USA Statutes : nevada
Title : Title 46 - MINES AND MINERALS
Chapter : CHAPTER 522 - OIL AND GAS
The waste of oil and
gas is prohibited in the State of Nevada.
[1:202:1953]
As used in this chapter, unless the
context otherwise requires, the words and terms defined in NRS 522.021
to 522.0395 , inclusive, have the meanings ascribed to
them in those sections.
[2:202:1953; A 1955, 55]—(NRS A 1977, 1149; 1983, 2078; 1991, 386,
962)
“Correlative rights”
means the opportunity afforded, so far as it is practicable to do so, to
the owner of each property in a pool to produce without waste his just
and equitable share of the oil or gas, or both, in the pool and for this
purpose to use his just and equitable share of the reservoir’s energy.
(Added to NRS by 1983, 2070)
“Division” means the Division of
Minerals of the Commission on Mineral Resources.
(Added to NRS by 1983, 2070; A 1993, 1689; 1999, 3632 )
“Division order” means a
written instrument executed for the purpose of:
1. Directing the distribution of the proceeds from the sale of the
production from an oil or gas well among the owners of the interests in
that production;
2. Setting forth the name and address of each of those owners; and
3. Enabling the purchaser of the production from an oil or gas
well who is responsible for the distribution to make remittance directly
to each of those owners.
(Added to NRS by 1991, 960)
“Field” means the general area which
is underlain or appears to be underlain by at least one pool and includes
the underground reservoir or reservoirs containing oil or gas.
(Added to NRS by 1983, 2070)
“Gas” includes all natural gas and all
hydrocarbons produced at the wellhead except oil.
(Added to NRS by 1983, 2070)
“Lessee” means the person entitled
under an oil and gas lease to drill and operate wells.
(Added to NRS by 1991, 385)
“Lessor” means the mineral owner
who has executed a lease and who is entitled to the payment of a royalty
on production.
(Added to NRS by 1991, 960)
“Oil” includes:
1. The crude petroleum oil and other hydrocarbons regardless of
gravity which are produced at the wellhead in liquid form; and
2. The liquid hydrocarbon known as distillate or condensate
recovered or extracted from gas, other than gas produced in association
with oil and commonly known as casing-head gas.
(Added to NRS by 1983, 2071)
“Operator” means a person
engaged in the business of drilling wells capable of producing oil or gas.
(Added to NRS by 1991, 385)
“Other
nonworking interest” means any interest in an oil and gas lease or well
which is not a royalty, overriding royalty or working interest.
(Added to NRS by 1991, 960)
“Overriding royalty”
means a share of production taken from the lessee’s interest under an oil
and gas lease.
(Added to NRS by 1991, 960)
“Owner” means the person who has the
right to drill into and produce from a pool and to appropriate the oil
and gas he produces therefrom for himself and others.
(Added to NRS by 1983, 2071)
“Person” includes any department,
agency or instrumentality of the State or any governmental subdivision
thereof.
(Added to NRS by 1983, 2071)
“Pool” means an underground reservoir
containing, or appearing to contain, a common accumulation of oil or gas.
Each zone of a general structure which is completely separated from any
other zone in the structure is included in the term “pool.”
(Added to NRS by 1983, 2071)
“Producer” means the owner of a
well or wells capable of producing oil or gas, or both.
(Added to NRS by 1983, 2071)
“Royalty” means the mineral
owner’s share of production.
(Added to NRS by 1991, 960)
“Waste” includes:
1. The inefficient, excessive or improper use of or unnecessary
dissipation of reservoir energy.
2. The locating, spacing, drilling, equipping, operating or
producing of any oil or gas well in a manner which results or tends to
result in reducing the quantity of oil or gas to be recovered from any
pool in this state under operations conducted in accordance with good
engineering practices in an oil field.
3. The inefficient aboveground storage of oil.
4. The locating, spacing, drilling, equipping, operating or
producing of any oil or gas well in a manner causing or tending to cause
unnecessary or excessive surface loss or destruction of oil or gas.
5. Producing oil or gas in such manner as to cause unnecessary
water channeling or coning.
6. The operation of an oil well with an inefficient ratio of gas
to oil.
7. The drowning with water of any pool or part thereof capable of
producing oil or gas, except insofar as and to the extent authorized by
the Commission under this chapter.
8. Underground waste.
9. The creation of unnecessary fire hazards.
10. The escape into the open air, from a well producing oil or
gas, of gas in excess of the amount which is reasonably necessary in the
efficient production of the well.
11. The use of gas for the manufacture of carbon black, except as
provided for in this chapter.
(Added to NRS by 1983, 2071)
“Working interest” means
the interest granted under an oil and gas lease, giving the lessee the
right to work on the leased property to search for, develop and produce
oil and gas.
(Added to NRS by 1991, 960)
1. The Division has jurisdiction and authority over all persons
and property, public and private, necessary to effectuate the purposes
and intent of this chapter.
2. The Division shall make investigation to determine whether
waste exists or is imminent, or whether other facts exist which justify
or require action by it.
3. The Division shall adopt regulations, make orders and take
other appropriate action to effectuate the purposes of this chapter.
4. The Division may:
(a) Require:
(1) Identification or ownership of wells, producing leases,
tanks, plants and drilling structures.
(2) The making and filing of reports, well logs and
directional surveys. Logs of exploratory or “wildcat” wells marked
“confidential” must be kept confidential for 6 months after the filing
thereof, unless the owner gives written permission to release those logs
at an earlier date.
(3) The drilling, casing and plugging of wells in such a
manner as to prevent the escape of oil or gas out of one stratum into
another, the intrusion of water into an oil or gas stratum, the pollution
of fresh water supplies by oil, gas or salt water, and to prevent
blowouts, cavings, seepages and fires.
(4) The furnishing of a reasonable bond with good and
sufficient surety conditioned for the performance of the duty to plug
each dry or abandoned well or the repair of wells causing waste.
