30-5-110. Agreements for waterflooding or other recovery operations, repressuring or pressure-maintenance operations, cycling or recycling operations; operation as a unit of 1 or more pools or parts thereof and pooling of interests in oil and gas therein; amendment of orders and agreements.

(a) An agreement for waterflooding or other recovery operations involving the introduction of extraneous forms of energy into any pool, repressuring or pressure-maintenance operations, cycling or recycling operations, including the extraction and separation of liquid hydrocarbons from natural gas in connection therewith, or for carrying any other method of unit or cooperative development or operation of one (1) or more pools or parts thereof, is authorized and may be performed, and shall not be held or construed to violate any of the statutes of this state relating to trusts, monopolies, or contracts and combinations in restraint of trade, and may be submitted to the commission for approval as being in the public interest or reasonably necessary to prevent waste or to protect correlative rights. Approval of such agreement by the commission shall constitute a complete defense to any suit charging violation of any statute of this state relating to trusts, monopolies and combinations in restraint of trade on account of such agreement or on account of operations conducted pursuant thereto. The failure to submit such an agreement to the commission for approval shall not for that reason imply or constitute evidence that such agreement or operations conducted pursuant thereto are in violation of laws relating to trusts, monopolies and combinations in restraint of trade.

(b) Except when context otherwise requires, the terms used or defined in W.S. 30-5-101, shall have the same meaning when used in this section.

(c) Any interested person may file an application with the commission requesting an order providing for the operation as a unit of one (1) or more pools or parts thereof and for the pooling of the interests in the oil and gas in the proposed unit area for the purpose of conducting such unit operation. Such application shall contain:

(i) A description of the land and pool, pools or portions thereof proposed to be so operated, termed the "unit area";

(ii) The names, as disclosed by the conveyance records of the county or counties in which the proposed unit area is situated, and the status records of the district office of the bureau of land management, of (A) all persons owning or having an interest in the oil and gas in such unit area or the production therefrom including mortgages and the owners of other liens or encumbrances, (B) all owners of every tract of land not included within but which immediately adjoins the proposed unit area or a corner thereof, and (C) the addresses of all such persons and owners, if known. If the name or address of any such person or owner is unknown, the application shall so indicate;

(iii) A statement of the type of operations contemplated in order to effectuate the purposes of this section;

(iv) A proposed plan of unitization applicable to the proposed unit area which the applicant considers fair, reasonable and equitable and which shall include provisions for the formula or method of allocating oil and gas produced from the proposed unit area to and among the separately owned tracts within such area, the appointment of a unit operator and the time when the plan is to become effective;

(v) A proposed operating plan providing the manner in which the unit will be supervised and managed and costs allocated and paid, unless all owners within the proposed unit area have joined in executing an operating agreement or plan providing for such supervision, management and allocation and payment of costs.

(d) Upon filing of such application, the commission shall promptly set the matter for hearing, and in addition to the notice, if any otherwise required by law or the commission's rules, shall cause notice of such hearing, specifying the time and place of hearing, and describing briefly its purpose and the land affected, to be mailed by certified mail at least fifteen (15) days prior to the hearing to all persons whose names and addresses are required to be listed in the application.

(e) If after considering the application and hearing the evidence offered in connection therewith, the commission shall enter an order setting forth the following described findings and approving the proposed plan of unitization and proposed operating plan, if any, if the commission finds that:

(i) The material allegations of the application are substantially true;

(ii) Such unit operation is feasible, will prevent waste, will protect correlative rights, and can reasonably be expected to increase substantially the ultimate recovery of oil or gas;

(iii) The value of the estimated additional recovery of oil or gas will exceed the estimated additional costs incident to conducting unit operations;

(iv) The oil and gas allocated to each separately owned tract within the unit area under the proposed plan of unitization represents, so far as can be practically determined, each such tract's just and equitable share of the oil or gas in the unit area;

