U.S. DEPARTMENT OF THE
INTERIORBUREAU OF LAND MANAGEMENT

Wyoming

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UNITED STATES
DEPARTMENT OF THE INTERIOR
GEOLOGICAL
SURVEY
Conservation DIVISION

Notice to Lessees and Operators of Onshore
Federal and
Indian Oil and Gas Leases
(NTL-4A)

Royalty or Compensation for Oil and Gas
Lost

This Notice is issued pursuant to the authority
prescribed in the Oil and Gas Operating Regulations, Title 30 CFR
221, and in accordance with the terms of the Federal and Indian oil
and gas leases under the jurisdiction of the Geological Survey. This
Notice supersedes certain provisions of NTL-4, issued effective
December 1, 1974; Supplement No. 1 to NTL-4, issued effective
December 1, 1978, to 10 lessees and operators on a nationwide basis;
and Supplement No. 1 to NTL-4, issued effective December 1, 1978, to
all lessees and operators in Wyoming. Lessees and operators who
submitted payments for royalty on oil and gas lost under these
provisions of NTL-4, which are hereby revoked, may file with the
Area Oil and Gas Supervisor (Supervisor) an application for a refund
of those payments in accordance with the addendum attached to this
Notice.

I. GENERAL

Oil production subject to royalty shall include that which (1) is
produced and sold on a lease basis or for the benefit of a lease
under the terms of an approved communitization or unitization
agreement and (2) the Supervisor determines to have been avoidably
lost on a lease, communitized tract, or unitized area. No royalty
obligation shall accrue as to that produced oil which (1) is used on
the same lease, same communitized tract, or same unitized
participating area for beneficial purposes or (2) the Supervisor
determines to have been unavoidably lost.

Gas Production (both gas well gas and oil well gas) subject to
royalty shall include that which is produced and sold on a lease
basis or for the benefit of a lease under the terms of an approved
communitization or unitization agreement. No royalty obligation
shall accrue on any produced gas which (1) is used on the same
lease, same communitized tract, or same unitized participating area
for beneficial purposes, (2) is vented or flared with the
Supervisor's prior authorization or approval during drilling,
completing, or producing operations, (3) is vented or flared
pursuant to the rules, regulations, or orders of the appropriate
State regulatory agency when said rules, regulations, or orders have
been ratified or accepted by the Supervisor, or (4) the Supervisor
determines to have been otherwise unavoidably lost.

Where produced gas (both gas well gas and oil well gas) is (1)
vented or flared during drilling, completing, or producing
operations without the prior authorization, approval, ratification,
or acceptance of the Supervisor or (2) otherwise avoidably lost, as
determined by the Supervisor, the compensation due the United States
or the Indian lessor will be computed on the basis of the full value
of the gas so wasted, or the allocated portion thereof, attributable
to the lease.

II. DEFINITIONS

As used in this Notice, certain terms are defined as
follows:

A. "Avoidably lost" production shall mean the venting or
flaring of produced gas without the prior authorization, approval,
ratification, or acceptance of the Supervisor and the loss of
produced oil or gas when the Supervisor determines that such loss
occurred as a result of (1) negligence on the part of the lessee
or operator, or (2) the failure of the lessee or operator to take
all reasonable measures to prevent and/or to control the loss, or
(3) the failure of the lessee or operator to comply fully with the
applicable lease terms and regulations, appropriate provisions of
the approved operating plan, or the prior written orders of the
Supervisor, or (4) any combination of the foregoing.

B. "Beneficial purposes" shall mean that oil or gas which is
produced from a lease, communitized tract, or unitized
participating area and which is used on or for the benefit of that
same lease, same communitized tract, or same unitized
participating area for operating or producing purposes such as (1)
fuel in lifting oil or gas, (2) fuel in the heating of oil or gas
for the purpose of placing it in a merchantable condition, (3)
fuel in compressing gas for the purpose of placing it in a
marketable condition, or (4) fuel for firing steam generators for
the enhanced recovery of oil. Gas used for beneficial purpose
shall also include that which is produced from a lease,
communitized tract, or unitized participating area and which is
consumed on or for the benefit of that same lease, same
communitized tract, or same unitized participating area (1) as
fuel for drilling rig engines, (2) as the source of actuating
automatic valves at production facilities, or (3) with the prior
approval of the Supervisor, as the circulation medium during
drilling operations. Where the produced gas is processed through a
gasoline plant and royalty settlement is based on the residue gas
and other products at the tailgate of the plant, the gas consumed
as fuel in the plant operations will be considered as being
utilized for beneficial purposes. In addition, gas which is
produced from a lease, communitized tract, or unitized
participating area and which, in accordance with a plan approved
by the Supervisor, is reinjected into wells or formations subject
to that same lease, same communitized tract, or same unitized
participating area for the purpose of increasing ultimate recovery
shall be considered as being used for beneficial purposes;
provided, however, that royalty will be charged on the gas used
for this purpose at the time it is finally produced and sold.

