2013 Kentucky Revised Statutes CHAPTER 349 - COALBED METHANE DEVELOPMENT 349.085 Duties of person requesting pooling order -- Notice to interested persons -- Review board to rule on request for pooling order -- Contents of pooling order -- Rights and financial shares of interested parties -- Escrow account.
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349.085 Duties of person requesting pooling order -- Notice to interested
persons -- Review board to rule on request for pooling order -- Contents
of pooling order -- Rights and financial shares of interested parties -Escrow account.
(1)
(2)
The person requesting a pooling order shall provide to the department a list of
all persons reasonably known to own an oil or gas interest and all coal interest
holders, in any tract upon which the coalbed methane well will be located from
the surface to a depth of one hundred (100) feet below the base of the deepest
coal seam to be penetrated. A pooling order shall be made only after the
department provides notice to all persons reasonably known to own an oil or
gas interest and all coal interest holders in any tract upon which the well will be
located and any tract or portion thereof proposed to be pooled in any drilling
unit, from the surface to a depth of one hundred (100) feet below the base of
the deepest coal seam to be penetrated, after a hearing has been held. After
filing an application for a pooling order under KRS 349.080(1), where unknown
or nonlocatable owners exist, or at the request of the permit applicant or
person requesting a pooling order, the permit applicant shall publish, at least
twenty (20) days prior to the hearing on the application for the pooling order,
one (1) notice in the newspaper of the largest circulation in each county in
which any tract, or portion thereof, proposed to be pooled is located. The notice
shall:
(a) State that an application for a pooling order is being filed with the review
board;
(b) Describe any tract, or portion thereof, proposed to be pooled;
(c) In the case of an unknown owner, identify the name of the last known
owner;
(d) In the case of a nonlocatable owner, identify the owner and the owner's
last known address; and
(e) State that any party claiming an interest in any tract, or portion thereof,
proposed to be pooled should contact the permit applicant at the
published address and provide a copy of the notification to the review
board within twenty (20) days of the date of the publication.
The review board shall grant or deny the request for a pooling order and issue
an order consistent with the intent and purposes of KRS Chapters 350 and 352
and this chapter, taking into consideration the following factors that it considers
applicable in the particular proceeding:
(a) The area which may be drained efficiently and economically by the
proposed coalbed methane well or wells and the spacing requirements of
KRS 349.075;
(b) The plan of development of the coal and the need for proper ventilation of
any mines or degasification of any affected coal seams;
(c) The nature and character of any coal seam or seams which will be
affected by the proposed coalbed methane well or wells;
(d) The surface topography and mineral boundaries of the lands underlaid by
the coal seams to be included in the unit;
(e) Evidence relevant to the proper boundary of the drilling unit;
(f)
(3)
(4)
(5)
The nature and extent of ownership of each coalbed methane owner or
claimant and whether conflicting claims exist;
(g) Whether the applicant for the drilling unit proposes to be the operator of
the coalbed methane well or wells within the drilling unit; and if so,
whether the applicant has a lease or other agreement from the owners or
claimants of a majority interest in the proposed drilling unit;
(h) Whether a disagreement exists among the coalbed methane owners or
claimants over the designation of the operator for any coalbed methane
wells within the unit, and if so, relevant evidence to determine which
operator can properly and efficiently develop the coalbed methane within
the unit for the benefit of the majority of the coalbed methane owners;
(i) If more than one person is interested in operating a coalbed methane well
within the unit, the estimated cost submitted by each such person for
drilling, completing, operating, and marketing the coalbed methane from
any proposed coalbed methane well or wells;
(j) Any other available geological or scientific data pertaining to the pool
which is proposed to be developed;
(k) The correlative rights of the operators and owners of the coalbed
methane, so that each operator and owner may obtain his or her just and
equitable share of production from the coalbed methane; and
(l) Any other factor the review board determines should be considered
consistent with KRS Chapters 350 and 352 and this chapter.
Upon consideration of the matters raised at the hearing, the review board shall
render a decision based upon whether to grant a pooling order, and shall enter
a written order containing findings of fact and conclusions which address any
relevant considerations in subsection (2) of this section and based thereon
shall issue and file with the department a written order granting the pooling
order with any applicable conditions or denying the pooling order.
