Senator Ronald M. Winterton proposes the following substitute bill:




Chief Sponsor: Ronald M. Winterton

House Sponsor: Steven J. Lund


8     General Description:
9          This bill amends definitions related to oil production.
10     Highlighted Provisions:
11          This bill:
12          ▸     amends the definitions of "crude oil" and "oil" to clarify regulatory authority over
13     tar sands production; and
14          ▸     makes technical and conforming changes.
15     Money Appropriated in this Bill:
16          None
17     Other Special Clauses:
18          None
19     Utah Code Sections Affected:
20     AMENDS:
21          40-6-2, as last amended by Laws of Utah 2020, Chapter 375

23     Be it enacted by the Legislature of the state of Utah:
24          Section 1. Section 40-6-2 is amended to read:
25          40-6-2. Definitions.

26          For the purpose of this chapter:
27          (1) "Board" means the Board of Oil, Gas, and Mining.
28          (2) "Correlative rights" means the opportunity of each owner in a pool to produce the
29     owner's just and equitable share of the oil and gas in the pool without waste.
30          (3) "Condensate" means hydrocarbons, regardless of gravity, that:
31          (a) occur naturally in the gaseous phase in the reservoir; and
32          (b) are separated from the natural gas as liquids through the process of condensation
33     either in the reservoir, in the wellbore, or at the surface in field separators.
34          (4) "Consenting owner" means an owner who, in the manner and within the time frame
35     established by the board in rule, consents to the drilling and operation of a well and agrees to
36     bear the owner's proportionate share of the costs of the drilling and operation of the well.
37          (5) "Crude oil" means hydrocarbons, regardless of gravity, that:
38          [(a) occur naturally in the liquid phase in the reservoir; and]
39          [(b) are produced and recovered at the wellhead in liquid form.]
40          (a) are produced at the wellhead in liquid form; and
41          (b) (i) occur naturally in the liquid phase in the reservoir; or
42          (ii) are produced through enhanced recovery operations authorized by the board in
43     accordance with Subsection 40-6-5(3)(c).
44          (6) "Division" means the Division of Oil, Gas, and Mining.
45          (7) (a) "Gas" means natural gas, as defined in Subsection (10), natural gas liquids, as
46     defined in Subsection (11), other gas, as defined in Subsection (17), or any mixture of them.
47          (b) "Gas" does not include any gaseous or liquid substance processed from coal, oil
48     shale, or tar sands.
49          (8) "Illegal oil" or "illegal gas" means oil or gas that has been produced from any well
50     within the state in violation of this chapter or any rule or order of the board.
51          (9) "Illegal product" means any product derived in whole or in part from illegal oil or
52     illegal gas.
53          (10) (a) "Natural gas" means hydrocarbons that occur naturally in the gaseous phase in
54     the reservoir and are produced and recovered at the wellhead in gaseous form, except natural
55     gas liquids as defined in Subsection (11) and condensate as defined in Subsection (3).
56          (b) "Natural gas" includes coalbed methane gas.

57          (11) "Natural gas liquids" means hydrocarbons, regardless of gravity, that are separated
58     from natural gas as liquids in gas processing plants through the process of condensation,
59     absorption, adsorption, or other methods.
60          (12) "Nonconsenting owner" means an owner who does not, after written notice and in
61     the manner and within the time frame established by the board in rule, consent to the drilling
62     and operation of a well or agree to bear the owner's proportionate share of the costs.
63          (13) (a) "Oil" means crude oil, as defined in Subsection (5), condensate, as defined in
64     Subsection (3), or any mixture of them.
65          (b) "Oil" does not include, except as provided in Subsection (13)(c), any gaseous or
66     liquid substance processed from coal, oil shale, or tar sands.
67          (c) "Oil" includes tar sands produced at the wellhead in liquid form through enhanced
68     recovery operations authorized by the board in accordance with Subsection 40-6-5(3)(c).
69          (14) "Oil and gas operations" means to explore for, develop, or produce oil and gas.
70          (15) (a) "Oil and gas proceeds" means any payment that:
71          (i) derives from oil and gas production from any well located in the state;
72          (ii) is expressed as a right to a specified interest in the:
73          (A) cash proceeds received from the sale of the oil and gas; or
74          (B) the cash value of the oil and gas; and
75          (iii) is subject to any tax withheld from the payment pursuant to law.
76          (b) "Oil and gas proceeds" includes a royalty interest, overriding royalty interest,
77     production payment interest, or working interest.
78          (c) "Oil and gas proceeds" does not include a net profits interest or other interest the
79     extent of which cannot be determined with reference to a specified share of:
80          (i) the cash proceeds received from the sale of the oil and gas; or
81          (ii) the cash value of the oil and gas.
82          (16) "Operator" means a person who has been designated by the owners or the board to
83     operate a well or unit.
84          (17) (a) "Other gas" means nonhydrocarbon gases that:
85          (i) occur naturally in the gaseous phase in the reservoir; or
86          (ii) are injected into the reservoir in connection with pressure maintenance, gas cycling,
87     or other secondary or enhanced recovery projects.

