(a) Requirement of Diligence. Any drilling operation or reworking operation will be conducted with reasonable diligence, in good faith and in a prudent, workmanlike manner.
(b) Drilling to well completion during the primary term.
  (1) If a dry hole or shut-in well is completed within 60 days of a lease anniversary date during the primary term, the lease is maintained until the next anniversary date without payment of delay rentals. If a dry hole or shut-in well is completed more than 60 days before a lease anniversary date during the primary term, a delay rental must be timely paid on or before such anniversary date to maintain the lease by delay rentals.
  (2) If a dry hole or a shut-in well is completed during the last year of the primary term or within the 60 days immediately preceding it, the lease is maintained until the end of the primary term.
  (3) If a well completed during the primary term secures production in paying quantities, refer to the provisions of §9.35 of this title, (relating to Producing the State Lease) to maintain the lease.
(c) Drilling operations at the expiration of the primary term (extensions).
  (1) To hold a lease by drilling operations at the expiration of the primary term, lessee must obtain an extension of the primary term as set out in this paragraph but may only obtain such an extension if the following conditions apply:
    (A) the lease has not produced in paying quantities during the primary term, and
    (B) lessee is conducting a drilling operation in good faith and in a good and workmanlike manner on the last day of the primary term.
  (2) To obtain an extension of the primary term and prevent automatic lease termination, lessee shall complete the following requirements:
    (A) Application. An application to extend the lease, on the appropriate GLO form and the correct payment, must be received by the GLO on or before the expiration date of the primary term. If such application and payment are not timely received, the lease shall expire automatically on the last day of the primary term.
    (B) Payments. The payments required to extend the primary term of a lease for 30 days are as follows:
      (i) if lease covers 640 acres or less: $3,000;
      (ii) if lease covers more than 640 acres: $6,000.
    (C) Affidavits required. Within 5 days after the expiration of the primary term, the GLO must receive an affidavit of drilling operations on the appropriate GLO form.
    (D) Effect of extension. An extension granted under this paragraph maintains the lease for only 30 days. If the 30 day period expires without lessee completing a productive well or obtaining a timely additional extension, then the lease automatically terminates.
  (3) Additional extensions for continued drilling operations.
    (A) Additional 30-day extensions may be obtained (for up to a maximum of 12 additional, consecutive extensions) by filing:
      (i) an application for additional extension on the appropriate GLO form and the appropriate payment, as established in subparagraph (B)of this section, prior to the expiration of the previous 30-day extension; and
      (ii) an affidavit of drilling operations on the appropriate GLO form with the daily drilling summaries for the previous 30 days attached must be filed within 5 days following the expiration of the previous 30-day extension.
    (B) Effect of additional extension. An additional extension granted under this paragraph maintains the lease for only 30 additional days. If this 30 day period expires without lessee completing a productive well or obtaining a timely additional extension, then the lease automatically terminates.
(d) Drilling or reworking operations after the expiration of the primary term.
  (1) Lessee may maintain a lease that has ceased production in paying quantities after the expiration of the primary term by conducting drilling or reworking operations.
  (2) One drilling or reworking operation will maintain a lease if:
    (A) the drilling or reworking operation begins within 60 days of the cessation of production in paying quantities;
    (B) lessee conducts such drilling or reworking operation without interruptions totaling more than 60 days during the entire, single drilling or reworking operation; and
    (C) such drilling or reworking operation results in production or enhanced production, or, such drilling or reworking operation results in a dry hole and a timely new drilling or reworking operation is commenced in compliance with the lease.
(e) No ratification or revivor. If a lessee fails to conduct drilling and reworking operations or to obtain an extension in accordance with this section and the lease terms and lessee has not otherwise maintained the lease, no action by the state or an owner of the soil on Relinquishment Act property, may ratify, re-grant or revive the terminated lease or may estop the state from asserting lease termination.

Source Note: The provisions of this §9.34 adopted to be effective January 7, 1999, 24 TexReg 146