(5) The operation of wells with efficient gas-oil and
water-oil ratios, and to fix these ratios.
(6) The gauging or other measuring of oil and gas to
determine the quality and quantity thereof.
(7) That every person who produces oil or gas in this State
keep and maintain for a period of 5 years within this State complete and
accurate record of the quantities thereof, which must be available for
examination by the Division or its agents at all reasonable times.
(b) Regulate, for conservation purposes:
(1) The drilling, producing and plugging of wells.
(2) The shooting and chemical treatment of wells.
(3) The spacing of wells.
(4) The disposal of salt water, nonpotable water and oil
field wastes.
(5) The contamination or waste of underground water.
(c) Classify wells as oil or gas wells for purposes material to the
interpretation or enforcement of this chapter.
[4:202:1953]—(NRS A 1977, 1151; 1981, 86; 1983, 2079; 1993, 1689)
DRILLING PERMITS; ESTABLISHMENT OF DRILLING UNITS
1. A person desiring to drill a well in search of oil or gas shall
notify the Division of that intent on a form prescribed by the Division
and shall pay a fee in an amount established pursuant to subsection 2 for
a permit for each well. Upon receipt of the notification and fee, the
Division shall promptly issue to the person a permit to drill, unless the
drilling of the well is contrary to law or a regulation or order of the
Division. The drilling of a well is prohibited until a permit to drill is
obtained in accordance with the provisions of this chapter.
2. The Commission on Mineral Resources shall, by regulations,
establish the fee required pursuant to subsection 1 in an amount not to
exceed $200 per permit.
[5:202:1953]—(NRS A 1977, 1151; 1983, 2080; 1993, 1689; 1999, 892
, 3632 ; 2001, 66 )
1. For the prevention of waste, to protect and enforce the
correlative rights of lessees in a pool, and to avoid the augmentation
and accumulation of risks arising from the drilling of an excessive
number of wells, or the reduced recovery which might result from too
small a number of wells, the Division shall, after a hearing, establish a
drilling unit or units for each pool. The establishment of a unit for gas
must be limited to the production of gas.
2. Each well permitted on a drilling unit must be drilled under
such regulations and in accordance with such a spacing pattern as the
Division prescribes for the pool in which the well is located. Exceptions
to the regulations and spacing pattern may be granted where it is shown,
after notice and hearing, that the unit is partly outside the pool, or
for some other reason a well so located on the unit would be
nonproductive, or topographical conditions are such as to make the
drilling at such a location unduly burdensome. If an exception is
granted, the Division shall offset any advantage which the person
securing the exception may have over other producers and shall prevent or
minimize drainage from developed units to the tract to which the
exception is granted. The producer of the well drilled as an exception
must be allowed to produce no more than a just and equitable share of the
oil and gas in the pool.
3. When two or more separately owned tracts of land are within an
established drilling unit, persons owning the drilling rights therein and
the right to share in the production therefrom may agree to pool their
interests and develop their lands as a drilling unit. If those persons do
not agree to pool their interests, the Division may, for the prevention
of waste, for the protection of correlative rights, or to avoid the
drilling of unnecessary wells, enter an order pooling and integrating
their interests for the development of their lands as a drilling unit.
Orders effectuating such pooling must be made after notice and hearing,
and must be upon terms and conditions which will afford to the owner of
each tract the opportunity to recover or receive his just and equitable
share of the oil and gas in the pool without unnecessary expense.
Operations incident to the drilling of a well upon any portion of a unit
covered by a pooling order shall be deemed for all purposes to be the
conduct of the operation upon each separately owned tract in the unit by
the several lessees thereof. The portion of the production allocated to
the lessee of each tract included in a drilling unit formed by a pooling
order shall, when produced, be considered as if it had been produced from
the tract by a well drilled thereon.
4. If the pooling is effectuated, the cost of development and
operation of the pooled unit chargeable by the operator to the other
interested lessees is limited to the actual and reasonable expenditures
required for that purpose, including a reasonable charge for supervision.
As to lessees who refuse to agree upon pooling, the order must provide
for reimbursement for 300 percent of the costs chargeable to each lessee
out of, and only out of, production from the unit belonging to the
lessee. In the event of a dispute relative to those costs, the Division
shall, upon notice to all interested parties and hearing thereon,
determine the proper costs. Appeals may be taken from the determination
as from any other order of the Division. If one or more of the lessees
drill and operate, or pay the expense of drilling and operating, the well
for the benefit of others, then in addition to any other right conferred
by the pooling order, the lessee or lessees so drilling or operating have
a lien on the share of production from the unit accruing to the interest
of each of the other lessees for the payment of his proportionate share
of the expenses. All the oil and gas subject to the lien, or so much
thereof as is necessary, must be marketed and sold by the creditor, and
the proceeds applied in payment of the expenses secured by the lien, with
the balance, if any, payable to the debtor.
5. The Division shall, in all instances where a unit has been
formed out of lands or areas of more than one ownership, require the
operator, upon request of a lessee, but subject to the right of the
operator to market production and collect the proceeds with respect to a
lessee in default, as provided in subsection 4, to deliver to the lessee
or his assigns his proportionate share of the production from the well
common to the drilling unit. The lessee receiving his share shall provide
at his own expense proper receptacles for the receipt and storage thereof.
6. If the persons owning the drilling or other rights in separate
tracts embraced within a drilling unit fail to agree upon the pooling of
the tracts and the drilling of a well on the unit, and if the Division is
without authority to require pooling as provided by this section, then
subject to all other applicable provisions of this chapter, the lessee of
each tract embraced within the drilling unit may drill on his tract, but
the allowable production from the tract is such a proportion of the
allowable production for the full drilling unit as the area of the
separately owned tract bears to the full drilling unit.
