§ 525. Field-wide unitization

(a) In addition to the authority for the establishment of drilling units for individual wells granted in section 522 of this title, the Board may establish field-wide units composed of one or more reservoirs or parts thereof and including one or more wells. After adequate geological, engineering, and other information has been required through development of the reservoir, the Board, on its own motion or upon application of any owner, shall hold a hearing to consider the need for cooperative development or operation as a field-wide unit.

(b) The Board shall enter an order providing for the unit development or operation of a reservoir or part thereof if it finds that:

(1) such operation will increase the ultimate recovery of oil or gas; and

(2) the value of the estimated additional recovery of oil and gas exceeds the estimated additional cost incident to conducting such operations; and

(3) the development or operation is reasonably necessary to prevent waste.

(c) The order shall be upon terms and conditions that are just and reasonable and shall prescribe a plan for unit operations that shall include:

(1) a description of the reservoir, reservoirs, or parts thereof to be operated as a unit, termed the unitized area;

(2) a statement of the nature of the operations contemplated;

(3) an allocation of production and costs to the separately owned tracts in the unitized area. The allocation shall be in accord with the agreement, if any, of the interested parties. If there is no such agreement, production shall be allocated in a manner calculated to ensure that each owner within the unitized area receives his or her just and equitable share of production. Costs shall be allocated on a just and reasonable basis;

(4) a provision, if necessary, permitting any owner who has involuntarily unitized to pay his or her share of costs out of his or her share of production, plus a supervision, risk, and interest assessment not to exceed 300 percent of that owner's share of the costs;

(5) a provision for the supervision and conduct of the unit operations, in respect to which each owner shall have a vote with a value corresponding to the percentage of the costs of unit operations chargeable against its interest;

(6) the time when the unit operations shall commence and the manner in which, and the circumstances under which, the unit operations shall terminate; and

(7) such additional provisions as are found to be appropriate for carrying out the unit operations.

(d) No order of the Board providing for unit operations shall become effective until the plan for unit operations approved by the Board:

(1) has been approved in writing by the owners who, under the Board's order, will be required to pay at least 60 percent of the costs of the unit operation, and also by those persons who own at least 60 percent of the royalties; and

(2) the Board has made a finding, either in the order providing for unit operations or in a supplemental order, that the plan for unit operations has been approved.

(e) If the plan for unit operations has not been approved at the time the order providing for unit operations is made, the Board shall upon application and notice hold supplemental hearings to determine if and when the plan for unit operations has been approved. If the persons owning required percentages of interest in the unitized area do not approve the plan for unit operations within a period of six months from the date on which the order providing for unit operations is made, or within such additional period or periods of time as the Board prescribes, the order will be unenforceable and shall be withdrawn by the Board.

(f) An order providing for unit operations may be amended by Board order made in the same manner and subject to the same conditions as an original order providing for unit operations, provided:

(1) if the amendment affects only the rights and interests of the owners, the approval of the amendment by the owners of interests free of cost shall not be required; and

(2) the order of amendment shall not change the percentage established in the original order for the allocation of oil and gas as established for any separately owned tract, except with the consent of all persons owning oil and gas rights in the tract; and

(3) the order of amendment shall not change the percentage established in the original order for the allocation of cost as established for any separately owned tract, except with the consent of all owners in the tract.

(g) The Board may order the unit operation of a reservoir or parts thereof that include a unitized area established by a previous order of the Board. In providing for the allocation of unit production, the order shall first treat the unitized area previously established as a single tract. The portion of the new unit production shall then be allocated among the separately owned tracts included in such previously established unit area in the same proportions as those specified in the previous order.

(h) All operations, including the commencement, drilling, or operation of a well under any portion of the unit area shall be deemed for all purposes the conduct of that operation upon each separately owned tract in the unit area by the several owners. The portion of the unit production allocated to a separately owned tract in a unit area shall be deemed, for all purposes, to have actually been produced from the tract by a well drilled on it. Operations conducted pursuant to an order of the Board providing for unit operations shall constitute fulfillment of all the express or implied obligations of each lease or contract covering lands in the unit area to the extent that compliance with those obligations cannot be had because of the order of the Board.

(i) The portion of the unit production allocated to any tract, and the proceeds from its sale, shall be the property and income of the several persons to whom, or to whose credit, they are allocated or payable under the order providing for unit operations.

(j) No division order or other contract relating to the sale or purchase of production from a separately owned tract shall be terminated by the order providing for unit operations, but shall remain in force and apply to oil and gas allocated to that tract until terminated in accordance with the provisions of the order.

(k) Except to the extent that the parties affected so agree, no order providing for unit operations shall be construed to result in a transfer of all or any part of the title of any person to the oil and gas rights in any tract in the unit area. All property, whether real or personal, that may be acquired in the conduct of unit operations shall be acquired for the account of the owners within the unit area, and shall be the property of those owners in the proportion that the expenses of unit operations are charged. (Added 1981, No. 240 (Adj. Sess.), § 2, eff. April 28, 1982.)