CHAPTER 39

O. S. T. GAS AND OIL REGULATION CODE

SECTION 85.70 DEFINITIONS .

(1) "Adjusted allowable," the allowable production a proration unit receives after all adjustments are applied;

(2) "Allocated pool," a pool in which the total oil or gas production is restricted and allocated to various proration units and fractional proration units therein in accordance with proration schedules;

(3) "Allowable production," that number of barrels of oil or cubic feet of gas authorized to be produced from the respective proration units and fractional proration units in an allocated pool;

(4) "Back allowable," the authorized accumulative underage or shortage for a given proration unit or fractional proration unit;

(5) "Barrel," 42 United States gallons measured at 60 degrees Fahrenheit and atmospheric pressure at sea level;

(6) "Barrel of oil," 42 United States gallons of oil after deductions for the full amount of basic sediment, water, and other impurities present, ascertained by the centrifugal or other recognized and customary test;

(7) "Bottom hole or subsurface pressure," the pressure in pounds per square inch gauge under conditions existing at or near the producing horizon;

(8) "Casing head gas," any gas or vapor, or both gas and vapor, indigenous to and produced from a pool classified as an oil pool by the Agency;

(9) "Common purchaser for gas," any person now or hereafter engaged in purchasing, from one or more producers, gas produced from gas wells within each common source of .supply from which it purchases, for processing or resale;

(10) "Common purchaser for oil," every person now engaged or hereafter engaging in the business of purchasing crude oil in this state;

(11) "Completion," an oil well shall be considered completed on the date that the first oil is produced through wellhead equipment into lease tanks from the ultimate producing interval after casing has been run. A gas well shall be considered complete on the date that a well is capable of producing gas through wellhead equipment from the ultimate producing zone after casing has been run. A dry hole shall be considered complete on the date that all provisions of plugging are complied with as set out in this article;

(12) ''Cubic foot of gas," that volume of gas contained in one cubic foot of space and computed at a pressure of 1, 465 pounds per square inch absolute at a base temperature of 60 degrees Fahrenheit;

(13) "Fractional proration unit for oil," a tract of land containing more or less that 40 acres predominantly situated within the confines of a pool;

(14) "Gas lift," any method of lifting liquid to the surface by injecting gas into a well from which oil production is obtained;

(15) "Gas-oil ratio," the ratio of the gas produced in cubic feet to the number of barrels of oil concurrently produced during any stated period;

(16) "Gas-oil ration adjustment," the reduction in allowable of a high gas-oil ratio proration unit to conform with the production permitted by the limiting gas-oil ratio for the particular pool during a particular proration period;

(17) "Gas transportation facility, " a pipe line in operation serving one or more gas wells for the transportation of gas, or some other device or equipment in like operation whereby gas produced from gas wells connected therewith can be transported;

(18) "Gas well," a well producing gas from a common source of gas supply as determined by the Agency;

(19) "High gas-oil ratio proration unit," a proration unit with a producing oil well with a gas-oil ratio in excess of the limiting gas-oil ratio for the pool;

(20) "Illegal gas," gas which has been produced from any well within this reservation in excess of the quantity permitted by any rule, regulation or order of the Agency;

(21) "Illegal oil," oil which has been produced from any well within this reservation in excess of the quantity permitted by any rule, regulation or order of the Agency;

(22) "Illegal product," any produce derived in whole or in part from illegal oil or illegal gas;

(23) "Injection or input well," any well used for the injection of air, gas, water or other substances into any underground stratum;

(24) "Limiting oil-gas ratio," the gas-oil ratio assigned by the to a particular oil pool to limit the volumes of casinghead gas which may be produced from the various oil producing units within the particular pool;

(25) "Log of well," a systematic, detailed, and correct record of formations encountered in the drilling of a well, including commercial electric logs and similar records;

(26) "Marginal unit," a proration unit or fractional proration from an oil or gas well which will encourage the continued operation of such well and below which the well might be threatened with premature abandonment and resulting waste;

