§ 30-5-109 — Rules and regulations governing drilling units

(a) When required, to protect correlative rights or, to
prevent or to assist in preventing any of the various types of
waste of oil or gas prohibited by this act, or by any statute of
this state, the commission, upon its own motion or on a proper
application of an interested party, but after notice and hearing
as herein provided shall have the power to establish drilling
units of specified and approximately uniform size covering any
pool.
(b) In establishing a drilling unit, the acreage to be
embraced within each unit and the shape thereof shall be
determined by the commission from the evidence introduced at the
hearing but shall not be smaller than the maximum area that can
be efficiently drained by one (1) well.
(c)(i) Subject to the provisions of this act, the
order establishing drilling units for a pool or part thereof
shall direct that no more than one (1) well shall be drilled to
and produced from such pool on any unit, and that the well shall
be drilled at a location authorized by the order, with such
exception as may be reasonably necessary where the drilling unit
is located on the edge of the pool and adjacent to a producing
unit, or, for some other reason, the requirement to drill the
well at the authorized location on the unit would be inequitable
or unreasonable;
(ii) The state oil and gas supervisor, upon proper
application therefor in accordance with the commission's rules,
may grant exceptions from such authorized location for good
cause shown, either (A) where written consents to the exception
applied for have been given by all owners of drilling units
directly or diagonally offsetting the unit for which the
exception is requested and, as to lands for which drilling units
have not been so established for such pool, by the owners of
those lands which would comprise the directly and diagonally
offsetting drilling units if the drilling unit order for the
pool involved were extended to include such additional lands, in
which case said supervisor may grant such exception immediately,
or (B) if less than all of such owners have so consented to such
exception, where the applicant shows to the satisfaction of said
supervisor (by affidavit stating the time, place and manner of
mailing, or such further proof as said supervisor may require)
that notice of the filing of such application for exception has
been mailed by registered or certified mail with return receipt
to all of such owners failing to so consent and that fifteen
(15) days have elapsed since the date of such mailing without
any of such owners having filed with said supervisor written
objections to the granting of such exception, in which case the
exception may be granted upon the expiration of such fifteen
(15) day period;
(iii) If any of the owners specified in paragraph
(ii) of this subsection, who have not in writing consented to
the exception applied for, file written objections to the
requested exception with the state oil and gas supervisor during
said fifteen (15) day period following the applicant's mailing
of the notice of filing, or if for any other reason said
supervisor fails to grant such requested exception, then no well
shall be drilled on the drilling unit involved except at the
location authorized by the order establishing such unit, unless
and until the commission shall grant such exception after notice
and hearing upon the application as required by this act.
Provided that in addition to any other notice required by W.S.
30-5-111(d) as amended, or any other provision of law or the
commission's rules, the commission shall cause notice of any
hearing before it on an application for such exception to be
mailed by registered or certified mail with return receipt to
each of the owners specified in paragraph (ii) of this
subsection at least ten (10) days before the date of such
hearing.
(d) The commission, upon application, notice, and hearing,
may decrease the size of the drilling units or permit additional
wells to be drilled within the established units in order to
prevent or assist in preventing any of the various types of
waste prohibited by this act or in order to protect correlative
rights, and the commission may enlarge the area covered by the
order fixing drilling units, if the commission determines that
the common source of supply underlies an area not covered by the
order.
(e) After an order fixing drilling units has been entered
by the commission, the commencement of drilling of any well or
wells into any common source of supply for the purpose of
producing oil or gas therefrom, at a location other than
authorized by the order, is hereby prohibited. The operation of
any well drilled in violation of an order fixing drilling units
is prohibited.
(f) When two (2) or more separately owned tracts are
embraced within a drilling unit, or when there are separately
owned interests in all or a part of the drilling unit, then
persons owning such interests may pool their interests for the
development and operation of the drilling unit. In the absence
of voluntary pooling, the commission, upon the application of
any interested person, may enter an order pooling all interests
in the drilling unit for the development and operation thereof.
Each such pooling order shall be made after notice and hearing
and shall be upon terms and conditions that are just and
reasonable. Operations incident to the drilling of a well upon
any portion of a unit covered by a pooling order shall be deemed
for all purposes to be the conduct of such operations upon each
separately owned tract in the unit by the several owners
thereof. That portion of the production allocated or applicable
to each tract included in a unit covered by a pooling order
shall, when produced, be deemed for all purposes to have been
produced from such tract by a well drilled thereon. A pooling
order issued under this subsection shall expire twelve (12)
months after issuance if the person authorized to drill and
operate a well fails to commence operations within twelve (12)
months of issuance of the pooling order.
