2013 Kentucky Revised Statutes CHAPTER 353 - MINERAL CONSERVATION AND DEVELOPMENT 353.651 Deep wells -- Establishment and regulation of drilling units -- Pooling of interests -- Exceptions.
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353.651 Deep wells -- Establishment and regulation of drilling units -- Pooling
of interests -- Exceptions.
The following provisions of this section shall apply to any deep well:
(1) Drilling units:
(a) The commission shall, after notice and a hearing, to be conducted in
accordance with KRS Chapter 13B, regulate the drilling and location of
wells in any pool and the production therefrom so as to prevent
reasonably avoidable net drainage from each developed unit (that is,
drainage which is not equalized by counterdrainage) so that each owner
in a pool shall have the right and opportunity to recover his fair and
equitable share of the recoverable oil and gas in such pool.
(b) For the prevention of waste, to protect and enforce the correlative rights
of the owners in a pool, and to avoid the augmenting and accumulation of
risks arising from the drilling of an excessive number of wells, the
commission shall, after notice and a hearing, to be conducted in
accordance with KRS Chapter 13B, establish drilling units for each pool.
The spacing of wells in proved oil and gas fields shall be governed by
administrative regulations promulgated for that particular field. Wells
drilled in areas not covered by special field administrative regulations
shall be governed by statewide administrative regulations promulgated by
the commission.
(c) Each well permitted to be drilled upon any drilling unit shall be drilled in
accordance with the administrative regulations promulgated by the
commission and in accordance with a spacing pattern fixed by the
commission for the pool in which the well is located, with any exceptions
that may be reasonably necessary where it is shown, in accordance with
administrative regulations promulgated by the commission, that the unit is
partly outside the pool or for some other reason a well otherwise located
on the unit would not be likely to produce in paying quantities, or
topographical conditions are such as to make the drilling at the location
unduly burdensome. Whenever an exception is granted, the commission
shall take action as will offset any advantage which the person securing
the exception may have over other owners by reason of the drilling of the
well as an exception.
(d) No drilling unit established by the commission shall be smaller than the
maximum area which can be drained efficiently by one (1) deep well so as
to produce the reasonable maximum recoverable oil or gas in such area,
unless an exception is granted in accordance with administrative
regulations promulgated by the commission.
(e) An order establishing drilling units may be modified, altered, extended,
amended, or vacated by the commission after notice and hearing as
prescribed above.
(2) Pooling of interests in drilling units:
(a) 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 a drilling unit, the interested persons may pool their tracts or interests
(b)
(c)
(d)
(e)
for the development and operation of the drilling unit. In the absence of
voluntary pooling and upon application of any operator having an interest
in the drilling unit, and after the commission has given notice to all
persons reasonably known to own an interest in the oil or gas in the
drilling unit, and after a hearing conducted in accordance with KRS
Chapter 13B, the commission shall enter an order pooling all tracts or
interests in the drilling unit for the development and operation thereof and
for the sharing production therefrom. Each pooling order shall be upon
terms and conditions which are just and reasonable.
All operations, including, but not limited to, the commencement, drilling,
or operation of a deep well, upon any portion of a drilling unit for which a
pooling order has been entered, shall be deemed for all purposes the
conduct of those operations upon each separately owned tract in the
drilling unit by the several owners thereof. That portion of the production
allocated to a separately owned tract included in a drilling unit shall, when
produced, be deemed for all purposes to have been actually produced
from the tract by a deep well drilled thereon.
Any pooling order under the provisions of subsection (2) of this section
shall authorize the drilling and operation of a deep well for the production
of oil or gas from the pooled acreage; shall designate the operator to drill
and operate such deep well; shall prescribe the time and manner in which
all owners of operating interests in the pooled tracts or portions of tracts
may elect to participate therein; shall provide that all reasonable costs
and expenses of drilling, completing, equipping, operating, plugging, and
abandoning the deep well shall be borne, and all production therefrom
shared, by all owners of operating interests in proportion to the acreage in
the pooled tracts owned or under lease to each owner; and shall make
provision for payment of all reasonable costs thereof, including
reasonable charge for supervision and for interest on past due accounts,
by all those who elect to participate therein. Upon the application of any
operator having an interest in the drilling unit, the person or persons
selected to drill and operate the deep well shall be determined by
competitive bids.
Upon request, any pooling order shall provide just and equitable
alternatives whereby an owner of an operating interest who does not elect
to participate in the risk and cost of the drilling of a deep well may elect to
surrender his interest or a portion thereof to the participating owners on a
reasonable basis and for a reasonable consideration, which, if not agreed
upon, shall be determined by the commission; or to participate in the
drilling of the deep well on a limited or carried basis on terms and
conditions which, if not agreed upon, shall be determined by the
commission to be just and reasonable.
If an operator owning an interest in a pooled drilling unit elects not to
participate in the risk and cost of drilling of a deep well thereon, and
another operator owning an interest therein, shall drill and operate, or pay
the costs of drilling and operating a deep well as provided in the
commission's order, then the operating owner shall be entitled to the
share of production from the tracts or portions thereof accruing to the
(3)
interest of the nonparticipating owner, exclusive of any royalty or
overriding royalty reserved in any leases, assignments thereof or
agreements relating thereto, of the tracts or portions thereof, or exclusive
of one-eighth (1/8) of the production attributable to all unleased tracts or
portions thereof, until the market value of the nonparticipating owner's
share of the production, exclusive of any royalty, overriding royalty or
one-eighth (1/8) of production, equals two (2) times the share of the costs
payable by or charged to the interest of the nonparticipating owner.
(f) If a dispute shall arise as to the costs of drilling and operating a deep
well, the commission shall determine and apportion the costs, within
ninety (90) days from the date of written notification to the commission of
the existence of such dispute.
This section shall not apply to wells drilled, deepened, or reopened for the
injection of water, gas, or other fluids into any subsurface formation.
Effective:July 12, 2006
History: Amended 2006 Ky. Acts ch. 158, sec. 1, effective July 12, 2006. -Amended 2000 Ky. Acts ch. 139, sec. 4, effective July 14, 2000. -- Amended
1996 Ky. Acts ch. 318, sec. 343, effective July 15, 1996. -- Created 1974 Ky.
Acts ch. 45, sec. 5.
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