(28) "Multiple completion," the completion of any well so as to permit the production from more than one common source of .supply;

(29) "Nonmarginal unit," a proration unit or a fractional proration unit that can produce at a rate equal to the top unit allowable for the proration period for the pool;

(30) "Normal unit allowable," the amount of allowable production allocated to proration unit which are producing from a depth of 5,000 feet or above;

(31) "Official gas-oil ratio test, " the periodic gas-oil ratio test made by order of the Agency and by such method and means and in such manner as prescribed by the Agency;

(32) "Oil well," any well capable of producing oil and which is not a gas well as defined herein;

(33) "Operator," any person or persons who, duly authorized, is in charge of the development or a lease or the operation of a producing property, including the severing of energy or minerals from the land;

(34) "Overage or over production, " the amount of oil or the amount of gas produced during a proration period in excess of the amount authorized on the proration schedule;

(35) "Pressure maintenance, " the injection of gas or other fluid into a reservoir, either to increase or maintain the existing pressure in such reservoir or to retard the natural decline in the reservoir pressure;

(36) "Proration day, " 24 consecutive hours which shall begin at 8:00a.m. and end at 8:00 a.m. on the following day;

(37) "Proration month," a calendar month which shall begin at 8:00 a.m. on the first day of such month and end at 8:00 a.m. on the first day of the next succeeding month;

(38) "Proration period," for oil the proration month and for gas six consecutive calendar months which shall begin at 8:00 a.m. on the first day of a calendar month and end at 8:00 a. m. on the first day of the seventh succeeding month;

(39) "Proration schedule," the periodic order of the Agency authorizing the production, purchase and transportation of oil or gas from the various units of oil or gas proration in allocated pools;

(40) "Proration unit for gas," such geographical area as may be prescribed by special pool rules issues by the Agency;

(41) "Proration unit for oil," a tract of land containing 40 acres predominantly situated within the confines of a pool;

(42) "Reasonable market demand," the demand for such crude petroleum oil for reasonable current consumption and use within or outside the state, together with the demand for such amounts are reasonable necessary for building up or maintaining reasonable storage reserves of crude petroleum oil or products thereof, or both such crude petroleum oil and products;

(43) "Recomplete," the subsequent completion of a well in a different pool from the pool in which it was originally completed;

(44) "Reservoir," a pool or common source of supply;

(45) "Salt water handling facility," a facility or any container such as a pit, tank, or pool, whether covered or uncovered, used for the handling, storage, disposal of deleterious substances obtained, or used, in connection with the drilling or operation of wells;

(46) "Secondary recovery," a method of recovering quantities of oil or gas from a reservoir which quantities would not be recoverable by ordinary primary depletion methods;

(47) "Shut-in pressure," the pressure noted at the well head when the well is completely shut in. Not to be confused with bottom hole pressure;

(48) "Spacing unit," the minimum area in each pool within which a well may be drilled;

(49) "Top unit allowable for gas," the maximum number of cubic feet of gas, for the proration period, allocated to a proration period, allocated to a proration unit for gas in an allocated gas pool;

(50) "Top unit allowable for oil," the maximum number of barrels of oil daily for each calendar month allocated to a proration unit for oil in a pool to nonmarginal units;

(51) "Underage," the amount of oil or the amount of gas during a proration period by which a given proration unit failed to produce in an amount equal to that authorized on the proration schedule.

SECTION 85.71 WASTE PROHIBITED DURING PRODUCTION OR HANDLING OF OIL OR GAS. The production or handling of crude petroleum oil or gas of any type or in any form, or handling of products thereof, in such a manner or under such conditions or in such amount as to constitute or result in waste is hereby prohibited.

All operators, contractors, drillers, carriers, gas distributors, service companies, pipe pulling and salvaging contractors, or other persons shall at all times conduct their operations in the drilling, equipping, operating, producing, plugging and abandonment of oil and gas wells in a manner that will prevent waste of oil and gas, and shall not allow either oil or gas to leak or escape from a natural reservoir, or from wells, tanks, containers, pipe or other storage, conduct or operating equipment .

