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353.652 Unit operation of pool -- Procedure.
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(2)
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Upon the application of any operator in a deep well pool productive of oil or gas, or
both, and other minerals which may be associated and produced therewith and after
notice given by the commission to all persons reasonably known to own an interest
in the oil or gas in the pool, and after a hearing conducted in accordance with KRS
Chapter 13B, the commission may enter a final order requiring the unit operation of
a pool or of any portion or combinations thereof within a field. The unit operation
shall be in connection with a program designed to avoid the drilling of unnecessary
wells, or otherwise to prevent waste, or to increase the ultimate recovery of the
unitized minerals by additional recovery methods. The final order shall provide for
the unitization of separately-owned tracts and interests within the pool or pools, but
only after finding that:
(a) The order is reasonably necessary for the prevention of waste;
(b) The proposed plan of unitized operation will increase the ultimate recovery of
oil or gas, or both, from the pool and will be economically feasible;
(c) The production of oil or gas, or both, from the unitized pool can be allocated
in a manner to insure the recovery by all owners of their just and equitable
share of the production; and
(d) A contract incorporating the unitization agreement has been signed or in
writing ratified or approved by the owners of at least seventy-five percent
(75%) in interest in the pool as costs are shared under the terms of the order
and by seventy-five percent (75%) in interest in the pool as production is to be
allocated of the royalty in the unit area, and a contract incorporating the
required arrangements for operations has been signed or in writing ratified or
approved by the owners of at least seventy-five percent (75%) in interest in
the pool as costs are shared, and the commission has made a finding to that
effect either in the final order or a supplemental order.
The final order requiring the unit operation shall designate one (1) operator as unit
operator and shall also make provision for the proportionate allocation to all
operators of the costs and expenses of the unit operation, including a reasonable
charge for supervision, which allocation shall be in the proportion that the
separately-owned tracts share in the production from the unit. In the absence of an
agreement entered into by the operators and filed with the commission providing for
sharing the costs of capital investments in wells and physical equipment, and
intangible drilling costs, the commission shall provide by order for the sharing of
the costs in the same proportion as the costs and expenses of the unit operation, but
any operator who has not consented to the unitization shall not be required to
contribute to the costs or expenses of the unit operation, or to the cost of capital
investment in wells and physical equipment, and intangible drilling costs, except
out of the proceeds from the sale of the production accruing to the interest of the
operator exclusive of any royalty or overriding royalty interest.
The commission, after notice and hearing as provided above may from time to time
by entry of a new or amending final order enlarge the unit area by approving
agreements adding to the area a pool or any portion or combinations thereof not
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previously included. Any new or amended final order shall not become effective
unless and until:
(a) All of the terms and provisions of the unitization agreement relating to the
extension or enlargement of the unit area or to the addition of pools or
portions or combinations thereof to unit operations have been fulfilled and
satisfied and evidence thereof has been submitted to the commission; and
(b) The extension or addition effected by the order has been agreed to in writing
by the owners of at least seventy-five percent (75%) in interest in the pool as
costs are shared in the pool or pools or portions or combinations thereof to be
added to unit operations by the order and by seventy-five percent (75%) in
interest in the pool as production is to be allocated of the royalty owners in the
pool, pools, portions, or combinations and evidence thereof has been
submitted to the commission.
Any agreement, in providing for allocation of production from the unit area, shall
first allocate to each pool or added portion a portion of the total production of oil
and gas, or both, from all pools affected within the area, as enlarged, the allocation
to be in proportion to the contribution which added pool or portions or extensions
thereof are expected to make, during the remaining course of unit operations, to the
total production of oil or gas, or both, of the unit as enlarged. The remaining portion
of unit production shall be allocated among the separately-owned tracts within the
previously established unit area in the same proportions as those specified prior to
the enlargement.
Effective: June 24, 2015
History: Amended 2015 Ky. Acts ch. 21, sec. 17, effective June 24, 2015. -- Amended
1996 Ky. Acts ch. 318, sec. 344, effective July 15, 1996. -- Amended 1990 Ky. Acts
ch. 11, sec. 1, effective July 13, 1990. -- Created 1974 Ky. Acts ch. 45, sec. 6.
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