[6:202:1953]—(NRS A 1977, 1152; 1983, 2080; 1985, 1675; 1993, 1690)
The use of gas from a well
producing gas only, or from a well which is primarily a gas well, for the
manufacture of carbon black or similar products predominantly carbon, is
declared to constitute waste prima facie, and the gas well must not be
used for any such purpose unless it is clearly shown at a public hearing
to be held by the Division, on application of the person desiring to use
the gas, that waste would not take place by the use of the gas for the
purpose applied for, and that gas which would otherwise be lost is now
available for that purpose, and that the gas to be used cannot be used
for a more beneficial purpose, such as for light or fuel, except at
prohibitive cost, and that it would be in the public interest to grant
the permit. If the Division finds that the applicant has clearly shown a
right to use the gas for the purpose applied for, it shall issue a permit
upon such terms and conditions as may be found necessary in order to
permit the use of the gas and at the same time require compliance with
the intent of this section.
[8:202:1953]—(NRS A 1977, 1159; 1983, 2082; 1993, 1691)
UNITIZATION
As used in NRS 522.082
to 522.0878 , inclusive, “unit production” includes all
oil and gas produced from a unit area from and after the effective date
of the order of the Division creating the unit regardless of the well or
tract within the unit area from which it is produced.
(Added to NRS by 1983, 2071; A 1993, 1691)
1. To prevent, or to assist in preventing waste, as prohibited by
this chapter, to ensure a greater ultimate recovery of oil and gas, and
to protect the correlative rights of persons owning interests in the
tracts of land affected, those persons may validly integrate their
interests to provide for the unitized management, development and
operation of those tracts of land as a unit. Where those persons have not
agreed so to integrate their interests, the Division, upon proper
petition, after notice and hearing, shall make and enforce such orders
and do such things as may be necessary or proper to carry out the
purposes of NRS 522.0828 to 522.0878
, inclusive.
2. The petition must set forth a description of the proposed unit
area with a map or plat thereof attached, must allege the existence of
the facts required to be found by the Division as provided in NRS
522.0828 and must have attached
thereto a recommended plan of unitization applicable to the proposed unit
area and which the petitioner considers to be fair, reasonable and
equitable.
(Added to NRS by 1983, 2072; A 1993, 1692)
If upon the filing of a petition and after notice and
hearing, the Division finds that:
1. The unitized management, operation and further development of a
pool or portion thereof is reasonably necessary in order effectively to
carry on pressure control, pressure-maintenance or repressuring
operations, cycling operations, waterflooding operations, or any
combination thereof, or any other form of joint effort calculated to
substantially increase the ultimate recovery of oil and gas from the pool;
2. One or more of the unitized methods of operation as applied to
the pool or portion thereof are feasible, will prevent waste and will,
with reasonable probability, result in the increased recovery of
substantially more oil and gas from the pool than would otherwise be
recovered;
3. The estimated additional cost, if any, of conducting those
operations will not exceed the value of the additional oil and gas so
recovered; and
4. The unitization and adoption of one or more of the unitized
methods of operation is for the common good and will result in the
general advantage of the owners of the oil and gas rights within the pool
or the portion thereof directly affected,
Ê it shall make a finding to that effect and make an order creating the
unit and providing for the unitization and unitized operation of the pool
or portion thereof described in the order, all upon such terms and
conditions, as may be shown by the evidence to be fair, reasonable,
equitable, and which are necessary or proper to protect, safeguard and
adjust the respective rights and obligations of the several persons
affected, including royalty owner, owners of overriding royalties, oil
and gas payments, carried interests, mortgages, lien claimants and
others, as well as the lessees.
(Added to NRS by 1983, 2072; A 1993, 1692)
1. The order of the Division must define the area of the pool or
portion thereof to be included within the unit area and prescribe with
reasonable detail the plan of unitization applicable thereto.
2. Each unit and unit area must be limited to all or a portion of
a single pool. Only so much of a pool as has been defined and determined
to be productive of oil and gas by actual drilling operations may be so
included within the unit area. A unit may be created to embrace less than
the whole of a pool only where it is shown by the evidence that the area
to be so included within the unit area is of such size and shape as may
be reasonably required for the successful and efficient conduct of the
unitized method of operation for which the unit is created, and that the
conduct thereof will have no material adverse effect upon the remainder
of the pool.
(Added to NRS by 1983, 2073; A 1993, 1692)
1. No order of the Division creating a unit and prescribing the
plan of unitization applicable thereto becomes effective unless:
(a) The plan of unitization has been signed or in writing ratified,
or approved by the lessees of record of not less than 62.5 percent of the
unit area affected thereby and by the owners of record or not less than
62.5 percent (exclusive of royalty interests owned by lessees or by
subsidiaries of any lessee) of the normal one-eighth landowners’ royalty
interest in and to the unit area; and
(b) The Division has made a finding either in the order creating
the unit or in a supplemental order that the plan of unitization has been
so signed, ratified or approved by lessees and royalty owners owning the
required percentage interest in and to the unit area.
2. Where the plan of unitization has not been so signed, ratified
or approved by the lessees and royalty owners owning the required
percentage interest in and to the unit area at the time the order
creating the unit is made, the Division shall, upon petition and notice,
hold such additional and supplemental hearings as may be requested or
required to determine if and when the plan of unitization has been so
signed, ratified or approved by lessees and royalty owners owning the
required percentage interest in and to the unit area and shall, in
respect to the hearing, make and enter a finding of its determination in
that regard. If lessees and royalty owners, or either, owning the
required percentage interest in and to the unit area have not so signed,
ratified or approved the plan of unitization within a period of 6 months
after the date on which the order creating the unit is made, the order
creating the unit ceases to be of further effect and must be revoked by
the Division.