SECTION 85.72 YEARLY FILING OF ORGANIZATION REPORTS OF PERSONS HANDLING OIL OR GAS REQUIRED . Every person acting as a principal or agent for another; or independently engaged in the drilling of oil or gas wells, or in the production, storage, transportation (except railroad), refining, reclaiming, treating, marketing, or processing of crude oil or gas on the Pine Ridge Indian Reservation shall immediately and annually thereafter on the first day of the calendar year, file with the Agency and organization report. Said report shall be on forms prescribed by the and shall include the name under which the business is being operated, the name and post office address of the person, and business or business in which the person is engaged.

SECTION 85.73 CLASSIFICATION OF WELLS AND POOLS. The Agency shall determine after notice and hearing whether a particular well or pool is a gas or oil well, or a gas or oil pool, as the case may be, and from time to time classify and reclassify wells, and shall determine the limits of any pool or pools producing crude petroleum oil and gas and from time to time redetermine such limits.

SECTION 85.74 REPORT FORMS. Forms for written notices, requests and reports required by the Agency will be furnished upon request to the Agency. These forms shall be of such nature as prescribed by the Agency to cover proposed work and to report the results of completed work .

SECTION 85.75 REQUIREMENTS TO DRILL FOR OIL OR GAS. Any person drilling for oil and gas on the Reservation must supply the Agency with the following:

(1) Organization report;
(2) Notice of intention to drill;
(3) A plat map certified by a registered surveyor or engineer;
(4) One hundred dollars permit fee; and
(5) Surety bond on the amount of $5,000 per well or $20,000 blanket bond.

SECTION 85.76 NOTICE REQUIRED OF INTENT TO DRILL. Prior to the commencement of a drilling, operation, notice shall be delivered to the Agency of intention to drill any well for oil and gas on a form prescribed by Said Agency.

SECTION 85.77 NOTICE REQUIRED BEFORE DRILLING PERMIT IS TRANSFERRED. No person to whom a permit has been issued shall transfer the permit to any other person or location without first notifying the Agency.

SECTION 85.78 NOTICE REQUIRED BEFORE DEEPENING OR PLUGGING BACK OF WELL. Ten days prior to the commencement of drilling for deepening or plugging back a well notice of intention to deepen or plug back shall be delivered to the Agency.

SECTION 85.79 FAILURE TO COMMENCE DRILLING CANCELS PERMITS -EXTENSIONS . Failure to commence drilling, deepening, or plugging back to a different pool for the period of 90 days after issuance of permit shall, ipso facto, work a cancellation of such permit unless a further extension is granted by the Agency.

SECTION 85.80 DRILLING BOND REQUIREMENT. Prior to commencement of drilling, a bond shall be delivered to the Agency on a form prescribed by the Agency. Said bond shall be delivered to the Agency sixty days prior to any drilling activities.

SECTION 85.81 SURETY NOTIFICATION. The Agency shall advise the surety when its liability under a bond is terminated within ten (10) days prior to completion of drilling activities.

SECTION 85.82 MINIMUM SPACING OF OIL WELLS. The Agency is authorized to promulgate regulations for the minimum spacing of oil wells .

SECTION 85.83 TEMPORARY SPACING OF WELLS AFTER DISCOVERY OF OIL OR GAS . After the discovery of oil or gas in a pool not then covered by an order of the Agency a hearing shall be held and the Agency shall issue an order prescribing a temporary spacing pattern for the development of the pool. This order shall continue in force until another hearing shall be held at the request of any interested party or by motion of the Agency which shall require the presentation of such evidence as will enable the Agency to determine the proper spacing for the pool.

During the interim period between the discovery and the issuance of the temporary order, no permits shall be issued for the drilling of offsets to the discovery well.