(v) Where the unit embraces less than the whole of a pool, that the portion thereof to be included within the unit area is of such size and shape as may be reasonably required for the successful and efficient conduct of the unitized method or methods of operation for which the unit is created and that the conduct thereof will have no material adverse effect upon the remainder of such pool;

(vi) In case there are owners who have not executed an operating agreement or agreed to the proposed operating plan covering the supervision, management and allocation of payment costs, that such proposed operating plan:

(A) Makes a fair and equitable adjustment among the owners within the unit area for their respective investments in wells, tanks, pumps, machinery, materials and equipment which have contributed to the unit operations;

(B) Provides for a fair and equitable determination of the cost of unit operations, including capital investment, and establishes a fair and equitable method for allocating such costs to the separately owned tracts and for the payment of such costs by the persons owning such tracts, either directly or out of such person's respective share of unit production;

(C) If necessary, prescribes fair, reasonable and equitable terms and conditions as to time and rate of interest for carrying or otherwise financing any person who is unable to promptly meet his financial obligations in connection with the unit;

(D) Provides that each owner shall have a vote in the supervision and conduct of unit operations corresponding to the percentage of costs of unit operations chargeable against the interests of such person; and

(E) Provides for fair and equitable terms and conditions for removal of unit operator and for appointment of a successor unit operator.

(f) No order of the commission authorizing the commencement of unit operations shall become effective until the plan of unitization has been signed or in writing ratified or approved by those persons who own at least eighty percent (80%) of the unit production or proceeds thereof that will be credited to royalty and overriding royalty interests which are free of costs, and unless both the plan of unitization and the operating plan, if any, have been signed, or in writing approved or ratified, by those persons who will be required to pay at least eighty percent (80%) of the cost of unit operations. However, to the extent that overriding royalty interests are in excess of a total of twelve and one-half percent (12 1/2%) of the production from any tract, such excess interests shall not be considered in determining the percentage of approval or ratification by such cost-free interests. If such consent has not been obtained at the time the commission order is made, the commission shall, upon application, hold such supplemental hearings and make such findings as may be required to determine when and if such consent has been obtained. Notice of such supplemental hearing shall be given by regular mail at least fifteen (15) days prior to such hearing to each person owning interests in the oil and gas in the proposed unit area whose name and address was required by the provisions of paragraph (c)(ii) of this section to be listed in the application for such unit operations. If the required percentages of consent have not been obtained within a period of six (6) months from and after the date on which the order of approval is made, such order shall be ineffective and revoked by the commission, unless, for good cause shown, the commission extends that time. Any interested person may file an application with the commission requesting an order applicable only to the proposed unit area described in the application which shall provide for the percentage of approval or ratification by either cost-free or cost-bearing interests, or both, to be reduced from eighty percent (80%) to seventy-five percent (75%). The application shall contain the information required by subsection (c) of this section and any order of the commission entered pursuant to the application must comply with subsection (e) of this section. Notice of the hearing on the application shall be given in the same manner and to the same persons as required by subsection (d) of this section. If the commission finds that negotiations were being conducted on the effective date of this act or have been conducted for a period of at least nine (9) months prior to the filing of the application, that the applicant has participated in the negotiations diligently and in good faith, and that the percentage of approval or ratification required by this subsection cannot be obtained, the commission may reduce any percentage of approval or ratification required by this section from eighty percent (80%) to seventy-five percent (75%). Such an order shall affect only the unit area described in the application and shall operate only to approve the proposed plan of unitization and proposed operating plan and to reduce the required percentage of approval or ratification thereof and shall not change any other requirement contained in this section.

(g) From and after the effective date of an order of the commission entered under the provisions of this section, the operation of any well producing from the unit area defined in the order by persons other than the unit operator or persons acting under the unit operator's authority, or except in the manner and to the extent provided in the plan of unitization approved by the order, shall be unlawful and is hereby prohibited.