(Added to NRS by 1983, 2074; A 1993, 1693)
The plan
of unitization for each such unit and unit area must be one suited to the
needs and requirements of the particular unit dependent upon the facts
and conditions found to exist with respect thereto. In addition to such
other terms, provisions, conditions and requirements found by the
Division to be reasonably necessary or proper to effectuate or accomplish
the purpose of this chapter, and subject to further requirements of this
section, each such plan of unitization must contain fair, reasonable and
equitable provisions for:
1. The efficient unitized management or control of the further
development and operation of the unit area for the recovery of oil and
gas from the pool affected. Under such a plan the actual operations
within the unit area may be carried on in whole or in part by the unit
itself, or by one or more of the lessees within the unit area as the unit
operator subject to the supervision and direction of the unit, dependent
upon what is most beneficial or expedient. The designation of the unit
operator must be by vote of the lessees in the unit in a manner provided
in the plan of unitization and not by the Division.
2. The Division of interest or formula for the apportionment and
allocation of the unit production among and to the several separately
owned tracts within the unit area such as will reasonably permit persons
otherwise entitled to share in or benefit by the production from such
separately owned tracts to produce and receive, in lieu thereof, their
fair, equitable and reasonable share of the unit production or other
benefits thereof. A separately owned tract’s fair, equitable and
reasonable share of the unit production must be measured by the value of
each such tract for oil and gas purposes and its contributing value to
the unit in relation to like values of other tracts in the unit, taking
into account acreage, the quantity of oil and gas recoverable therefrom,
location on the structure, its probable productivity of oil and gas in
the absence of unit operations, the burden of operation to which the
tract will or is likely to be subjected, or so many of such factors, or
such other pertinent engineering, geological or operating factors, as may
be reasonably susceptible of determination.
3. The manner in which the unit and the further development and
operation of the unit area will be financed and the basis, terms and
conditions on which the cost and expense thereof will be apportioned
among and assessed against the tracts and interests made chargeable
therewith, including a detailed accounting procedure governing all
charges and credits incident to the operations. Upon and subject to such
terms and conditions as to time and rate of interest as is fair to all
concerned, reasonable provisions must be made in the plan of unitization
for carrying or otherwise financing lessees who are unable promptly to
meet their financial obligations in connection with the unit.
4. The procedure and basis upon which wells, equipment and other
properties of the several lessees within the unit area are to be taken
over and used for unit operations, including the method of arriving at
the compensation therefor, or of otherwise proportionately equalizing or
adjusting the investment of the several lessees in the project as of the
effective date of unit operation.
5. The creation of an operating committee to have general overall
management and control of the unit and the conduct of its business and
affairs and the operations carried on by it, together with the creation
or designation of such other subcommittees, boards or officers to
function under the authority of the operating committee as may be
necessary, proper or convenient in the efficient management of the unit,
defining the powers and duties of all those committees, boards and
officers, and prescribing their tenure and time and method for their
selection.
6. The time when the plan of unitization becomes effective.
7. The time when and the conditions under which and the method by
which the unit may be dissolved and its affairs wound up.
(Added to NRS by 1983, 2073; A 1993, 1693)
The unit area of a unit may be
enlarged to include adjoining portions of the same pool, including the
unit area of another unit, and a new unit created for the unitized
management, operation and further development of the enlarged unit area,
or the plan of unitization may be otherwise amended, all in the same
manner, upon the same conditions and subject to the same limitations as
provided in NRS 522.082 to 522.0878
, inclusive, with respect to the
creation of a unit in the first instance, except that where the amendment
to the plan of unitization relates only to the rights and obligations as
between lessees the requirement that it be signed, ratified and approved
by royalty owners of record of not less than 62.5 percent of the unit
area does not apply.
(Added to NRS by 1983, 2077)
All property, whether real or personal, which the
unit may in any way acquire, hold or possess, may not be acquired, held
or possessed by the unit for its own account but must be so acquired,
held and possessed by the unit for the account and as agent of the
several lessees and is the property of the lessees as their interests may
appear under the plan of unitization, subject to the right of the unit to
the possession, management, use or disposal of the property in the proper
conduct of its affairs, and subject to any lien the unit may have on it
to secure the payment of unit expense.
(Added to NRS by 1983, 2077)
1. This chapter does not require a transfer to or vesting in the
unit of title to the separately owned tracts or leases within the unit
area, other than the right to use and operate them to the extent set out
in the plan of unitization; nor may the unit be regarded as owning the
unit production. The unit production and the proceeds from the sale
thereof are owned by the several persons to whom they are allocated under
the plan of unitization.
2. Neither the unit production or proceeds from the sale thereof,
nor the other receipts may be treated or taxed as income or profits of
the unit; but instead, all such receipts are the income of the several
persons to whom or to whose credit they are payable under the plan of
unitization. To the extent the unit may receive or disburse the receipts
it shall only do so as a common administrative agent of the persons to
whom they are payable.
(Added to NRS by 1983, 2076)
1. The amount of the unit production allocated to each separately
owned tract within the unit, and only that amount, regardless of the well
or wells in the unit area from which it may be produced and regardless of
whether it be more or less than the amount of the production from the
well or wells, if any, on any such separately owned tract, must be
considered as production from the separately owned tract, and, except as
may be otherwise authorized in this chapter, or in the plan of
unitization approved by the Division, must be distributed among or the
proceeds thereof paid to the several persons entitled to share in the
production from the separately owned tract in the same manner, in the
same proportions, and upon the same condition that they would have
participated and shared in the production or proceeds thereof from such
separately owned tract had not the unit been organized, and with the same
legal effect.
2. If adequate provisions are made for the receipt thereof, the
share of the unit production allocated to each separately owned tract
must be delivered in kind to the persons entitled thereto by virtue of
ownership of oil and gas rights therein or by purchase from the owners
subject to the rights of the unit to withhold and sell it in payment of
unit expense pursuant to the plan of unitization, and subject further to
the call of the unit on such portions of the gas for operating purposes
as may be provided in the plan of unitization.
