(1) An
agreement for repressuring or pressure maintenance operations, cycling or
recycling operations, including the extraction and separation of liquid hydrocarbons
from natural gas in connection therewith, or for carrying on any other methods of
unit or cooperative development or operation of a field or pool or a part of either, is
authorized and may be performed, and shall not be held or construed to violate any
statutes relating to trusts, monopolies, or contracts and combinations in restraint of
trade, if the agreement is approved by the commission as being in the public
interest for conservation or is reasonably necessary to increase ultimate recovery
or to prevent waste of oil or gas. Any such agreement entered into prior to July 1,
1951, for any such purpose is approved.
(2) The commission upon the application of any interested person shall hold
a hearing to consider the need for the operation as a unit of one or more pools or
parts thereof in a field.
(3) The commission shall make an order providing for the unit operation of a
pool or part thereof if it finds that:
(a) Such operation is reasonably necessary to increase the ultimate recovery
of oil or gas; and
(b) The value of the estimated additional recovery of oil or gas exceeds the
estimated additional cost incident to conducting such operations.
(4) The order shall be upon terms and conditions that are just and reasonable
and shall prescribe a plan for unit operations that shall include:
(a) A description of the pool, or parts thereof, to be so operated, termed the
unit area, but only so much of a pool as has reasonably been defined and
determined by drilling operations to be productive of oil or gas may be included
within the unit area;
(b) A statement of the nature of the operations contemplated;
(c) An allocation to the separately owned tracts in the unit area of all the oil
and gas that is produced from the unit area and is saved, being the production that
is not used in the conduct of operations on the unit area or not unavoidably lost. The
allocation shall be in accord with the agreement, if any, of the interested parties. If
there is no such agreement, the commission shall determine the relative value, from
evidence introduced at the hearing, of the separately owned tracts in the unit area,
exclusive of physical equipment, for development of oil and gas by unit operations.
The commission shall require the production of or may itself produce such
geological, engineering, or other evidence, at the hearing or at any continuance
thereof, as may be required to protect the interests of all interested persons. The
production allocated to each tract shall be the proportion that the relative value of
each tract so determined bears to the relative value of all tracts in the unit area.
(d) A provision for the credits and charges to be made in the adjustment
among the owners in the unit area for their respective investments in wells, tanks,
pumps, machinery, materials, and equipment contributed to the unit operations;
(e) A provision providing how the costs of unit operations, including capital
investments, shall be determined and charged to the separately owned tracts and
how said costs shall be paid, including a provision providing when, how, and by
whom the unit production allocated to an owner who does not pay the share of the
cost of unit operations charged to such owner, or the interest of such owner, may
be sold and the proceeds applied to the payment of such costs;
(f) A provision, if necessary, for carrying or otherwise financing any person
who elects to be carried or otherwise financed, allowing a reasonable interest
charge for such service payable out of such person's share of the production;
(g) A provision for the supervision and conduct of the unit operations, in
respect to which each person shall have a vote with a value corresponding to the
percentage of the costs of unit operations chargeable against the interest of such
person;
(h) The time when the unit operations shall commence, and the manner in
which, and the circumstances under which, the unit operations shall terminate; and
(i) Such additional provisions that are found to be appropriate for carrying on
the unit operations, and for the protection of correlative rights.
(5) No order of the commission providing for unit operations shall become
effective unless the plan for unit operations prescribed by the commission has been
approved in writing by those persons who, under the commission's order, will be
required to pay at least eighty percent of the costs of the unit operation, and also
by the owners of at least eighty percent of the production or proceeds thereof that
will be credited to interests which are free of cost, such as royalties, overriding
royalties, and production payments, and the commission has made a finding, either
in the order providing for unit operations or in a supplemental order, that the plan
for unit operations has been so approved. If the plan for unit operations has not
been so approved at the time the order providing for unit operations is made, the
commission shall upon application and notice hold such supplemental hearings as
may be required to determine if and when the plan for unit operations has been so
approved. If the persons owning the required percentage of interest in the unit area
do not approve the plan for unit operations within a period of six months from the
date on which the order providing for unit operations is made, such order shall be
ineffective and shall be revoked by the commission unless for good cause shown
the commission extends said time.
(6) An order providing for unit operations may be amended by an order made
by the commission in the same manner and subject to the same conditions as an
original order providing for unit operations; but if such an amendment affects only
the rights and interests of the owners, the approval of the amendment by the
owners of royalty, overriding royalty, production payment, and other such interests
which are free of costs shall not be required. No such order of amendment shall
change the percentage for the allocation of oil and gas as established for any
separately owned tract by the original order, except with the consent of all persons
owning oil and gas rights in such tract, or change the percentage for the allocation
of cost as established for any separately owned tract by the original order, except
with the consent of all owners in such tract.
(7) The commission, by an order, may provide for the unit operation of a pool,
or parts thereof, that embraces a unit area established by a previous order of the
commission. Such order, in providing for the allocation of unit production, shall first
treat the unit area previously established as a single tract, and the portion of the
unit production so allocated thereto shall then be allocated among the separately
owned tracts included in such previously established unit area in the same
proportions as those specified in the previous order.
(8) An order may provide for unit operations on less than the whole of a pool
where the unit area is of such size and shape as may be reasonably required for that
purpose, and the conduct thereof will have no adverse effect upon other portions of
the pool.
(9) All operations, including, but not limited to, the commencement, drilling,
or operation of a well upon any portion of the unit area shall be deemed for all
purposes the conduct of such operations upon each separately owned tract in the
unit area by the several owners thereof. The portion of the unit production allocated
to a separately owned tract in a unit area shall, when produced, be deemed, for all
purposes, to have been actually produced from such tract by a well drilled thereon.
Operations conducted pursuant to an order of the commission providing for unit
operations shall constitute a fulfillment of all the express or implied obligations of
each lease or contract covering lands in the unit area to the extent that compliance
with such obligations cannot be had because of the order of the commission.
(10) The portion of the unit production allocated to any tract, and the
proceeds from the sale thereof, shall be the property and income of the several
persons to whom, or to whose credit, the same are allocated or payable under the
order providing for unit operations.
(11) No division order or other contract relating to the sale or purchase of
production from a separately owned tract shall be terminated by the order
providing for unit operations, but shall remain in force and apply to oil and gas
allocated to such tract until terminated in accordance with the provisions thereof.
(12) Except to the extent that the parties affected so agree, no order
providing for unit operations shall be construed to result in a transfer of all or any
part of the title of any person to the oil and gas rights in any tract in the unit area.
All property, whether real or personal, that may be acquired in the conduct of unit
operations under this article, shall be acquired for the account of the owners within
the unit area, and shall be the property of such owners in the proportion that the
expenses of unit operations are charged.