§ 15-76-314 - Participation by owners and royalties. - Arkansas Statutes

15-76-314. Participation by owners and royalties.

(a) Upon the establishment of a unit, each owner of an unleased interest therein shall elect within sixty (60) days from the effective date of the order establishing such unit either to participate affirmatively in the operation of the unit and the production of brine therefrom or to transfer his or her interest in the brine to the participating producers thereof upon such terms as are hereinafter set forth. The election shall be made in writing to the operator as otherwise provided in the order establishing the unit, provided that, if no such written election is made within the sixty (60) days, the nonelecting owner shall be deemed to have transferred his or her interest to the operator as provided herein.

(b) If an owner of an unleased interest elects to participate, he or she shall pay his or her share of the costs set forth in 15-76-311 and agree to pay his or her share of the additional costs to be incurred in the drilling, equipping, and operating of each completed well within the unit. A participating owner shall have the option, which shall be exercised at the time of the election to participate, either to:

(1) Take his or her just and equitable share of the brine produced from the unit in kind and, if required by the Oil and Gas Commission, return it, after his or her use, to disposal wells within the unit; or

(2) Receive the value of his or her just and equitable share of the brine produced from the unit.

(c) If, at any time or for any reason, an owner who has elected to participate defaults in any payments due and owing to the operator or by written notice manifests his or her intention to withdraw from active participation, the owner shall be deemed to have transferred all of his or her interests and rights in the unit to the operator for a reasonable consideration and on a reasonable basis which, in the absence of agreement between the parties, shall be determined by the commission, who, in addition to the other consideration granted to the operator, shall assess a penalty against the owner. The transfer may be either a permanent transfer or may be for a limited period pending recoupment by the operator out of the share of production attributable to the interest so transferred of an amount equal to those costs that would have been borne by the transferring party had he or she continued to participate in the operations conducted pursuant to the plan of development plus an additional sum to be fixed by the commission.

(d) If an owner elects not to participate affirmatively in the development of the unit and the production of the brine, he or she shall be deemed to have transferred his or her right to produce brine to the operator for the period of time for which the unit is operative for a reasonable consideration and on a reasonable basis which, in the absence of agreement between the parties, shall be determined by the commission. Any transfer, the terms of which are established by the commission, shall be either a permanent transfer or a transfer for a limited period pending recoupment by the operator, from the nonparticipating owner's just and equitable share of the brine produced from the unit, of an amount equal to those costs which the nonparticipating owner would have borne had he or she elected to participate affirmatively in the development of the unit and the production of brine therefrom plus an additional amount assessed as a risk factor by the commission.

(e) Each owner of an unleased interest in a unit shall be deemed to be the owner of a royalty interest equal to one-eighth (1/8) of the value of his or her just and equitable share of the brine produced from the unit, and the royalty interest shall not be chargeable with any of the costs of the development and operation of the unit.

(f) The provisions of this section shall not alter, modify, or otherwise amend the terms of any lease or agreement with respect to payments of royalty or in lieu of royalty in force and effect as of July 20, 1979, or which may be executed after that date.