(g) Each pooling order shall provide for the drilling and
operation of a well on the drilling unit, and for the payment of
the cost thereof, as provided in this subsection. The commission
is specifically authorized to provide that the owner or owners
drilling or paying for the drilling or for the operation of a
well for the benefit of all owners shall be entitled to all
production from the well which would be received by the owner or
owners, for whose benefit the well was drilled or operated,
after payment of royalty as provided in the lease, if any,
applicable to each tract or interest or after payment of the
royalty if required under subsection (h) of this section, and
obligations payable out of production, until the owner or owners
drilling or operating the well or both have been paid the amount
due under the terms of the pooling order or order settling the
dispute. In the event of any disputed cost, the commission shall
determine the proper cost. The order shall determine the
interest of each owner in the unit, and may provide that each
owner who agrees with the person or persons drilling and
operating the well for the payment by the owner of his share of
the costs, unless he has agreed otherwise, shall be entitled to
receive, subject to royalty or similar obligations, the share of
the production of the well applicable to the tract of the
nonconsenting owner. Each owner who does not agree, shall be
entitled to receive from the person or persons drilling and
operating the well on the unit his share of the production
applicable to his interest after the person or persons drilling
and operating the well have recovered the following, subject to
the provisions of subsection (h) of this section:
(i) One hundred percent (100%) of each such
nonconsenting owner's share of the cost of any newly acquired
surface equipment beyond the wellhead connections (including,
but not limited to, stock tanks, separators, treaters, pumping
equipment and piping), plus one hundred percent (100%) of each
such nonconsenting owner's share of the cost of operation of the
well commencing with first production and continuing until each
such nonconsenting owner's relinquished interest shall revert to
it under other provisions in this section, it being intended
that each nonconsenting owner's share of such costs and
equipment will be that interest which would have been chargeable
to each nonconsenting owner had it initially agreed to pay its
share of the costs of said well from the beginning of the
operation; and
(ii) Up to:
(A) Three hundred percent (300%) of that portion
of the costs and expenses of drilling, reworking, deepening or
plugging back, testing and completing, after deducting any cash
contributions received and up to two hundred percent (200%) of
that portion of the cost of newly acquired equipment in the
well, to and including the wellhead connections, which would
have been chargeable to the nonconsenting owner if he had
participated therein, if the nonconsenting owner's tract or
interest is subject to a lease or other contract for oil and gas
development;
(B) For the first well the person drills and
operates in a drilling unit and under a pooling order, two
hundred percent (200%) of that portion of the costs and expenses
of drilling, reworking, deepening or plugging back, testing and
completing, after deducting any cash contributions received and
up to one hundred twenty-five percent (125%) of that portion of
the cost of newly acquired equipment in the well, to and
including the wellhead connections, which would have been
chargeable to the nonconsenting owner if he had participated
therein, if the nonconsenting owner's tract or interest is not
subject to a lease or other contract for oil and gas
development;
(C) For each subsequent well the person drills
and operates in a drilling unit and under a pooling order, one
hundred fifty percent (150%) of that portion of the costs and
expenses of drilling, reworking, deepening or plugging back,
testing and completing, after deducting any cash contributions
received and up to one hundred twenty-five percent (125%) of
that portion of the cost of newly acquired equipment in the
well, to and including the wellhead connections, which would
have been chargeable to the nonconsenting owner if he had
participated therein, if the nonconsenting owner's tract or
interest is not subject to a lease or other contract for oil and
gas development.
(h) During the time the person or persons drilling and
operating a well are recovering costs from a nonconsenting owner
as authorized in a pooling order issued pursuant to subsection
(g) of this section, a nonconsenting owner of a tract or
interest in a drilling unit that is not subject to a lease or
other contract for oil and gas development shall be entitled to
a cost-free royalty interest equal to the greater of:
(i) Sixteen percent (16%); or
(ii) The acreage weighted average royalty interest of
the leased tracts within the drilling unit.
(j) Upon full payment of the recoverable costs as
specified in subsection (g) of this section:
(i) Within thirty (30) days after the producer has
fully recovered his costs under subsection (g) of this section,
the producer shall send notice to the nonconsenting owner to
offer the nonconsenting owner the opportunity to participate
under the pooling order as a working interest owner. The notice
shall state that the nonconsenting owner may elect to
participate in the pooling order or may elect to continue
receiving the royalty specified in subsection (h) of this
section;
(ii) Within sixty (60) days after receiving notice,
the nonconsenting owner shall inform the producer whether he
wishes to make an election to participate under the pooling
order as a working interest owner or continue receiving the
royalty specified in subsection (h) of this section;
(iii) If the nonconsenting owner fails to respond to
the notice within the time specified in paragraph (ii) of this
subsection, the nonconsenting owner shall be deemed to elect to
continue receiving the royalty specified in subsection (h) of
this section;
(iv) Within five (5) business days after receiving
notice of election from a nonconsenting owner or upon expiration
of the time specified in paragraph (ii) of this subsection, the
producer shall notify the commission regarding the nonconsenting
owner's election or lack thereof.