§ 15-74-605 - Sale of proportionate share of production. - Arkansas Statutes

15-74-605. Sale of proportionate share of production.

(a) For any gas well completed as a commercially productive well subsequent to the passage of this section, the party designated as operator of the well shall sell, and the operator's first purchaser shall purchase, the gas production attributable to the interest of any party who participated in any part of the costs and expenses of the well and who:

(1) Is not regularly engaged in the oil and gas business;

(2) Owns no more than a five percent (5%) mineral interest in the well;

(3) Is not an individual in the oil and gas industry;

(4) Has made a reasonable good faith attempt to obtain a market for or contract covering its proportionate share of production from the well and can demonstrate those efforts by objective evidence, such as letters from purchasers, but has failed to obtain a market or contract;

(5) Agrees to pay a proportionate share of any costs associated with the construction of a pipeline which is to be or has been constructed to facilitate the marketing of production from the well and, in addition thereto, if the costs of the pipeline have been previously invoiced, simple interest at the maximum rate provided by law on the proportionate share to be paid by a party electing under this section from the due date of the invoices;

(6) Makes a written election under this section, which is received by the operator within sixty (60) days of the date of first sales of production by the operator;

(7) (A) Agrees to pay to the operator a reasonable administrative and overhead charge for the initial setup of the necessary accounts and procedures and for operator's administration and oversight of monthly sales under this section.

(B) However, the operator shall charge a monthly fee if a party electing under this section desires to receive monthly revenue checks or an annual fee if the party desires to receive revenues only on an annual basis;

(8) Agrees to indemnify and hold harmless the operator and its first purchaser for any inadvertent error or omission which may occur in the administration hereof; and

(9) Agrees to be bound by the terms and conditions of the operator's contract with its first purchaser until the contract terminates or production from the well ceases, whichever is earlier.

(b) In the event that a new party should be designated as operator of the well, subsequent to any election made under this section, the proportionate share of production of any party who avails itself of the benefits of this section shall remain subject to, and be sold pursuant to, the terms and conditions of the contract of the initial operator.