We have a oil well up in Divide County that has been producing since Feb 2015. Over the last 2 years the operator has started to flare all the gas off - even though there is a gas pipeline that was operational in May 2015. Is the operator obligated to pay the “lost value” of the flared gas? Typically 1200 MCF per month. Please advise -thanks in advance!
Are you a non-operating working interest owner or a royalty owner?
If you are a royalty owner, you might take a look at N.D. Century Code 38-08-06.4. Generally speaking, an operator cannot flare gas produced after a one-year period from the date of first production from the well. With that said, there are several exceptions to this statutory requirement.
If your operator is in violation of this statute (and you are a royalty owner), then the operator shall pay royalties to royalty owners upon the value of the flared gas. N.D.C.C. § 38-08-06.4 (4).
To know whether or not the state prohibits, I’d check with the ND DNR to see if there is a maximum flaring period. Flaring periods may also be contractually limited in your lease. For the payment issue, the royalty provision in your lease should let you know.