Section 259.120

Title XVI CONSERVATION, RESOURCES AND DEVELOPMENT

Chapter 259

Effective - 28 Aug 1972   

  259.120.  Unit or cooperative development and operation agreements, hearings — petition, contents — findings, effect of — order, contents — unit expenses, how charged — enlarged units, how treated. — 1.  A voluntary agreement for the unit or cooperative development and operation of a field or pool, in connection with the conduct of repressuring or pressure maintenance operations, cycling or recycling operations, including the extraction and separation of liquid hydrocarbons from natural gas in connection therewith, or any other method of operation, including selective production methods, injection of water or other fluids, and including but not limited to thermal or combustion processes, is authorized and may be performed and shall not be held or construed to violate any of the statutes of this state relating to trusts, monopolies, or contracts and combinations in restraint of trade, if the agreement is approved by the council as being in the public interest, protective of correlative rights, and reasonably necessary to increase ultimate recovery or to prevent waste of oil or gas.  Such voluntary agreements bind only the persons who execute them, and their heirs, successors, assigns, and legal representatives.

  2.  Where a unit or cooperative plan of development and operation has been submitted to the owners of interests in a field or pool and one or more of such owners fails or refuses to execute the applicable unit agreements for such plan, then, upon the filing of a petition as hereinafter provided, the council, after notice, shall hold a public hearing to consider the need for the operation as a unit of an entire pool, or any portion thereof, to prevent waste, to increase ultimate recovery of oil and gas and to protect correlative rights.  The petition shall contain the following:

  (1)  A description of the proposed unit area;

  (2)  A statement of the nature of the proposed unit operation;

  (3)  Conformed copies of the applicable unit agreements, which may be composites of executed counterparts.  The petition may be filed by any one or more of the owners who have executed the applicable unit agreements.

  3.  If, after hearing and considering the petition and evidence offered in support thereof, the council finds that:

  (1)  The proposed unit plan has been agreed to by persons, who, at the time of filing of the petition, owned of record legal title to at least seventy-five percent interest in the right to drill into and produce oil and gas from the total proposed unit area and by persons, who, at that time, owned of record legal title to at least seventy-five percent of production payments, royalty and overriding royalty payable with respect to oil and gas produced from the total proposed unit area, and that

  (2)  Unit operation of the pool, or any portion thereof, proposed to be unitized, is reasonably necessary to prevent waste, to increase ultimate recovery of oil and gas and to protect correlative rights, and that

  (3)  The value of the additional oil and gas to be recovered from the proposed unit area as a result of the proposed unit operation will exceed the additional cost incident to conducting such operation, it shall issue an order requiring unit operation in accordance with the terms of the applicable unit operating agreements.  Such order and the unit plan shall, thereafter, be effective as to and binding upon each person owning an interest in the unit area, or in oil and gas produced therefrom or the proceeds thereof.

  4.  The order requiring unit operation shall be fair and reasonable under all circumstances and shall include:

  (1)  A description of the unit area;

  (2)  An allocation, upon the basis agreed upon by the provisions of the unit applicable agreements, and found by the council to be fair and equitable to each separately owned tract in the unit area, in that under the allocation each separately owned tract receives its fair share of all of the oil and gas produced from the unit area and not required or consumed in the conduct of the operation of the unit area or unavoidably lost;

  (3)  A provision for the credits and charges to be made in the adjustment among the owners of the unit area for their respective investments in wells, tanks, pumps, machinery, materials and equipment contributed to the unit operation.  The net amount charged against the owner or owners of a separately owned tract shall be considered expenses of unit operation chargeable against such tract;

  (4)  A provision that a part of the expenses of unit operation, including capital investments, be charged to each separately owned tract in the same proportion that the tract shares in the unit production.  The expenses chargeable to a tract shall be paid by the person or persons who, in the absence of unit operation, would be responsible for the expense of developing and operating such tract;

  (5)  Designation of the unit operator and the time at which the unit operation shall commence; and

  (6)  Those additional provisions, not in conflict with, or inconsistent with, the applicable unit agreements, which the council determines to be appropriate for the prevention of waste and the protection of all interested parties.

  5.  The obligation or liability of each owner in the several separately owned tracts for the payment of unit expense shall at all times be several and not joint or collective and in no event shall an owner of the oil and gas rights in the separately owned tract be chargeable with, obligated or liable, directly or indirectly, for, more than the amount apportioned, assessed or otherwise charged to his interest in such separately owned tract pursuant to the plan of unitization.

  6.  The council, upon the filing of a petition in a form complying with the requirements of subsection 2 of this section, may, after notice and hearing, require unit operation of a pool, or portion thereof, when the unit area newly established embraces a unit area within the same pool established by a previous order of the council.  In each such case the petition shall be accompanied by a copy of the proposed unit agreements with respect to the operation of the unit as so enlarged, in the form meeting the requirements of subdivision (3) of subsection 2 of this section.  In each such instance the proposed unit agreements shall be executed by persons owning interests in oil and gas in the entire unitized area so enlarged in sufficient numbers to comply with the requirements of subdivision (1) of subsection 3 of this section; provided that, if the unit agreements then in effect with respect to the unit area to which an additional portion of a pool is to be added contain provisions, under the terms of which additions to the unit area may be made, the application for such enlargement of the unitized area need only be accompanied by an agreement, executed by persons owning interests in oil and gas under the area to be added to the unit area in numbers sufficient to comply with the requirements of subdivision (1) of subsection 3 of this section, for the inclusion, in accordance with the plan provided in the unit agreements involved, of the additional area to the unit area then existing.  In either such case, such new order, in providing for allocation of unit production from the enlarged unit area, shall first treat the unit area previously established as a single tract, and the portion of unit production so allocated thereto shall then be allocated among the separately owned tracts included in such previously established unit area in the same proportion as those specified therefor in the previous order.  In no event shall said new order alter the relative values of tract factors of the previously established unit area, except by consent of all parties owning interests in the tract affected.

  7.  An order of the council entered under subsection 6 shall be effective as to the enlarged unit area and to all persons owning interests in oil and gas therein to the same extent as an order entered under subsection 3, shall contain provisions with respect to the enlarged unit area to meet the requirements of subsection 4, and the provisions of subsections 5 and 6 shall be applicable to obligations incurred in the operation of the enlarged unit area.

  8.  The portion of oil and gas produced from the unit area and allocated to a separately owned tract shall be deemed, for all purposes, to have been actually produced from such tract, and operations for the production of oil and gas from any part of the unit area, conducted pursuant to the order of the council, shall be deemed, for all purposes, to be operations for the production of oil and gas from each separately owned tract in the unit area.

  9.  The formation of such a unit as provided for in subsections 2 through 9 of this section and the operation of the unit under order of the council shall not be a violation of any statute of this state relating to trusts, monopolies, contracts or combinations in restraint of trade.

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(L. 1965 2d Ex. Sess. p. 917 § 12, A.L. 1972 S.B. 431, H.B. 1176)