Administrative Rule Review Report  #AR07-001

Legislative Service Office

04-Jan-07

 

AGENCY:                                       Office of State Lands and Investments.

 

DATE SUBMITTED:                     December 28, 2006.

 

SUBJECT:                                       Chapter 18, Section 8(b), Leasing of Oil and Gas.

 

NATURE OF RULES:                   Legislative and procedural

 

STATUTORY AUTHORITY:        36-6-101(b)

 

DETERMINATION OF PROCEDURAL COMPLIANCE BASED UPON INFORMATION SUBMITTED BY THE AGENCY TO LSO:  Apparently complete to date.

 

SUMMARY OF RULES:

 

This amendment to the rules was originally submitted on a emergency rule basis (ER-30).  The final amendment of the rules regarding this topic is being presented here.  The amendment to the rules results from the shortage of drilling rigs nationwide.  Many state oil and gas lease holders are facing the dilemma of not being able to drill during the term of their lease because there are no drilling rigs available.  The rules do allow for an extension to be granted but the unavailability of an actual drilling rig was specifically excluded as justification for the granting of an extension.  In that the unavailability of drilling rigs at this time is the norm and not the exception this amendment to the rules allows state oil and gas lease holders to cite rig unavailability as a justification for an extension of the lease term.  The lease holder must prove this by written documentation filed with the Office of State Lands and Investments to be factually based on correspondence with all known drilling contractors operating in the Rocky Mountains.  The rules allow annual extensions of the lease term for up to five years.  The lease holder must prove rig unavailability each and every year they seek an extension of the lease term.

 

FINDINGS:  The rules appear to be within the scope of statutory authority and legislative intent.

 

STAFF RECOMMENDATION:  That the rules be placed on the Consent List and be approved by the Council as submitted by the Agency.

 

                                                                        _______________________

                                                                        Joseph Rodriguez

                                                                        Staff Attorney

 

                                                                        _______________________

                                                                        David K. Gruver

                                                                        Assistant Director

JAR/