(Added to NRS by 1983, 2076; A 1993, 1695)
The obligation or liability of the lessees or
other owners of the oil and gas rights in the several separately owned
tracts for the payment of unit expense is at all times several and not
joint or collective and in no event is a lessee or other owner of the oil
and gas rights in the separately owned tract chargeable with, obligated
or liable, directly or indirectly, for more than the amount apportioned,
assessed or otherwise charged to his interest in such separately owned
tract pursuant to the plan of unitization and then only to the extent of
the lien provided for in NRS 522.0858 .
(Added to NRS by 1983, 2075)
1. Subject to such reasonable limitations as may be set out in the
plan of unitization, the unit has a first and prior lien upon the
leasehold estate and all other oil and gas rights (exclusive of a
one-eighth landowners’ royalty interest) in and to each separately owned
tract, the interest of the owners thereof in and to the unit production
and all equipment in the possession of the unit, to secure the payment of
the amount of the unit expense charged to and assessed against the
separately owned tract.
2. The interest of the lessee or other persons who by lease,
contract or otherwise are obligated or responsible for the cost and
expense of developing and operating a separately owned tract for oil and
gas in the absence of unitization, is primarily responsible for and
charged with any assessment for unit expense made against the tract and
resort may be had to overriding royalties, oil and gas payments, royalty
interests in excess of one-eighth of the production, or other interests
which otherwise are not chargeable with that cost, only if the owner of
interest primarily responsible fails to pay the assessment of the
production to the credit thereof, or production is insufficient for that
purpose.
3. If the owner of any royalty interest, overriding royalty, oil
or gas payment, or any other interest which under the plan of unitization
is not primarily responsible therefor pays in whole or in part the amount
of an assessment for unit expense for the purpose of protecting that
interest, or the amount of the assessment in whole or in part is deducted
from the unit production to the credit of that interest, the owner
thereof is to the extent of the payment or deduction subrogated to all
the rights of the unit with respect to the interest or interests
primarily responsible for the assessment.
4. A one-eighth part of the unit production allocated to each
separately owned tract must in all events be regarded as royalty to be
distributed to and among, or the proceeds thereof paid to, the royalty
owners free and clear of all unit expense and free of any lien therefor.
(Added to NRS by 1983, 2075)
Operations carried on
under and in accordance with the plan of unitization must be considered
as a fulfillment of a compliance with all of the provisions, covenants
and conditions, express or implied, of the several oil and gas leases
upon lands included with the unit area, or other contracts pertaining to
the development thereof insofar as those leases or other contracts may
relate to the pool or portion thereof included in the unit area. Wells
drilled or operated on any part of the unit area, no matter where
located, must for all purposes be regarded as wells drilled on each
separately owned tract within the unit area.
(Added to NRS by 1983, 2077)
Property rights, leases, contracts and all other rights and obligations
must be regarded as amended and modified to the extent necessary to
conform to the provisions and requirements of this chapter and to any
valid and applicable plan of unitization or order of the Division made
and adopted pursuant to this chapter, but otherwise to remain in effect.
(Added to NRS by 1983, 2076; A 1993, 1695)
No agreement or plan for the development and
operation of a field or pool of oil or gas as a unit, if approved by the
Division for the purpose of conserving oil or gas, violates any of the
statutes of this state prohibiting monopolies or acts, arrangements,
agreements, contracts, combinations or conspiracies in restraint of trade
or commerce.
(Added to NRS by 1983, 2077; A 1993, 1695)
NRS 522.082 to 522.0878 , inclusive, and any plan of unitization do
not increase or decrease the implied covenants of a lease in respect to a
common source of supply or lands not included within the unit area of a
unit.
(Added to NRS by 1983, 2077)
1. Except as otherwise expressly provided in NRS 522.082 to 522.0878 , inclusive, all proceedings held under this
chapter, including the filing of petitions, the giving of notices, the
conduct of hearings and other action taken by the Division must be in the
form and manner and in accordance with the procedure and procedural
requirements provided in NRS 522.090 .
2. Such additional notice must be given as may be required by the
Division.
(Added to NRS by 1983, 2075; A 1993, 1695)
After the effective date of an order of the
Division creating a unit and prescribing the plan of unitization
applicable thereto, the operation of any well producing from the pool or
portion thereof within the unit area defined in the order by persons
other than the unit or persons acting under its authority or except in
the manner and to the extent provided in the plan of unitization is
unlawful.
(Added to NRS by 1983, 2075; A 1993, 1695)
HEARINGS, ORDERS AND REGULATIONS OF DIVISION
1. The Division shall make no regulation or order, or amendment
thereof, except in an emergency, without a public hearing upon at least
10 days’ notice. The public hearing must be held at such time and place
as may be prescribed by the Division, and any interested person is
entitled to be heard.
2. Any notice required by this chapter must be given by personal
service on all interested persons, and if personal service cannot be
made, then substituted service may be made in the manner provided for
substitute service of process under the Nevada Rules of Civil Procedure.
3. The Division may act upon its own motion, or upon the petition
of any interested person. On the filing of a petition concerning any
matter within the jurisdiction of the Division, the Division shall
promptly fix a date for a hearing thereon, and shall cause notice of the
hearing to be given. The hearing must be held without undue delay after
the filing of the petition. The Division shall enter its order within 30
days after the hearing.
[9:202:1953]—(NRS A 1977, 77, 1159; 1983, 2083; 1993, 1696)
1. The Division may summon witnesses and require the production of
records, books and documents for examination at any hearing or
investigation conducted by it. No person may be excused from attending
and testifying, or from producing books, papers and records before the
Division or a court, or from obedience to the subpoena of the Division or
a court, on the ground or for the reason that the testimony or evidence,
documentary or otherwise, required of him may tend to incriminate him or
subject him to a penalty or forfeiture. This section does not require any
person to produce any books, papers or records, or to testify in response
to any inquiry not pertinent to some question lawfully before the
Division or court for determination. No natural person may be subjected
to criminal prosecution or to any penalty or forfeiture for or on account
of any transaction, matter or thing concerning which, in spite of his
objection, he may be required to testify or produce evidence, documentary
or otherwise, before the Division or court, or in obedience to its
subpoena, but no person testifying is exempt from prosecution and
punishment for perjury committed in so testifying.
