[Code of Federal Regulations]
[Title 25, Volume 1]
[Revised as of April 1, 2005]
From the U.S. Government Printing Office via GPO Access
[CITE: 25CFR226]

[Page 721]
 
                            TITLE 25--INDIANS
 
     CHAPTER I--BUREAU OF INDIAN AFFAIRS, DEPARTMENT OF THE INTERIOR
 
PART 226_LEASING OF OSAGE RESERVATION LANDS FOR OIL AND GAS MINING
--Table of Contents
 
Sec.  226.25  Gas well drilled by oil lessees and vice versa.

    Prior to drilling, the oil or gas lessee shall notify the other 
lessees of his/her intent to drill. When an oil lessee in drilling a 
well encounters a formation or zone having indications of possible gas 
production, or the gas lessee in drilling a well encounters a formation 
or zone having indication of possible oil production, he/she shall 
immediately notify the other lessee and the Superintendent. Lessee 
drilling the well shall obtain all information which a prudent operator 
utilizes to evaluate the productive capability of such formation or 
zone.
    (a) Gas well to be turned over to gas lessee. If the oil lessee 
drills a gas well, he/she shall, without removing from the well any of 
the casing or other equipment, immediately shut the well in and notify 
the gas lessee and the Superintendent. If the gas lessee does not, 
within 45 days after receiving notice and cost of drilling, elect to 
take over such well and reimburse the oil lessee the cost of drilling, 
including all damages paid and the cost in-place of casing, tubing, and 
other equipment, the oil lessee shall immediately confine the gas to the 
original stratum. The disposition of such well and the production 
therefrom shall then be subject to the approval of the Superintendent. 
In the event the oil lessee and gas lessee cannot agree on the cost of 
the well, such cost shall be apportioned between the oil and gas lessee 
by the Superintendent. If such apportionment is not accepted, the well 
shall be plugged by the oil and gas lessee who drilled the well.
    (b) Oil well to be turned over to oil lessee. If the gas lessee 
drills an oil well, he/she must immediately, without removing from the 
well any of the casing or other equipment, notify the oil lessee and the 
superintendent.
    (1) If the oil lessee does not, within 45 days after receipt of 
notice and cost of drilling, elect to take over the well, he/she must 
immediately notify the gas lessee. From that point, the superintendent 
must approve the disposition of the well, and any gas produced from it.
    (2) If the oil lessee chooses to take over the well, he/she must pay 
to the gas lessee:
    (i) The cost of drilling the well, including all damages paid; and
    (ii) The cost in place of casing and other equipment.
    (3) If the oil lessee and the gas lessee cannot agree on the cost of 
the well, the superintendent will apportion the cost between the oil and 
gas lessees. If the lessees do not accept the apportionment, the oil or 
gas lessee who drilled the well must plug the well.
    (c) Lands not leased. If the gas lessee shall drill an oil well upon 
lands not leased for oil purposes or vice versa, the Superintendent may, 
until such time as said lands are leased, permit the lessee who drilled 
the well to operate and market the production therefrom. When said lands 
are leased, the lessee who drilled and completed the well shall be 
reimbursed by the oil or gas lessee, for the cost of drilling said well, 
including all damages paid and the cost in-place of casing, tubing, and 
other equipment. If the lessee does not elect to take over said well as 
provided above, the disposition of such well and the production 
therefrom shall be determined by the Superintendent. In the event the 
oil lessee and gas lessee cannot agree on the cost of the well, such 
cost shall be apportioned between the oil and gas lessee by the 
Superintendent. If such apportionment is not accepted, the well shall be 
plugged by the oil and gas lessee who drilled the well.

[39 FR 22254, June 21, 1974. Redesignated at 47 FR 13327, Mar. 30, 1982, 
as amended at 55 FR 33115, Aug. 14, 1990; 64 FR 13896, Mar. 23, 1999]