88          (b) "Other gas" includes hydrogen sulfide, carbon dioxide, helium, and nitrogen.
89          (18) "Owner" means a person who has the right:
90          (a) to drill into and produce from a reservoir; and
91          (b) to appropriate the oil and gas produced for that person or for that person and others.
92          (19) "Payor" means the person who undertakes to distribute oil and gas proceeds to the
93     persons entitled to them, whether as the first purchaser of that production, as operator of the
94     well from which the production was obtained, or as lessee under the lease on which royalty is
95     due.
96          (20) "Person" means the same as that term is defined in Section 68-3-12.5 and includes
97     an operator or owner as used in this chapter.
98          (21) "Pool" means an underground reservoir containing a common accumulation of oil
99     or gas or both. Each zone of a general structure that is completely separated from any other
100     zone in the structure is a separate pool. "Common source of supply" and "reservoir" are
101     synonymous with "pool."
102          (22) "Pooling" means the bringing together of separately owned interests for the
103     common development and operation of a drilling unit.
104          (23) "Producer" means the owner or operator of a well capable of producing oil and
105     gas.
106          (24) "Product" means any commodity made from oil and gas.
107          (25) "Surface land" means privately owned land:
108          (a) overlying privately owned oil and gas resources;
109          (b) upon which oil and gas operations are conducted; and
110          (c) owned by a surface land owner.
111          (26) (a) "Surface land owner" means a person who owns, in fee simple absolute, all or
112     part of the surface land as shown by the records of the county where the surface land is located.
113          (b) "Surface land owner" does not include the surface land owner's lessee, renter,
114     tenant, or other contractually related person.
115          (27) "Surface land owner's property" means a surface land owner's:
116          (a) surface land;
117          (b) crops on the surface land; and
118          (c) existing improvements on the surface land.

119          (28) "Surface use agreement" means an agreement between an owner or operator and a
120     surface land owner addressing:
121          (a) the use and reclamation of surface land owned by the surface land owner; and
122          (b) compensation for damage to the surface land caused by oil and gas operations that
123     result in:
124          (i) loss of the surface land owner's crops on the surface land;
125          (ii) loss of value of existing improvements owned by the surface land owner on the
126     surface land; and
127          (iii) permanent damage to the surface land.
128          (29) "Waste" means:
129          (a) the inefficient, excessive, or improper use or the unnecessary dissipation of oil or
130     gas or reservoir energy;
131          (b) the inefficient storing of oil or gas;
132          (c) the locating, drilling, equipping, operating, or producing of any oil or gas well in a
133     manner that causes:
134          (i) a reduction in the quantity of oil or gas ultimately recoverable from a reservoir
135     under prudent and economical operations;
136          (ii) unnecessary wells to be drilled; or
137          (iii) the loss or destruction of oil or gas either at the surface or subsurface; or
138          (d) the production of oil or gas in excess of:
139          (i) transportation or storage facilities; or
140          (ii) the amount reasonably required to be produced as a result of the proper drilling,
141     completing, testing, or operating of a well or otherwise utilized on the lease from which it is
142     produced.