2. In case of failure or refusal on the part of any person to
comply with the subpoena issued by the Division, or in case of the
refusal of any witness to testify as to any matter regarding which he may
be interrogated, any court of record in the State, upon application of
the Division, may issue an attachment for that person and compel him to
comply with the subpoena, and to attend before the Division and produce
his records, books and documents for examination, and to give his
testimony. The court may punish for contempt as in the case of
disobedience to a like subpoena issued by the court, or for refusal to
testify therein.
[10:202:1953]—(NRS A 1977, 1160; 1981, 87; 1983, 2083; 1993, 1696)
Within 20 days after
written notice of the entry of any order or decision of the Division, or
such further time as the Division may grant for good cause shown, any
person affected thereby may file with the Division an application for the
rehearing in respect of any matter determined by the order or decision,
setting forth the respect in which the order or decision is believed to
be erroneous. The Division shall grant or refuse any such application in
whole or in part within 10 days after it is filed, and failure to act
thereon within such period is deemed a refusal thereof and a final
disposition of the application. If the rehearing is granted, the Division
may enter such new order or decision after rehearing as may be required
under the circumstances.
[11:202:1953]—(NRS A 1977, 78, 1160; 1983, 2084; 1993, 1696)
PRODUCTION FROM WELLS
1. The owner, lessee, operator or other person who is liable for
payment of the money derived from the sale of the production from an oil
or gas well located in this state shall:
(a) Pay the money directly to each person identified as being
legally entitled thereto not later than:
(1) Six months after the first day of the month following
the date of the first sale of the production, and thereafter not later
than 60 days after the end of the month within which subsequent
production is sold; or
(2) Twelve months after the first day of the month following
the date of the first sale of the production, and every 12 months
thereafter, if the amount owed is $25 or less.
(b) If unable to pay timely any portion of the money because of
inability to locate a person entitled to receive the money or for any
other reason, deposit the unpaid portion of the money in an escrow
account in a bank, credit union or savings and loan institution in
Nevada, using a standard escrow document form approved by the Attorney
General of Nevada. The bank, credit union or savings and loan association
must be federally insured or insured by a private insurer approved
pursuant to NRS 678.755 . The deposit
must earn interest at the highest rate being offered by that institution
for similar deposits. The escrow agent may commingle money so received
into escrow from any one source. The escrow agent shall pay the
appropriate amount of principal and accrued interest from such an account
to a person legally entitled thereto within 30 days after the date of
receipt by the escrow agent of a final legal determination of entitlement
thereto. Applicable escrow fees must be deducted from the payment.
2. Any person who violates the provisions of subsection 1 is
liable to each person legally entitled thereto for the unpaid amounts of
money, together with interest at the rate of 18 percent per annum on the
unpaid balance from the date the payment was due pursuant to paragraph
(a) of subsection 1.
3. This section does not apply to payments from an owner, lessee,
operator or other person who is liable for payment of the money derived
from the sale of the production from an oil or gas well located in this
state to a person identified as being legally entitled to such a payment
if those persons have agreed in writing to some other period of payment
for the first payment or for subsequent payments.
(Added to NRS by 1991, 385; A 1999, 1507 )
ROYALTIES AND OTHER NONWORKING INTERESTS
1. For purposes of determining the respective rights of the lessor
and lessee and the owners of a royalty interest, overriding royalty
interest and any other nonworking interest in the money earned from an
oil and gas lease or other agreement concerning the sale of the
production from an oil or gas well located in this state:
(a) The lessee is liable for all of the costs of production, which
must be deducted from the working interest.
(b) The lessor’s interest, the mineral owner’s royalty interest and
the overriding royalty interest must not be decreased by the costs of
production.
(c) The following information must be reported with each
remittance, unless otherwise reported each month, to the owner of an
interest:
(1) The name or number used to identify the lease, property
or well;
(2) The month and year during which any sale occurred for
which payment is being made;
(3) The total number of barrels of oil or thousands of cubic
feet of gas sold;
(4) The price per barrel of oil or the price per thousand
cubic feet of gas;
(5) The total amount of state taxes on the net proceeds of
minerals, taxes ad valorem and other taxes on the production from an oil
or gas well, if the payment of those taxes reduces the amount paid to the
owner of an interest;
(6) An itemized list of any other deductions or adjustments
that reduce the amount paid to the owner of an interest;
(7) The net value of total sales after deductions or
adjustments that reduce the amount paid to the owner of an interest;
(8) The percentage share of the owner of an interest in the
sales of the production from the oil or gas well, lease or property as
expressed by a decimal number;
(9) The share of the total value attributed to the owner of
an interest in the sales of the production from the oil or gas well,
lease or property before any deductions or adjustments and after any
deductions or adjustments; and
(10) A name and an address where the owner of an interest
may receive clarification of the information reported pursuant to this
paragraph and additional information concerning his interest. If
information is requested by certified mail, an answer must be mailed by
certified mail within 30 days after receipt of the request.
2. Any person who fails to report information pursuant to
paragraph (c) of subsection 1 is liable to the affected owner of an
interest, except for the working interest, in the amount of $100 for each
violation and $100 for each month that elapses thereafter until the
information is provided.
