Title 52 - Oil & Gas Code

§52-581.5. Election to market share - Procedure.


          A. For wells producing natural gas or casinghead gas, any owner not having a gas sales contract shall be entitled to elect to share in the sale of production, to the extent set forth in the Natural Gas Market Sharing Act.

           An electing owner shall give written notice of his election to the designated marketer. An election shall constitute a warranty that gas production attributable to such electing owner's interest is not covered by an existing gas purchase contract, and an indemnification of any designated marketer sharing market with such electing owner from losses arising from breach of such warranty. Market sharing shall become effective as to sales commencing on the first day of the month following the expiration of sixty (60) days from receipt of such election by the designated marketer. Termination of a market sharing shall become effective on the first day of the month following expiration of sixty (60) days from receipt of written notice of said termination by the designated marketer. Copies of all elections and notices required shall also be sent to the operator if the operator is not the designated marketer.

          B. The operator shall serve as designated marketer until such time as a substituted designated marketer is elected by a numerical majority of the eligible electing owners. No election of a substituted designated marketer shall occur within twelve (12) months of the prior election.

          C. Upon receipt of the notice of election to market share, the designated marketer shall secure an independent nonaffiliated purchaser for gas production of such electing owner or shall produce and sell for the account of such electing owner gas attributable to the working interest of such electing owner and account to such electing owner at the same average price, weighted by volume, received by the designated marketer for all of its nonexempt gas sales from that well during each month, net of all reasonable marketing and post-production costs and expenses required to render the gas marketable and to sell and deliver the gas to market. The volumetric allocation of sales between a designated marketer and an electing owner shall be in proportion to their respective working interests in such well.

          D. If all of a designated marketer's sales of gas are exempt, it may so notify the electing owners and the operator in writing whereupon the electing owners shall select another designated marketer pursuant to subsection B of this section by written notice thereof to the operator and the new designated marketer.

          E. If the gas sales of the designated marketer are subject to a contract of a duration in excess of one (1) year, the designated marketer may require such electing owners' written agreement to be bound by the terms of such contract. If the contract does not contain a confidentiality provision preventing the furnishing of a copy to the electing owners, the designated marketer shall then furnish them a copy of the gas sales contract, and upon receipt of a copy of such contract and notice setting forth the provisions of this section, each electing owner shall have thirty (30) days within which in writing to either:

                    1. Elect a new designated marketer pursuant to subsection B of this section, notwithstanding the twelve-month limitation contained therein;

                    2. Agree to be bound by the terms of such contract; or

                    3. Terminate market sharing.

                    Failure by any electing owner to return such written agreement shall be deemed an election to not market share and shall relieve that producing owner of any further obligation to market share or otherwise secure a market for such electing owner's share of production under this section for the duration of that contract.

          F. Any administration fees established by the Corporation Commission which are payable to a designated marketer by an electing owner who has elected to market share may be deducted from proceeds.

          G. The election to market share under the provisions of the Natural Gas Market Sharing Act shall not result in the electing owner becoming a party to any contract under which the electing owner's gas is marketed, and neither the electing owner nor any person owning a royalty or other non-cost-bearing interest burdening the interest of the electing owner shall acquire any third-party beneficiary rights in such contract. Further, the election to market share under the Natural Gas Market Sharing Act shall not result in the designated marketer having any fiduciary or other duties to the electing owner, or to any persons having a royalty or other nonoperating interest burdening the interest of the electing owner with respect to the marketing of the electing owner's gas except those expressly provided in the Natural Gas Market Sharing Act. In no event shall any designated marketer be liable to any electing owner for any losses sustained or liabilities incurred in the absence of bad faith, gross negligence or willful misconduct.

          H. If by statute an owner's percentage entitlement to produce and market gas in a well is other than its working interest percentage, such percentage calculated pursuant to statute shall be utilized in lieu of the working interest percentage for purposes of the Natural Gas Market Sharing Act.

Added by Laws 1983, c. 77, § 3, emerg. eff. May 3, 1983. Amended by Laws 1992, c. 190, § 22, eff. Sept. 1, 1992. Renumbered from § 543 of this title by Laws 1992, c. 190, § 29.