§ 9-17-83 — Order Requiring Unit Operation - Contents

Alabama § 9-17-83

• Jurisdiction: Alabama
• Title 9: Conservation and Natural Resources
• Ch. 17: Oil and Gas
• Art. 3: Unit Operations

Text

The order shall be fair and reasonable under all the circumstances, shall protect the rights of interested parties and shall include:
(1) A description of the area embraced, termed the unit area, and a description of the pool or pools or portions thereof affected and lying within the unit area, termed the unit pool.
(2) A statement of the nature of the operations contemplated.
(3) An allocation among the separately owned interests derived from or associated with tracts in the unit area of all the oil or gas, or both, produced from the unit pool within the unit area, and not required in the conduct of such operation or unavoidably lost, such allocation to be based on the relative contribution which each such tract or interest is expected to make during the course of such operation, to the total production of oil or gas, or both, so allocated.
(4) A provision for adjustment among the owners of the unit area (not including royalty owners, except as otherwise hereinafter provided) of their respective investment in wells, tanks, pumps, machinery, materials, equipment and other things and services of value attributable to the unit operations. The amount to be charged unit operations for any such items shall be determined by the owners of the unit area (not including royalty owners, except as otherwise hereinafter provided); provided, that, if said owners of the unit area are not able to agree upon the amount of such charges, or to agree upon the correctness thereof, the board shall determine them after due notice and hearing thereon, upon the application of any interested party. The net amount charged against the owner of a separately owned tract or separately owned interest derived from or associated with a tract within the unit shall be considered expense of unit operation chargeable against such tract or interest. The adjustments provided for in this subdivision may be treated separately and handled by agreements separate from the unitization agreement.
(5) A provision that the costs and expenses of unit operation, including investment, past and prospective be charged to the separately owned tracts or interests in the same proportions that such tracts or interests share in unit production, as provided in subdivision (3) of this section. The expenses chargeable to a tract or interest shall be paid by the person or persons not entitled to share in production free of operating costs and who, in the absence of unit operation, would be responsible for the expense of developing and operating such tract or interest, and such person or person’s interest in the separately owned tract or interest shall be primarily responsible therefor.
(6) The designation of, or a provision for the selection of, a unit operator. The conduct of all unit operations by the unit operator and the selection of a successor to the unit operator designated by the board shall be governed by the terms and provisions of the unitization agreement.
(7) A provision that when the full amount of any charge made against a separately owned tract or interest is not paid when due by the person or persons primarily responsible therefor, as provided in subdivision (5) of this section, then seven-eighths of the oil and gas production allocated to such separately owned tract or interest may be appropriated by the unit operator and marketed and sold for the payment of such charge, together with interest at the rate of five percent per annum thereon. A one-eighth part of the unit production allocated to each separately owned tract or interest shall in all events be regarded as royalty to be distributed to and among, or the proceeds thereof paid to, the royalty owners, free and clear of all unit expense and free and clear of any lien therefor. The owner of any overriding royalty, oil and gas payment, royalty in excess of one-eighth of production, or other interests, who is not primarily responsible therefor shall, to the extent of such payment or deduction from his share, be subrogated to all the rights of the unit operator with respect to the interest or interests primarily responsible for such payment; provided, however, such right of subrogation shall not apply, inure to or exist for the benefit of the owner of any overriding royalty, oil and gas payment, royalty in excess of one-eighth of production, or other interest, who is not primarily responsible therefor, in any oil production unit from the lower cretaceous geological formation between depths of 10,500 feet and 11,500 feet subsea in which tertiary recovery methods are utilized. The owner of such overriding royalty, oil and gas payment, royalty in excess of one-eighth of production, or other interest in any oil production unit from the lower cretaceous geological formation between depths of 10,500 feet and 11,500 feet subsea in which tertiary recovery methods are utilized shall bear his fair share of all capital and operating costs incurred by a unit operator from the first day of the month next succeeding the month during which such tertiary recovery methods are initiated and implemented in the production unit, and the owner of such interest shall continue to bear his share of both capital and operating cost so long as such unit is producing oil or gas utilizing tertiary recovery methods. The term “tertiary recovery methods” as used herein shall include, but shall not be limited to, the maintenance or partial maintenance of reservoir pressures by any method recognized by the industry as a tertiary method of recovery and approved by the board, recycling, injecting or flooding a pool, or pools, or parts thereof, with air, gas, water, hydrocarbons, carbon dioxide (CO2) or any other substance, or any combination or combinations thereof, the use of polymers, steam flooding or fire flooding, or any other tertiary method of producing hydrocarbons recognized by the industry and approved by the board. Any surplus received by the operator from any such sale of production shall be credited to the person or persons from whom it was deducted in the proportion of their respective interest.
(8) The time the unit operation shall become effective and the manner in which and the circumstances under which the unit operation shall terminate.

Legislative History

(Acts 1957, No. 352, p. 461, §3; Acts 1978, No. 724, p. 1043, §1; Acts 1979, No. 79-622, p. 1103, §1.)