3. As used in this section, the term “costs of production” means
all costs incurred for the exploration and development of, primary or
enhanced recovery of oil or gas from, and operations associated with the
abandonment of, an oil or gas well, including costs associated with the:
(a) Acquisition of an oil and gas lease;
(b) Drilling and completion of the well;
(c) Pumping or lifting, recycling, gathering, compressing,
pressurizing, heater treating, dehydrating, separating and storing of oil
or gas; and
(d) Transporting of oil to storage tanks, or gas into the pipeline
for delivery.
Ê The term does not include the reasonable and actual direct costs
associated with transporting oil from storage tanks to the market, gas
from the point of entry into the pipeline to the market or the processing
of gas in a processing plant.
(Added to NRS by 1991, 960)
1. The provisions of NRS 522.115
govern the relationship between the parties to an oil and gas lease, or
other agreement, concerning the determination and reporting of royalties,
overriding royalties, working interests or other nonworking interests
from the sale of the production from an oil or gas well located in this
state, unless otherwise specifically provided within such a lease or
other agreement that has been reduced to writing and executed by all of
the affected parties.
2. A division order may not alter or amend the terms of a
previously executed oil or gas lease or other written agreement. A
division order that purports to alter or amend the terms of such a lease
or other agreement is invalid to the extent of the alteration or
amendment and the terms of the oil or gas lease or other written
agreement govern.
(Added to NRS by 1991, 961)
PENALTIES; INJUNCTIVE RELIEF
1. Any person who willfully violates any provision of this
chapter, or any regulation or order of the Division is subject to a
penalty of not more than $1,000 for each act of violation and for each
day that the violation continues, unless the penalty for the violation is
otherwise provided for and made exclusive in this chapter.
2. If any person, for the purpose of evading this chapter, or any
regulation or order of the Division, makes or causes to be made any false
entry in any record, account or memorandum required by this chapter, or
by any such regulation or order, or omits or causes to be omitted, from
any such record, account or memorandum, full, true and correct entries as
required by this chapter, or by any such regulation or order, or removes
from this state or destroys, mutilates, alters or falsifies any such
record, account or memorandum, that person is guilty of a gross
misdemeanor.
3. Any person knowingly aiding or abetting any other person in the
violation of any provision of this chapter, or any regulation or order of
the Division is subject to the same penalty as that prescribed by this
chapter for the violation by the other person.
4. The penalties provided in this section are recoverable by suit
filed by the Attorney General in the name and on behalf of the Division
in the district court of the county in which the defendant resides or in
which any defendant resides, if there is more than one defendant, or in
the district court of any county in which the violation occurred. The
payment of any such penalty does not operate to relieve a person on whom
the penalty is imposed from liability to any other person for damages
arising out of the violation.
[12:202:1953]—(NRS A 1967, 607; 1977, 1160; 1983, 2084; 1985, 304;
1993, 1697)
1. Whenever it appears that any person is violating or threatening
to violate any provision of this chapter, or any regulation or order of
the Division, the Division shall bring suit against that person in the
district court of any county where the violation occurs or is threatened
to restrain the person from continuing the violation or from carrying out
the threat of violation. Upon the filing of any such suit, summons issued
to the person may be directed to the sheriff of any county in this state
for service by the sheriff or his deputies. In any such suit, the court
may grant to the Division, without bond or other undertaking, such
prohibitory and mandatory injunctions as the facts may warrant.
2. If the Division fails to bring suit to enjoin a violation or
threatened violation of any provision of this chapter, or any regulation
or order of the Division, within 10 days after receipt of written request
to do so by any person who is or will be adversely affected by the
violation, the person making the request may bring suit in his own behalf
to restrain the violation or threatened violation in any court in which
the Division might have brought suit. If, in the suit, the court should
hold that injunctive relief should be granted, then the Division must be
made a party and must be substituted for the person who brought the suit,
and the injunction must be issued as if the Division had at all times
been the plaintiff.
[13:202:1953]—(NRS A 1977, 1161; 1983, 2085; 1993, 1697)
MISCELLANEOUS PROVISIONS
1. As the State of Nevada is a sovereign state and not disposed to
jeopardize or surrender any of its sovereign rights, this chapter applies
to all lands in the State of Nevada lawfully subject to its police
powers. It applies to lands of the United States or to lands subject to
the jurisdiction of the United States only to the extent that control and
supervision of conservation of oil and gas by the United States on its
lands fails to effect the intent and purposes of this chapter and
otherwise applies to those lands to such extent as an officer of the
United States having jurisdiction, or his authorized representative,
approves any of the provisions of this chapter or the order or orders of
the Division which affects those lands.
2. This chapter applies to any lands committed to a unit agreement
approved by the Secretary of the Interior of the United States or his
authorized representative, except that the Division may, under the unit
agreements, suspend the application of this chapter or any part of this
chapter so long as the conservation of oil and gas and the prevention of
waste is accomplished thereby, but the suspension does not relieve any
operator from making such reports as are necessary or advised to be fully
informed as to operations under the agreement and as the Division may
require under this chapter.
[14:202:1953]—(NRS A 1977, 1162; 1983, 2085; 1993, 1698)
1. Any expenses in connection with Nevada’s affiliation with the
Interstate Oil Compact Commission must be paid from the Account for the
Division of Minerals created pursuant to NRS 513.103 .
2. To pay the expenses of the Division, every producer of oil or
natural gas in this state shall, on or before the last day of each month,
report to the Division and the State Treasurer his production in this
state of oil in barrels and of natural gas in thousands of cubic feet
during the preceding month, and at the same time shall pay to the
Division a fee in an amount established pursuant to subsection 3 on each
barrel of oil and each 50,000 cubic feet of natural gas produced and
marketed by him during the preceding month. The Division shall deposit
with the State Treasurer, for credit to the Account for the Division of
Minerals, all money received pursuant to this subsection. Every person
purchasing such oil or natural gas is liable for the payment of the fee
for each barrel of oil or each 50,000 cubic feet of natural gas, unless
it has been paid by the producer.