SECTION 85.84 IDENTIFICATION SIGN REQUIRED AT EACH WELL. Every drilling and producible well shall be identified by a sign, posted on the derrick or not more than 20 feet from such well, and such signs shall be of durable construction and the lettering thereon shall be kept in a legible condition and shall be large enough to be legible condition and shall be large enough to be legible under normal conditions at a distance of 50 feet. Each sign shall show the number of the well, the name of the lease (which shall be different or distinctive for each lease), the name of the lessee, owner or operator, permit number, and the location by legal description.

SECTION 85.85 PIT REQUIRED FOR ACCUMULATED CLAY, SHALE, AND DRILL CUTTINGS. An adequate pit for the accumulation of drill cuttings shall be provided by each operator in order to assure a supply of proper material or mud-laden fluid to continue oil, gas, or water to its native strata during the drilling of any well.

SECTION 85.86 OIL, GAS, AND WATER STRATA REQUIRED TO BE SEALED. During drilling of any oil or gas well, all oil, gas, or water strata above the producing horizon shall be sealed or separated when necessary, in order to prevent its content from passing into other strata.

SECTION 85.87 CASING REQUIRED TO PROTECT STRATA. All wells drilled for oil and gas shall be completed with strings of casing which shall be properly cemented at sufficient depths adequately to protect the water, and oil or gas bearing strata to be produced.

SECTION 85.88 AGENCY TO PRESCRIBE PROCEDURES FOR SETTING CASING. Procedures to be used in setting casing shall be prescribed by the Agency and made available to all persons drilling far oil and gas on the Reservation.

SECTION 85.89 OPERATORS TO SEAL OFF OR PLUG WELLS WITH DEFECTIVE CASINGS. In any well that appears to have defective casing which will permit or may create underground waste, the operator shall proceed with diligence to eliminate such hazard of underground waste by sealing off or properly plugging and abandoning of well.

SECTION 85.90 BLOWOUT PREVENTERS REQUIRED. In all drilling operations proper and necessary precautions shall be taken for keeping the well under control, including the use of blowout preventer and high pressure fittings attached to properly cemented casing string.

SECTION 85.91 PROCEDURE FOR PULLING OUTSIDE STRING OF CASING -AGENCY TO APPROVE REMOVAL OF ALL CASINGS. In pulling the outside string of casing from any oil or gas well, the space outside the casing left in the hole shall be kept and left full of mud-laden fluid or cement of adequate specific gravity to seal off all water strata and any strata not producing oil or gas . No casing shall be removed without prior approval of the Agency.

SECTION 85.92 AGENCY AUTHORIZED TO REQUIRE DEVIATION TESTS. When any well is drilled or deepened, the Agency may require a test to determine the deviation from the vertical, and if necessary the Agency may require the hole to be straightened.

SECTION 85.93 PERMITS REQUIRED FOR DIRECTIONAL DRILLING - HEARING REQUIRED ON PERMITS. A deviational or directional survey shall be made and filed with the Agency on any well utilizing a whipstock or any method of deviating the well bore in a predetermined direction except to sidetrack junk in the hole, straighten a crooked hole or to control a blowout.

Special permits may be obtained to drill directionally in a predetermined direction only after a hearing before the Agency.

SECTION 85.94 MULTIPLE ZONE COMPLETIONS TO BE APPROVED BY AGENCY. Multiple zone completions in any pool must be approved only permission of the Agency .

SECTION 85 . 95 FITTINGS AND CONNECTIONS REQUIRED FOR EASE OF PRESSURE TESTS. Christmas tree fittings or well-head connections with a working pressure at least equivalent to the calculated or known pressure to which the equipment will be subjected shall be installed and maintained in first class condition so that, on flowing wells, gas-oil ration, and static bottom hole or other pressure tests may be made easily. Valves shall be installed and maintained in good working order to permit pressure readings to be obtained on both casing and tubing.

