§5. Permission to convert gas into carbon black; recycling gas; unit operations

A. In order to prevent waste of natural gas, the commissioner may grant to bona fide applicants permits for the building and operation of plants and to burn natural gas into carbon black for the period of time fixed by the commissioner in the permit, not to exceed twenty-five years and subject to the provisions of the laws of the state and the rules and regulations of the department. It shall be a violation of this Chapter for any person to build or operate a new plant, for these purposes without the permit required by this Section.

B. In order to prevent waste and to avoid the drilling of unnecessary wells, the commissioner shall, after notice and upon hearing, and his determination of feasibility, require the re-cycling of gas in any pool or portion of a pool productive of gas from which condensate or distillate may be separated or natural gasoline extracted, and promulgate rules to unitize separate ownership and to regulate production of the gas and reintroduction of the gas into productive formations after separation of condensate or distillate, or extraction of natural gasoline, from the gas.

C.(1) Without any way modifying the authority granted to the assistant secretary of the office of conservation in R.S. 30:9(B) to establish a drilling unit or units for a pool and in addition to the authority conferred in Subsection B of this Section:

(a) The assistant secretary of the office of conservation upon the application of any interested party, also is authorized and empowered to enter an order requiring the unit operation of any pool or a combination of two pools in the same field, productive of oil or gas, or both, in connection with the institution and operation of systems of pressure maintenance by the injection of gas, water, or any other extraneous substance, or in connection with any program of secondary or tertiary recovery; and

(b) The assistant secretary of the office of conservation is further authorized and empowered to require the unit operation of a single pool in any situation where the ultimate recovery can be increased and waste and the drilling of unnecessary wells can be prevented by such a unit operation.

(2) In connection with such an order of unit operation, the assistant secretary of the office of conservation shall have the right to unitize, pool, and consolidate all separately owned tracts and other property ownerships. Any order for such a unit operation shall be issued only after notice and hearing and shall be based on findings that:

(a) The order is reasonably necessary for the prevention of waste and the drilling of unnecessary wells, and will appreciably increase the ultimate recovery of oil or gas from the affected pool or combination of two pools,

(b) The proposed unit operation is economically feasible,

(c) The order will provide for the allocation to each separate tract within the unit of a proportionate share of the unit production which shall insure the recovery by the owners of that tract of their just and equitable share of the recoverable oil or gas in the unitized pool or combination of two pools, and

(d) At least three-fourths of the owners and three-fourths of the royalty owners, as to a particular interest, as hereinafter defined, such three-fourths to be in interest as determined under (c) hereof, shall have approved the plan and terms of unit operation, such approval to be evidenced by a written contract or contracts covering the terms and operation of the unitization signed and executed by the three-fourths in interest of the owners and three-fourths in interest of the said royalty owners and filed with the assistant secretary of the office of conservation on or before the day set for the hearing.

(3) The order requiring the unit operation shall designate a unit operator and shall also make provision for the proportionate allocation to the owners (lessees or owners of unleased interests) of the costs and expenses of the unit operation, which allocation shall be in the same proportion that the separately owned tracts share in unit production. The cost of capital investment in wells and physical equipment and intangible drilling costs, in the absence of voluntary agreement among the owners to the contrary, shall be shared in like proportion; however, no such owner who has not consented to the unitization shall 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 of production accruing to the interest of such owner out of production from such unit operation. However, no well costs credit allowable shall be adjusted on the basis of less than the average well costs within the unitized area. The order requiring unit operation shall not vary nor alter any of the terms of the above required written contract or contracts evidencing approval nor impose any terms or operations upon the non-signers of the contract or contracts more onerous than the terms and operations set out in the contract or contracts.

(4) Upon application and after notice and a public hearing and consideration of all available geological and engineering evidence, the Assistant Secretary of the Office of Conservation, to the extent required by such evidence, may revise any reservoirwide unit or units heretofore created by the Assistant Secretary of the Office of Conservation.

(5) For the purpose of calculating the above required three-fourths in interest of royalty owners, the term "royalty owner" shall mean any interested party other than the owner of an unleased interest or a mineral lessee or the owner of any interest created out of the interest of a mineral lessee, such as a net operating interest, overriding royalty, or production payment. Solely for the purpose of calculating the above required three-fourths in interest of owners and without expanding the definition of the term "owner" in R.S. 30:3(8), all interested parties owning interests entitling them to share in production from a proposed unit whose interests have been created out of that of a mineral lessee shall have their interests considered as if they were owners.

(6) No order of the commissioner entered pursuant hereto shall have the effect of enlarging, displacing, varying, altering, or in anywise whatsoever modifying or changing contracts in existence on the effective date of this Act concerning the unitization of any pool (reservoir) or pools (reservoirs) or field (as defined in the contract) for the production of oil or gas, or both.

D.(1) In order to prevent waste and increase the ultimate recovery of oil or gas, or both, the assistant secretary of the office of conservation, upon the application of any interested owner, and only after notice and a public hearing, is authorized to approve a cyclic injection project for the operation of a well by the method of enhanced recovery known as cyclic injection, without the formation of a unit under Subsection C of this Section or under any other provisions of this Chapter. No operator shall utilize cyclic injection without first securing the assistant secretary's approval pursuant to this Subsection. For the purposes of this Subsection, "cyclic injection" is hereby defined as a single-well process in which a production well is injected with a substance for the purpose of enhanced recovery. After a shut-in period, the well is returned to production. This procedure may be performed repeatedly on one or more wells in a reservoir.

(2) Prior to approving any cyclic injection project the assistant secretary must find that the project will not drain any area of the reservoir different from that being drained by the project well prior to initiation of the project, and that the project will not otherwise adversely affect other owners having rights in the same reservoir in which the applicant proposed to conduct cyclic injection. If the assistant secretary does not make these findings required in the preceding sentence, he shall not approve the cyclic injection project, and it shall not be conducted, unless:

(a) A unit encompassing the maximum area which may efficiently and economically be drained by one well utilizing cyclic injection is formed under other provisions of this Chapter, or

(b) A unit encompassing the entire reservoir is formed under Subsection C of this Section.

(3) The approval of a cyclic injection project shall not cause any change or alteration in the boundaries, tract participations or other aspects of any unit previously formed under this Chapter except to the extent the unit is superseded by a unit formed under Subsection C of this Section.

(4) No cyclic injection project approved under this Subsection shall qualify for exemption from severance tax under R.S. 47:633.4, unless:

(a) A unit is formed under Subsection C of this Section and

(b) The project employs one of the techniques enumerated in, and otherwise qualifies under, R.S. 47:633.4.

(5) Notwithstanding any other provision of law to the contrary, an owner, producer, or operator in the Caddo Pine Island Field in Caddo Parish shall be authorized to dispose or reinject produced saltwaters into the productive interval of the Nacotoch Formation without unitization of the entire reservoir; however, the consent of the other owners, producers, or operators operating within a one-fourth mile radius of such wells shall be obtained prior to the commencement of the disposal or injection of such saltwaters.

Amended by Acts 1960, No. 441, §1; Acts 1984, No. 768, §1; Acts 1987, No. 363, §1; Acts 1992, No. 1052, §1.