Okla. Admin. Code § 165:10-24-4

Current through Vol. 42, No. 4, November 1, 2024

Section 165:10-24-4 - Duties and accounting

(a) The designated marketer shall find an independent, non-affiliated purchaser for the electing owner's gas, or the designated marketer shall produce and sell said gas for the account of the electing owner.

(b) During market sharing, the designated marketer shall have the right to produce and sell and electing owner's gas, without further notice and consent except in those cases where the designated marketer has secured an independent non-affiliated purchaser for the gas production of such electing owner.

(c) If the designated marketer produces and sells the electing owner's gas for the account of the electing owner, the designated marketer shall account to the electing owner at the average price, weighted by volume, received by the marketer for all of the designated marketer's non-exempt sales from the well for that month, less post production cost and expenses required to render the gas marketable and to sell and deliver the gas to market, and net of all reasonable marketing costs, expenses and administrative fees. Volumetric allocation between the designated marketer and the electing owner shall be in proportion to their working interests in the well, with one exception. If the owner's proportionate production interest is different from his working interest, the proportionate production interest shall be used.

(d) Disbursement of gas sales proceeds shall be subject to the Production Revenue Standards Act of 1992 (52 O.S. Section 570.1, et seq.).

(e) The designated marketer shall not be considered as a fiduciary to any electing owner or to any owner with an interest burdening the electing owner's interest. The designated marketer shall not be liable for losses absent bad faith, gross negligence or willful misconduct.

(f) Market sharing according to this Subchapter shall not confer any contract rights to an electing owner or his assigns, either directly or as third party beneficiaries.

(g) For a gas contract with a term in excess of one year, the designated marketer may require an electing owner to either agree in writing to be bound by the contract terms or forego market sharing under that contract. Absent a confidentiality provision in said gas contract, the designated marketer shall send a copy of the gas contract to each electing owner.

(1) After receipt of the contract, the electing owner shall have 30 days in which to:

(A) send written consent to the contract terms, or

(B) provide a written termination of market sharing or

(C) elect a new designated marketer.

(2) If the electing owner fails to so respond, his election to market share shall be deemed terminated.

(h) If the designated marketer ceases to sell gas from the well and therefore has no sales, the designated marketer:

(1) may:

(A) notify the electing owners in writing that it has no sales and that the electing owners must elect a new designated marketer, or

(B) locate a non-affiliated purchaser for the electing owners.

(2) shall not be responsible for sharing sales with electing owners as it has no sales. If such a designated marketer again begins to produce and market gas from the well, then the electing owners may re-elect it as designated marketer.

(i) If the designated marketer provides the electing owner with a sales contract with a gas purchaser, the designated marketer shall be relieved of the duty to market share with the electing owner to the extent that the terms of said contract provide for the purchase of the electing owner's share of each withdrawal from the well during the contract period, provided:

(1) The designated marketer is not an affiliate of the gas purchaser: said term "affiliate" being defined at 18 O.S. Section 1148A(2); and

(2) The contract is of a type and with terms generally offered at the time to other producers for gas production from wells in the common source of supply; and

(3) If the designated marketer operates and controls a gathering line to the well, it does not prohibit access to downstream transportation or impose unjust or discriminatory gathering fees or tariffs upon the electing owner; and

(4) Before discontinuing market sharing if it had begun, the designated marketer provides the electing owner with at least thirty days in which to accept or reject the offer for said contract.

(j) In so far as the exemption established by subsection (i) of this Section, if the designated marketer fulfills each of the foregoing conditions, it shall be relieved from the duty to market share with the electing owner for a time period hereafter described as the "exemption period", calculated as follows:

(1) If the electing owner enters into said contract with said purchaser, then the exemption period shall be the duration of the contract as originally offered to the electing owner or the duration of the contract as entered into by the electing owner, whichever is greater;

(2) If the electing owner fails to enter into said contract for any reason, then the exemption period shall be the duration of the contract period as initially offered to the electing owner or twelve months, whichever is less.

(k) During the exemption period as determined in subsection (j) of this Section, failure to enter into said contract shall not be grounds for election or appointment of an additional designated marketer to market share with the electing owner with respect to volumes of gas which would have been purchased if the electing owner had entered into the said contract as initially offered to the electing owner.

(l) Upon request, the designated marketer or electing owner shall provide the first purchaser of production with information concerning the election to market share and the electing owner's share of monthly production.

Okla. Admin. Code § 165:10-24-4

Added at 10 Ok Reg 2601, eff 6-25-93

Amended by Oklahoma Register, Volume 32, Issue 23, August 17, 2015, eff. 8/27/2015.