C. "Unavoidably lost" production shall mean (1) those gas
vapors which are released from storage tanks or other low-pressure
production vessels unless the Supervisor determines that the
recovery of such vapors would be warranted, (2) that oil or gas
which is lost because of line failures, equipment malfunctions,
blowouts, fires, or otherwise except where the Supervisor
determines that said loss resulted from the neglið gence or the
failure of the lessee or operator to take all reasonable measures
to prevent and/or control the loss, and (3) the venting or flaring
of gas in accordance with Section III
hereof.

III. AUTHORIZED VENTING AND FLARING OF
GAS

Lessees or operators are hereby authorized to vent or flare gas
on a short-term basis without incurring a royalty obligation in the
following circumstances:

A. Emergencies. During temporary emergency situations, such as
compressor or other equipment failures, relief of abnormal system
pressures, or other conditions which result in the unavoidable
short-term venting or flaring of gas. However, this authorization
to vent or flare gas in such circumstances without incurring a
royalty obligation is limited to 24 hours per incident and to 144
hours cumulative for the lease during any calendar month, except
with the prior authorization, approval, ratification, or
acceptance of the Supervisor.

B. Well Purging and Evaluation Tests. During the unloading or
cleaning up of a well during drillstem, producing, routine
purging, or evaluation tests, not exceeding a period of 24 hours.

C. Initial Production Tests. During initial well evaluation
tests, not exceeding a period of 30 days or the production of 50
MMcf of gas, whichever occurs first, unless a longer test period
has been authorized by the appropriate State regulatory agency and
ratified or accepted by the Supervisor.

D. Routine or Special Well Tests. During routine or special
well tests, other than those cited in III.B and C above, only
after approval by the Supervisor.

IV. OTHER
VENTING OR FLARING

A. Gas Well Gas. Except as provided in II.C and III above, gas
well gas may not be flared or vented. For the purposes of this
Notice, a gas well will be construed as a well from which the
energy equivalent of the gas produced, including its entrained
liquid hydrocarbons, exceeds the energy equivalent of the oil
produced.

B. Oil Well Gas. Except as provided in II.C and III above, oil
well gas may not be vented or flared unless approved in writing by
the Supervisor. The Supervisor may approve an application for the
venting or flaring of oil well gas if justified either by the
submittal of (1) an evaluation report supported by engineering,
geologic, and economic data which demonstrates to the satisfaction
of the Supervisor that the expenditures necessary to market or
beneficially use such gas are not economically justified and that
conservation of the gas, if required, would lead to the premature
abandonment of recoverable oil reserves and ultimately to a
greater loss of equivalent energy than would be recovered if the
venting or flaring were permitted to continue or (2) an action
plan that will eliminate venting or flaring of the gas within 1
year from the date of application.

The venting or flaring of gas from oil wells completed prior to
the effective date of this Notice is authorized for an interim
period. However, an application for approval to continue such
practices must be submitted within 90 days from the effective date
hereof, unless such venting or flaring of gas was authorized,
approved, ratified, or accepted previously by the Supervisor. For
oil wells completed on or after the effective date of this Notice,
an application must be filed with the Supervisor, and approval
receive, for any venting or flaring of gas beyond the initial
30-day or other authorized test period.

C. Content of Applications. Applications under section B above
shall include all appropriate engineering, geologic, and economic
data in support of the applicant's determination that conservation
of the gas is not viable from an economic standpoint and, if
approval is not granted to continue the venting or flaring of the
gas, that it will result in the premature abandonment of oil
production and/or the curtailment of lease development. The
information provided shall include the applicant's estimates of
the volumes of oil and gas that would be produced to the economic
limit if the application to vent or flare were approved and the
volumes of the oil and gas that would be produced if the applicant
was required to market or beneficially use the gas. When
evaluating the feasibility of requiring conservation of the gas,
the total leasehold production, including both oil and gas, as
well as the economics of a fieldwide plan shall be considered by
the Supervisor in determining whether the lease can be operated
successfully if it is required that the gas be
conserved.

