Section 100. Allowable cost which may be shared in pooled gas or oil operations

A. The unit operator of a pooled unit may share all reasonable costs of operating the unit, including a reasonable supervision fee, with other participating and nonparticipating operators, as provided for in § 45.1-361.21 of the Code of Virginia, which may include:

1. Direct costs:

a. Ecological and environmental;

b. Rentals and royalties;

c. Labor;

d. Employee benefits;

e. Material;

f. Transportation;

g. Services;

h. Equipment and facilities furnished by the unit operator;

i. Damages and losses to joint property;

j. Legal expenses;

k. Taxes;

l. Insurance;

m. Abandonment and reclamation;

n. Communications; and

o. Other expenditures.

2. Indirect charges:

a. Drilling and production operations;

b. Major construction; and

c. Catastrophe.

B. Where there are conflicting royalty claims to coalbed methane gas, the unit operator of a forced pooled coalbed methane gas unit shall deposit proceeds in accordance with § 45.1-361.22 of the Code of Virginia, to be determined at the wellhead.

C. Where there are conflicting claims and one or more persons have elected to become participating or nonparticipating operators, the unit operator of a forced pooled coalbed methane gas unit shall escrow net proceeds after deduction for royalty and other costs consistent with the terms of this chapter and the board's order regarding the unit.

D. In any dispute which may arise regarding a unit operator's costs, the unit operator shall be entitled to the benefit of a presumption of reasonableness where it is shown that the types of costs being disputed are, by custom and practice, customary and usual within the industry. The unit operator shall not be entitled to a presumption of reasonableness of the amount of the costs being disputed.

E. Unless one or more respondents elect to participate or elect to be a nonparticipating operator on a carried basis, the unit operator shall have no obligation to report costs after the expiration of the election period.

Historical Notes

Derived from VR480-05-22.2 § 10, eff. October 23, 1991; amended, Volume 13, Issue 22, eff. August 20, 1997.

Statutory Authority

§ 45.1-361.15 of the Code of Virginia.