§5.1. Deep pool order; ultra deep structure units; application; procedure; allocation of costs; rules and regulations

A. The following shall be applicable to deep pool units:

(1) In order to prevent waste and to avoid the drilling of unnecessary wells, and to encourage the development of deep oil and gas pools in Louisiana, the commissioner of conservation is authorized, as provided in this Subsection, to establish a single unit to be served by one or more wells for a deep pool and to adopt a development plan for such deep unit.

(2) Without in any way modifying the authority granted to the commissioner in R.S. 30:9(B) to establish a drilling unit or units for a pool and in addition to the authority conferred in R.S. 30:5, the commissioner upon the application of any interested party may enter an order requiring the unit operation of any deep pool when such unit operation will promote the development of such deep pools, prevent waste, and avoid the drilling of unnecessary wells.

(3) In connection with such order, the commissioner shall have the right to establish a unit for a deep pool and to unitize, force pool, and consolidate all separately owned tracts and other property ownerships within such unit. Any order creating a unit for a deep pool shall be issued only after notice and public hearing and shall be based on findings that:

(a) The order is reasonably necessary to promote the development of a deep pool and for the prevention of waste and the drilling of unnecessary wells.

(b) The proposed unit operation is economically feasible.

(c) The geologic top of the deep pool was encountered in the initial well for the pool at a depth in excess of fifteen thousand feet true vertical depth.

(d) Sufficient evidence exists to reasonably establish the limits of the deep pool.

(e) The plan of development for the unit is reasonable. The plan shall be revised only if approved by the commissioner after notice and public hearing.

(4) The order shall provide for the initial allocation of unit production on a surface acreage basis to each separately owned tract within the unit.

(5) No order shall be issued by the commissioner unless interested parties have been provided a reasonable opportunity to review and evaluate all data submitted by the applicant to the commissioner to establish the limits of the deep pool, including seismic data.

(6) The order creating the unit 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. In the event of a dispute relative to the calculation of unit well costs or depreciated unit well costs, the commissioner shall determine the proper costs after notice to all interested owners and public hearing thereon.

(7) Upon application and after notice and public hearing and consideration of all available geological and engineering evidence, the commissioner, to the extent required by such evidence, may create, revise, or dissolve any unit provided for under this Subsection or modify any provision of any order issued hereunder. Any such order shall provide for the allocation of unit production on a just and equitable basis to each separately owned tract within the unit.

(8) The commissioner shall prescribe, issue, amend, and rescind such orders, rules, and regulations as he may find necessary or appropriate to carry out the provisions of this Subsection.

(9) While this Subsection authorizes the initial creation of a single unit to be served by one or more wells, nothing herein shall be construed as limiting the authority of the commissioner to approve the drilling of alternate unit wells on drilling units established pursuant to R.S. 30:9(B).

B. The following shall be applicable to ultra deep structure units:

(1) In order to prevent waste and to avoid the drilling of unnecessary wells, and to encourage the development of ultra deep oil and gas structures in Louisiana, the commissioner of conservation is authorized, as provided in this Subsection, to establish a single unit to be served by one or more wells for an ultra deep structure and to adopt a plan of development for such ultra deep structure unit. For purposes of this statute, a "structure" is defined as a unique geologic feature that potentially traps hydrocarbons in one or more pools or zones.

(2) Without in any way modifying the authority granted to the commissioner by R.S. 30:9(B) to establish a drilling unit or units for a pool and in addition to the authority conferred by R.S. 30:5 and 5.2, the commissioner, upon the application of any interested party, may enter an order requiring the unit operation of any ultra deep structure when such unit operation will promote the development of such ultra deep structure, prevent waste, and avoid the drilling of unnecessary wells.

(3) In connection with such order, the commissioner shall have the right to establish a unit no greater than nine thousand acres for an ultra deep structure and to unitize, force pool, and consolidate all separately owned tracts and other property ownerships within such unit. Any order creating a unit for an ultra deep structure shall be issued only after notice and public hearing and shall be based on findings that:

(a) The order is reasonably necessary to promote the development of an ultra deep structure and to prevent waste and the drilling of unnecessary wells.

(b) The proposed unit operation appears economically feasible.

(c) The stratigraphic top of the ultra deep structure unit is encountered or anticipated to be encountered in the initial well for the structure at a depth in excess of twenty-two thousand feet true vertical depth.

(d) Sufficient evidence exists to reasonably establish the limits of the ultra deep structure.

(e) The applicant has submitted a plan of development for the unit that is reasonable and contains the information listed under Paragraph (B)(4) of this Section. It is presumed that a reasonable plan of development will include at least one well for each three thousand acres contained in the unit.

(4) The plan of development shall include, at a minimum, the following:

(a) The applicant's estimate of the number of wells it intends to drill in the unit.

(b) The applicant's estimated time table for drilling and completing each unit well.

(c) The applicant's anticipated target depth for each such well.

(5) Upon application of any landowner or other interested party, or at the commissioner's discretion, the plan of development may be revised by the commissioner after notice and public hearing for good cause.

(6) The order creating a unit for an ultra deep structure shall provide for the initial allocation of unit production on a surface acreage basis to each separately owned tract within the unit and shall also specify the stratigraphic intervals to which the unit shall be limited.

(7) No order creating a unit for an ultra deep structure shall be issued by the commissioner unless interested parties have been provided a reasonable opportunity to review and evaluate all data, including seismic data, submitted by the applicant to the commissioner to establish the limits of the deep structure.

(8) An order creating the unit for an ultra deep structure shall designate a unit operator.

(9) The initial well and each subsequent well proposed or drilled pursuant to the plan of development shall be deemed a unit well. The provisions of R.S. 30:10(A)(2) shall be applicable to ultra deep structure units, including the applicable risk charge. In the event of a dispute relative to the calculation of unit well costs or depreciated unit well costs, the commissioner shall determine the proper costs after notice to all interested owners and public hearing thereon.

(10) Upon application by any landowner or other interested party, or at the commissioner's discretion, and after notice and public hearing and consideration of available geological, engineering, and other relevant evidence, the commissioner, to the extent required by such evidence, may by order create, revise, confirm, or dissolve any unit provided for under this Subsection or modify any provision of any order issued hereunder. Any such order shall provide for the allocation of unit production on a just and equitable basis to each separately owned tract within the unit. The applicant shall, in all cases, have the burden of proof that the existing unit or order should be revised, confirmed, dissolved, or amended in the manner proposed in the application. If the commissioner determines that the unit operator has not substantially complied with the plan of development, the unit operator shall be required to show cause why the unit should not be reduced in size.

(11) The provisions of Subsection A of this Section shall not be applicable to any unit well drilled in a unit established pursuant to this Subsection.

(12) The commissioner shall prescribe, issue, amend, and rescind such orders, rules, and regulations as he may find necessary or appropriate to carry out the provisions of this Subsection.

(13) While the provisions of this Subsection authorize the initial creation of a single unit to be served by one or more wells, nothing herein shall be construed as limiting the authority of the commissioner to approve the drilling of alternate unit wells on drilling units established pursuant to R.S. 30:9(B).

Acts 1999, No. 1094, §1; Acts 2012, No. 743, §1.