, Utah Offset Well Protection establishes the requirement for compensation, in the form of compensatory royalty, to be paid by the operator of the newly drilled well to the operator of the affected well. The compensatory royalty is intended to reimburse the affected operator for the loss of resources and value resulting from any production imbalance caused by the drilling of the new well. Payment of Compensatory Royalty: The payment of compensatory royalty in Utah is a key component of the Offset Well Protection regulation. It ensures fairness and equity among operators when there is potential interference of newly drilled wells with existing producing wells. The payment serves as a form of compensation to the operator of the affected well for any loss in production or financial impact caused by the drilling of the new well. The compensatory royalty is typically calculated based on a percentage of the new well's production, which is established through negotiations between the operators involved or determined by the DOG. The specific terms and conditions of the compensatory royalty are outlined in agreements or orders approved by the DOG. Different Types of Utah Offset Well Protection and Payment of Compensatory Royalty: 1. Vertical Well Offset Protection: This type of protection applies when a new vertical well is proposed within a certain distance from an existing producing vertical well. The operator of the new well must comply with the notification and compensatory royalty requirements to ensure the interests of the affected well are adequately protected. 2. Horizontal Well Offset Protection: This type of protection is applied when a new horizontal well is planned within a specified distance from an existing producing horizontal well. Similar to vertical well protection, the operator of the new well must adhere to the notification and compensatory royalty obligations to avoid any negative impacts on the existing well. In conclusion, Utah Offset Well Protection and the payment of compensatory royalty are essential regulations aimed at maintaining fair competition and sustainable development in the oil and gas industry. These regulations ensure that operators in Utah comply with specific requirements when drilling near existing producing wells and compensate the affected operators for any potential loss of resources or value caused by their activities.
