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353.652 Unit operation of pool -- Procedure.
(1)
(2)
(3)
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 as costs are shared under the terms of the order and by
seventy-five percent (75%) in interest 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
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
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thereof not 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 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 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:July 15, 1996
History: 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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