SECTION 85.96 NOTIFICATION REQUIRED OF FIRE, BREAKS, LEAKS, OR BLOWOUTS. All persons controlling or operating any oil or gas well or pipeline, or receiving tank, storage tank, or receiving and storage receptacle into which crude oil is produced, received, or stored, or through which crude oil is piped or transported shall immediately report all tanks or receptacles struck by lightning and any other fire which destroys oil or gas, and shall immediately report any leaks or breaks in or from tanks or receptacles and pipelines from which oil or gas is escaping or has escaped. In all such reports of fires, breaks, leaks, or escapes, or other accidents of this mature, the location of the well, tank, receptacle, or line break

shall be given by section, township, range, and property, so that the exact location thereof can be readily located on the ground. Such reports shall likewise specify what steps have been taken or are in progress to remedy the situation reported ; and shall detail the quantity of oil or gas lost, destroyed, or permitted to escape. In case any tank or receptacle is permitted run over, the amount running over shall be reported as in the case of a leak. The report hereby required as to oil leaks shall be necessary only in case such oil loss exceeds 100 barrels in the aggregate, or when such gas loss exceeds 3, 000, 000 cubic feet in the aggregate.

SECTION 85.9? WELL LOGS, COMPLETION REPORTS, AND WORKOVER REPORTS TO BE FILED WITH AGENCY. Within 30 days after the completion of a well drilled for oil or gas, or the recompletion of a- well into a different source of supply, a completion report shall be filed with the Agency, on a form prescribed by the Agency. The logs on such wells shall be forwarded to the Agency, without cost to him/her and shall be confidential for a period of six months when so requested by the operator in writing.

SECTION 85.98 AGENCY TO APPROVE PLUGGING AND ABANDONINGOF WELL. Authority to plug and abandon a well must be obtained from the Agency on a prescribed form before the commencement of abandoning and plugging. Failure to obtain approval shall result in a penalty of five thousand dollars for each well.

SECTION 85.99 AGENCY TO APPROVE METHOD OF PLUGGING. Before any well is abandoned it shall be plugged by following a plugging schedule approved by the office of the Agency.

SECTION 85.100 AGENCY TO APPROVE TEMPORARY ABANDONMENT OF WELLS -PLUGGING REQUIRED AFTER SIX MONTHS. Approval must be obtained from the Agency for the temporary abandonment of a well. A well abandoned for six months shall be plugged unless a subsequent temporary abandonment is approved by the Agency.

SECTION 85.101 MARKERS REQUIRED ON ABANDONED WELLS. All abandoned wells must be marked with a permanent monument on which shall be shown the number and location of the well by section, township, and range. A land owner not desiring a marker above ground level, must be writing the Agency, be granted permission to have the well operator plug or seal the well at the surface of the ground or the bottom of the cellar in the hole in such a manner as not to interfere with soil cultivation or other surface use. The monument, if erected, shall consist of a piece of pipe not less than 4 inches in outside diameter and not lease than 10 feet in length, of which 4 feet shall be above the ground level, the remainder being securely anchored in cement. The top of the pipe must be permanently sealed.

SECTION 85.102 PROCEDURE FOR CONVERSION OF WELLS TO BE USED FOR FRESH WATER. When the well to be plugged may safely be used as a fresh water well and such utilization is desired by the landowner, procedure for completion as a water well must be obtained from the Agency and followed .

SECTION 85.103 OWNERS OF WELLS RESPONSIBLE FOR PLUGGING. The owner of any well drilled for-oil or gas, or any seismic, core, or other exploratory holes, whether cased or uncased, shall be liable and responsible for the plugging thereof in accordance with the rules of the Agency.

SECTION 85.104 SLUSH PITS REQUIRED TO BE NONHAZARDOUS. Slush pits at producing oil and gas wells shall be constructed so as to be nonhazardous to wildlife and livestock and shall meet the requirements prescribed by the Agency.

SECTION 85.105 CORES AN SAMPLES REQUIRED TO BE SENT TO AGENCY - IDENTIFICATION. Section of cores, if taken, and sample of cuttings taken at regular intervals in all wells drilled for oil and gas or geological information on the Reservation, shall be identified as to operator, well names, and location, and depth of sample or core, and shall be shipped free of cost to the Agency.