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Basic Procedures through Resolution

James D. Chase, James G. Pettengill, Federal Drainage Protection & Compensatory Royalties (1994)

This paper will discuss the Bureau's drainage procedures for protecting the royalty interest for leased and unleased Federal, Tribal and Allotted mineral interests from the loss of oil and gas resources by drainage. The objectives of the drainage program are to prevent substantial loss of oil and gas resources from jurisdictional lands due to drainage, and when such loss is not prevented, to ensure that the Federal or Indian lessors are not subjected to significant revenue losses through such drainage1.

Attached is a flowchart which illustrates the drainage procedures from identification of a potential drainage situation to the retirement of a potential drainage situation case when the Minerals Management Service (MMS) initiates collection for compensatory royalty.

This paper is not intended to represent official Bureau policy nor be a legal analysis. It is intended to be a practical guide for outlining the procedures that the Bureau follows in identifying and pursuing potential drainage situations.

BASIC PROCEDURES

A potential drainage situation (PDS) exists when Federal or Indian lands are offset by a producing well located on adjoining fee land, lower royalty, participation or allocation Federal or Indian land, different ownership Indian land, or Federal land for which the revenues are distributed to different accounts, provided the Federa