3. The Commission on Mineral Resources shall, by regulation,
establish the administrative fee required pursuant to subsection 2 in an
amount not to exceed 20 cents for each barrel of oil or each 50,000 cubic
feet of natural gas.
[15:202:1953]—(NRS A 1971, 207; 1977, 1162; 1983, 399, 2086; 1989,
1595; 1991, 1781; 1993, 1698; 1999, 892 , 3632 ; 2001, 66 )
INTERSTATE COMPACT TO CONSERVE OIL AND GAS
The Governor is
authorized and directed, for and in the name of the State of Nevada, to
join with the other states in the Interstate Compact to Conserve Oil and
Gas, which was heretofore executed in the city of Dallas, Texas, on
February 16, 1935, and which is now on deposit with the Department of
State of the United States, and which has been extended to September 1,
1955, all with the consent of the Congress of the United States.
[1:42:1955]
The Interstate
Compact to Conserve Oil and Gas referred to in NRS 522.160 is as follows:
AN INTERSTATE COMPACT TO CONSERVE OIL AND GAS
Article I
This agreement may become effective within any compacting state at
any time as prescribed by that state, and shall become effective within
those states ratifying it whenever any three of the States of Texas,
Oklahoma, California, Kansas and New Mexico have ratified and Congress
has given its consent. Any oil producing state may become a party hereto
as hereinafter provided.
Article II
The purpose of this Compact is to conserve oil and gas by the
prevention of physical waste thereof from any cause.
Article III
Each state bound hereby agrees that within a reasonable time it
will enact laws, or if laws have been enacted, then it agrees to continue
the same in force, to accomplish within reasonable limits the prevention
of:
(a) The operation of any oil well with an inefficient gas-oil ratio.
(b) The drowning with water of any stratum capable of producing oil
or gas, or both oil and gas in paying quantities.
(c) The avoidable escape into the open air or the wasteful burning
of gas from a natural gas well.
(d) The creation of unnecessary fire hazards.
(e) The drilling, equipping, locating, spacing or operating of a
well or wells so as to bring about physical waste of oil or gas or loss
in the ultimate recovery thereof.
(f) The inefficient, excessive or improper use of the reservoir
energy in producing any well.
The enumeration of the foregoing subjects shall not limit the scope
of the authority of any state.
Article IV
Each state bound hereby agrees that it will, within a reasonable
time, enact statutes, or if such statutes have been enacted, then it will
continue the same in force, providing in effect that oil produced in
violation of its valid oil and/or gas conservation statutes, or any valid
rule, order or regulation promulgated thereunder, shall be denied access
to commerce; and providing for stringent penalties for the waste of
either oil or gas.
Article V
It is not the purpose of this Compact to authorize the states
joining herein to limit the production of oil or gas for the purpose of
stabilizing or fixing the price thereof, or create or perpetuate
monopoly, or to promote regimentation, but is limited to the purpose of
conserving oil and gas and preventing the avoidable waste thereof within
reasonable limitations.
Article VI
Each state joining herein shall appoint one representative to a
commission hereby constituted and designated as the Interstate Oil
Compact Commission, the duty of which said Commission shall be to make
inquiry and ascertain from time to time such methods, practices,
circumstances and conditions as may be disclosed for bringing about
conservation and the prevention of physical waste of oil and gas, and at
such intervals as said Commission deems beneficial it shall report its
finding and recommendations to the several states for adoption or
rejection.
The Commission shall have power to recommend the coordination of
the exercise of the police powers of the several states within their
several jurisdictions to promote the maximum ultimate recovery from the
petroleum reserves of said states, and to recommend measures for the
maximum ultimate recovery of oil and gas. Said Commission shall organize
and adopt suitable rules and regulations for the conduct of its business.
No action shall be taken by the Commission except: (1) By the
affirmative votes of the majority of the whole number of the compacting
states, represented at any meeting, and (2) by a concurring vote of a
majority in interest of the compacting states at said meeting, such
interest to be determined as follows: Such vote of each state shall be in
the decimal proportion fixed by the ratio of its daily average production
during the preceding calendar half-year to the daily average production
of the compacting states during said period.
Article VII
No state by joining herein shall become financially obligated to
any other state, nor shall the breach of the terms hereof by any state
subject such state to financial responsibility to the other states
joining herein.
Article VIII
This Compact shall expire September 1, 1937. But any state joining
herein may, upon sixty (60) days notice, withdraw herefrom.
The representatives of the signatory states have signed this
agreement in a single original, which shall be deposited in the archives
of the Department of State of the United States, and a duly certified
copy shall be forwarded to the Governor of each of the signatory states.
This Compact shall become effective when ratified and approved as
provided in Article I. Any oil producing state may become a party hereto
by affixing its signature to a counterpart to be similarly deposited,
certified and ratified.
Done in the City of Dallas, Texas, this sixteenth day of February,
1935.
[2:42:1955]
1. The Governor is authorized and empowered, for and in the name
of the State of Nevada, to execute agreements for the further extension
of the expiration date of the Interstate Compact to Conserve Oil and Gas,
and to determine if and when it shall be to the best interest of the
State of Nevada to withdraw from the Compact following a notice of 60
days as provided by its terms.
2. In the event of withdrawal, the Governor or any succeeding
Governor may thereafter, in his discretion, effect the reentry of the
State into the Compact as herein provided.
[3:42:1955]
1. The Governor shall be the official representative of the State
of Nevada on the Interstate Oil Compact Commission provided for in the
Interstate Compact to Conserve Oil and Gas and shall exercise and perform
for the State all of the powers and duties as a member of the Interstate
Oil Compact Commission.
2. The Governor shall have the authority to appoint an assistant
representative who shall act in his stead as the official representative
of the State as a member of the Commission. His official representative,
if not already a state official, shall take the oath of office prescribed
by the Constitution and file the same with the Secretary of State.
[4:42:1955]