A pooling order shall authorize the drilling, deepening, or reopening, and the
operation of a well for the production of coalbed methane on the tracts or
portions thereof pooled; shall designate the operator to drill and operate the
well; shall prescribe the time and manner in which all owners of working
interests in the pooled tracts or portions thereof may elect to participate therein;
shall provide that all reasonable costs and expenses of drilling, deepening,
converting or reopening, and the completing, operating, plugging, and
abandoning the well shall be borne, and all production from the well shall be
shared, by all owners of working interests in proportion to the net mineral acres
in the pooled tracts owned or under lease to each owner; and shall make
provision for the payment of the reasonable and actual cost thereof, including a
reasonable charge for supervision, by all those who elect to participate therein.
A pooling order shall establish a procedure for the owner who claims a working
interest and who does not decide to become a participating working interest
owner to elect to either:
(a) Surrender, by means of sale or lease, the interest to a participating
working interest owner on a reasonable basis and for a reasonable
consideration, which if not agreed upon shall be one-eighth (1/8) of the
production attributable to the well; or
(b) Share in the operation of the well as a nonparticipating working interest
owner on a carried basis after the proceeds allocable to his or her share
equal to two hundred percent (200%) of the share of the costs allocable to
his or her interest.
(6) A coalbed methane owner or claimant whose identity and location remain
unknown at the conclusion of the hearing concerning the entry of a pooling
order for which public notice was given and whose interest is pooled pursuant
to KRS 349.080(1) shall be deemed to have elected to lease the interest to the
coalbed methane operator, exclusive of one-eighth (1/8) of the production
attributable to the unleased interest, and shall not be entitled to make the
election established in subsection (5) of this section.
(7) Except as provided in this section, a coalbed methane owner who does not
make an election under the pooling order within thirty (30) days of the entry of
the order shall be deemed to have leased the coalbed methane interest to the
coalbed methane well operator in the manner established in subsection (6) of
this section.
(8) A person whose interest is subject to a coalbed methane lease or other
agreement which grants to another the right to operate or conduct operations
shall not own an operating interest for the purposes of this section.
(9) A certified copy of any pooling order entered under this section shall be entitled
to be recorded in the office of the county clerk of the county or counties in
which all or any portion of the pooled tract is located, and the record of the
order, from the time of lodging the order for record, shall be notice of the order
to all persons.
(10) Each pooling order for a coalbed methane well issued pursuant to KRS
349.080(1) shall provide for the establishment of an interest-bearing escrow
account to be maintained by the department. The escrow account shall receive
deposits and hold payment for costs and proceeds attributable to the conflicting
interests as follows:
(a) Each participating working interest owner, except for the unit operator,
shall deposit in the escrow account the owner's proportionate share of the
costs allocable to the ownership interest claimed by each participating
working interest owner as set forth in the pooling order; and
(b) The unit operator shall collect all proceeds from the sale or use of
coalbed methane and deposit in the escrow account all proceeds
attributable to the conflicting interests of lessors, lessees, or royalty
owners and all proceeds in excess of the recovery of all capital costs and
expenses and all ongoing operational expenses including reasonable
overhead costs and operating fees attributable to conflicting working
interests.
(11) The department shall order payment of principal and accrued interest from the
escrow account to all legally entitled entities within thirty (30) days of receipt by
the department of notification of the final legal determination of entitlement or
upon agreement of all entities claiming an ownership interest in the coalbed
methane. Upon the department's final determination:
(a)
(b)
(c)
(d)
(e)
(f)
Each legally entitled participating working interest owner shall receive a
proportionate share of the proceeds attributable to the conflicting
ownership interest;
Each legally entitled nonparticipating working interest owner shall receive
a proportionate share of the proceeds attributable to the conflicting
ownership interest, less the cost of being carried as a nonparticipating
working interest owner as determined by the election of the person under
the applicable pooling order;
Each person leasing or deemed to have leased its coalbed methane
ownership interest to the unit operator shall receive a share of the royalty
proceeds as set out in the applicable pooling order attributable to the
conflicting interests of the lessees;
The unit operator shall receive the costs contributed to the escrow
account by each legally entitled participating working interest owner, but
only to the extent that the costs and expenses described in subsection
(10)(b) of this section have not been recouped from production proceeds;
Each participating working interest owner who is determined not to hold
an ownership interest shall receive a refund of all amounts placed in
escrow pursuant to subsection (10)(a) of this section plus interest earned
thereon; and
All amounts remaining in escrow, after distribution of amounts described
in paragraphs (a), (b), (c), (d), and (e) of this subsection, shall be
distributed to the legally entitled participating working interest owners in
proportion to their interests.
Effective:July 13, 2004
History: Created 2004 Ky. Acts ch. 65, sec. 17, effective July 13, 2004.
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