This form provides that when Operator, in good faith, believes or determines that the actual costs for any Drilling, Reworking, Sidetracking, Deepening, or Plugging Back operation conducted under this Agreement will exceed a designated of the costs estimated for the operation on the approved AFE, the Operator will give prompt notice by telephone to the other Parties participating in the operation, as well as delivering a supplemental AFE estimating the costs necessary to complete the operation. Each Party receiving the supplemental AFE shall have forty-eight from receipt of the notice to elect to approve Operators recommendation or propose an alternative operation.
Kentucky Cost Overruns for Non-Operator's Non-Consent Option refers to a specific provision in oil and gas contracts in Kentucky that addresses the issue of cost overruns in drilling operations when a non-operating partner fails to consent to a project. When a non-operator in an oil or gas venture in Kentucky decides not to participate in a drilling operation, they may be required to pay their share of any cost overruns that occur during the project. This means that if the actual costs exceed the initially estimated budget, the non-operator is obligated to cover their portion of the additional expenses. This provision is significant as it helps prevent unfair burdening of the operator by ensuring that all partners in the venture bear their fair share of the financial responsibility. It encourages participation from non-operators while protecting the operator's interests in avoiding unforeseen costs. There are different types of Kentucky Cost Overruns for Non-Operator's Non-Consent Option, including: 1. Fixed Percentage: In this type, the non-operator's share of the cost overruns is determined based on their percentage ownership interest in the project. For instance, if the non-operator holds a 20% stake, they would be responsible for covering 20% of the additional expenses incurred. 2. Fixed Amount: Under this approach, the non-operator has a predetermined fixed dollar amount that they must contribute towards cost overruns, regardless of their ownership percentage. This option provides certainty for both parties involved. 3. Proration based on Consent: In some cases, the non-operator's liability for cost overruns may be prorated based on their consent to specific operations within the project. For example, if the non-operator consents to drilling but not to certain ancillary services, their share of the cost overrun may only apply to the drilling expenses. The Kentucky Cost Overruns for Non-Operator's Non-Consent Option is an essential aspect of oil and gas contracts in the state, as it ensures transparency, fairness, and accountability among the partners involved. By clearly outlining the obligations of non-operators in the event of cost overruns, this provision helps maintain a healthy working relationship and minimizes potential disputes between operators and non-operators in Kentucky's oil and gas industry.
