These bills are identical. These bills are the opposite of HB 1379. They follow the proposed Devon rule proposal at the OCC last year that makes vertical well owners responsible for damage caused by horizontal frack jobs.

These bills require operators who receive frack notices pursuant to the OCC frack notice rule to take actions to prevent their producing well from causing pollution and to prevent damage to their well. Basically, under the current rule, it says that if we send you a notice that we are going to frack a well sometime with a minimum of 5 day notice, but what could be weeks from now, it is your responsibility to protect the environment and your well from our frack. Nevermind that the required frack notices provide no actual information as to when the fracks will actually occur, the actual location of the frack, the size of the frack, etc. Bills don’t say what happens if the protective efforts are unsuccessful but it does create a statutory duty on the vertical well operator to take action.

Presumably the vertical well operator could be deemed to not be acting as a reasonably prudent operator which can be used against them in either an OCC hearing or trial for damages. What has happened to an operator being responsible for his own actions to prevent pollution and damage to others?
Also, bills reference/incorporate a specific OCC rule, which we have never seen before. A rule that is subject to change by the OCC, and is in fact, included in this year’s rule making. Highly unusual to say the least.

This bill essentially does 3 things:

1. Extends dates for beginning payment of proceeds of production. Currently proceeds of production must begin to be paid within 6 months after the date of first sale, unless there are title problems, etc. This bill would extend that date out to 12 months. Six months should be plenty of time for an operator to get his title work in order. Most prudent operators will have drilling title opinions, or comparable title work, in place before drilling a well. Also a lower interest rate is currently applicable if there are truly title issues.

2. Delays the date from which interest is calculated on proceeds not timely paid. Currently interest is paid from the date of sale if not timely paid. This would delay the start date from which interest is calculated to the date from which payment was due. This could be as much as a 12+ months difference. Without the interest requirement in place to “encourage” timely payment some operators may be more inclined to hold other people’s proceeds/money interest free as long as they can.

3. Division/transfer orders. Currently Operators are required to pay proceeds to people legally entitled thereto without a division/transfer order. The proposed change would require a division/transfer order before payments of proceeds can be made. The “new” division/transfer order must include, among other things, a “certification” (akin to a warranty) of the interest being paid, and indemnity if proceeds are paid and title is not marketable. It additionally provides that if a party does not sign a division order, the holder of the proceeds of production can hold the proceeds without interest accruing until a division order is signed. The division/transfer order would impose additional requirements upon owners who are legally entitled to the proceeds beyond what the law currently requires.
Note: There is no limit on what clauses they can demand.

Basically, it provides that for wells damaged by operations from a nearby well (fracking, drainage, disposal, etc.), the operator must seek and obtain a report from the OCC “stating whether or not actual damages to a well occurred,” before being allowed to file a lawsuit in district court. Obviously, very prejudicial to damaged parties. Besides being bad law, one can only imagine the conclusions that the OCC might reach in these reports, given their lack of concern for these types of damages in spacings, increased densities, location exceptions, etc. By and large the OCC would effectively have to acknowledge/admit that they erred in granting regulatory relief (spacings, increased densities, location exceptions, waiver of consents, etc.) and failing to protect correlative rights and prevent drainage, etc. in stating that actual damage occurred. Obviously it will delay the ability and timing of filing a lawsuit.