V. REPORTING AND MEASUREMENT
RESPONSIBILITIES

The volume of oil or gas produced, whether sold, avoidably or
unavoidably lost, vented or flared, or used for beneficial purposes
(including gas that is reinjected) must be reported on Form 9-329,
Monthly Report of Operation, in accordance with the requirement of
this Notice and the applicable provisions of NTL-1 and NTL-1A. The
volume and value of all oil and gas which is sold, vented or flared
without the authorization, approval, ratification, or acceptance of
the Supervisor, or which is otherwise determined by the Supervisor
to be avoidably lost must be reported on Form 9-361, Monthly Report
of Sales and Royalties. Payments submitted in this respect must be
accompanied by a Form 9-614-A, Rental and Royalty Remittance Advice.

In determining the volumes of oil and gas to be reported in
accordance with the first and second paragraphs of this Section V,
lessees and operators shall adhere to the following:

1. When the amount of oil or gas involved has been measured in
accordance with Title 30 CFR 221.43 or 221.44, that measurement
shall be the basis for the volume reported.

2. When the amount of oil and gas avoidably or unavoidably
lost, vented or flared, or used for beneficial purposes occurs
without measurement, the volume of oil or gas shall be determined
utilizing the following criteria, as applicable:

a. Last measured throughput of the production facility.

b. Duration of the period of time in which no measurement was
made.

c. Daily lease production rates.

d. Historic production data.

e. Well production rates and gasðoil ratio tests.

f. Productive capability of other wells in the area completed
in the same formation.

g. Subsequent measurement or testing, as required by the
Supervisor.

h. Such other methods as may be approved by the
Supervisor.

The Supervisor may require the
installation of additional measurement equipment whenever it is
determined that the present methods are inadequate to meet the
purposes of this Notice.

VI. VALUE DETERMINATIONS FOR ROYALTY OR COMPENSATION PURPOSES

In computing the royalty or compensation due on oil or gas under
the provisions of this Notice, the value shall be computed in the
same manner as the Supervisor would have calculated the value of the
oil or gas had it been sold from the same lease, same communitized
tract, or same unitized participating area.

VII. COMPLIANCE

The failure to comply with the requirements of this Notice will
result in compliance being secured by such actions as are provided
by law and regulation.

January 1, 1980

/s/ C.J. Curtis

_________________________________

_______________________________

Date

C.J. Curtis

Oil and Gas Supervisor

Northern Rocky Mountain Area

Approved:

/s/ Hillary A.
Oden
____________________________________
Hillary A.
Oden
Acting Chief, Conservation Division

ADDENDUM TO NTL-4A

Refund Applications

Certain provisions of NTL-4 have been revoked retroactive to
December 1, 1974, the effective date of said Notice. Accordingly,
lessees and operators who submitted royalty payments under the
provisions of NTLð4 may apply for a refund of those payments made
for (1) oil that was unavoidably lost or used for beneficial
purposes on the lease, communitized tract, or unitized participating
area from which it was produced and/or (2) gas that was vented or
flared with the prior approval of the Supervisor or unavoidably
lost. No refunds will be processed in the absence of such an
application, and no refunds will be made of those payments submitted
on the basis of a determination of waste by the Supervisor. In
addition, liquidated damages assessed for the late filing of reports
or the failure to report pursuant to the provisions of NTL-4 will
not be refunded.

The application shall be in the form of a letter signed by an
authorized officer or agent of the lessee or operator and for each
individual lease shall include:

1. The lease prefix code and lease number.

2. The month and year.

3. The product code (01, 02, 03, 04, 41, or 43) used in the
report and payments previously submitted to the Supervisor.

4. The volume of lost oil and/or gas previously reported and
the amount of the refund requested.

5. The total amount of the refund requested for each lease as a
subtotal.

6. The total amount of the refund requested for all leases as a
grand total.

Additional instructions in regard
to the filing and contents of said applications may be obtained by
contacting the Supervisor having jurisð diction over the lease or
leases involved.

Refund applications will be processed as promptly as possible.
The Supervisor, as to Federal leases, may process a direct refund or
authorize the applicant to withhold the refund amount from future
royalty accruals. However, refunds authorized by the Supervisor with
respect to Indian leases will be recoverable only as a credit
against future rental or royalty accruals in accordance with the
provisions of Section IX (Overð payments) of NTL-1A.

Last updated: 05-11-2007

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