(h) An order entered by the commission under this section, or an agreement under subsection (a) of this section establishing a unit area under which waterflooding or other recovery operations involving the introduction of extraneous forms of energy into the pool have been conducted, may be amended in the same manner and subject to the same conditions as an original order or previous agreement: provided, (i) if the amendment affects only the rights of owners, then consent to the amendment by those persons who will be credited with unit production or proceeds thereof free of cost shall not be required; and (ii) no amendatory order shall change the percentage for the allocation of oil and gas as established by the original order or previous agreement, except with the written consent of those persons who own at least eighty percent (80%) of the unit production or proceeds thereof that will be credited to royalty and overriding royalty interests which are free of costs, and of those persons who will be required to pay at least eighty percent (80%) of the cost of unit operations, nor change the percentage for the allocation of costs as established by the original order or previous agreement, except with the written consent of those persons who own at least eighty percent (80%) of the unit production or proceeds thereof that will be credited to royalty and overriding royalty interests which are free of costs, and of those persons who will be required to pay at least eighty percent (80%) of the cost of unit operations. However, to the extent that overriding royalty interests are in excess of a total of twelve and one-half percent (12 1/2%) of the production from any tract, such excess interests shall not be considered in determining the percentage of approval or ratification by such cost-free interests. If such consent has not been obtained at the time the commission order is made, the commission shall, upon application, hold such supplemental hearings and make such findings as may be required to determine when and if such consent has been obtained. Notice of such supplemental hearing shall be given by regular mail at least fifteen (15) days prior to such hearing to each person owning interests in the oil and gas in the unit area whose name and address was required by the provisions of paragraph (c)(ii) of this section to be listed in the application for such unit operations. If the required percentages of consent have not been obtained within a period of six (6) months from and after the date on which the order of approval is made, such order shall be ineffective and revoked by the commission, unless, for good cause shown, the commission extends that time. Any interested person may file an application with the commission requesting an order applicable only to the unit area described in the application which shall provide for the percentage of approval or ratification by either cost-free or cost-bearing interests, or both, to be reduced from eighty percent (80%) to seventy-five percent (75%). The application shall contain the information required by subsection (c) of this section and any order of the commission entered pursuant to the application must comply with subsection (e) of this section. Notice of the hearing on the application shall be given in the same manner and to the same persons as required by subsection (d) of this section. If the commission finds that negotiations were being conducted on the effective date of this act or have been conducted for a period of at least nine (9) months prior to the filing of the application, that the applicant has participated in the negotiations diligently and in good faith, and that the percentage of approval or ratification required by this subsection cannot be obtained, the commission may reduce any percentage of approval or ratification required by this section from eighty percent (80%) to seventy-five percent (75%). Such an order shall affect only the unit area described in the application and shall operate only to approve a proposed plan of unitization and a proposed operating plan and to reduce the required percentage of approval or ratification thereof and shall not change any other requirement contained in this section.

(j) Upon application by any interested person, the commission, by order may, in the same manner and subject to the same conditions as an original order, provide for the unit operation of a pool or pools, or parts thereof, that embrace a unit area established by a previous order of the commission or that embrace a unit area previously established by a previous agreement under which waterflooding or other recovery operations involving the introduction of extraneous form of energy into the pool have been conducted. Such order in providing for the allocation of unit production, shall first treat the unit area previously established as a single tract, and the portion of unit production so allocated thereto 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 or such previous agreement as the case may be.

(k) All operations, including, but not limited to, the commencement, drilling, or operation of a well upon any portion of the unit area for all purposes shall be deemed to be the conduct of such operations upon each separately owned tract in the unit area by the owner or owners thereof. The portion of the unit production allocated to a separately owned tract in a unit area shall, when produced, be deemed, for all purposes, to have been actually produced from such tract by a well drilled thereon. Operations conducted pursuant to an order of the commission providing for unit operations shall constitute a 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 such obligations cannot be had because of the orders of the commission. Whenever the commission enters an order providing for a unit operation, any lease, other than a state or federal lease, which covers lands that are in part within the unit area embraced in any such plan of unitization and that are in part outside of such unit area shall be vertically segregated into separate leases, one (1) covering all formations underlying the lands within such unit area and the other covering all formations underlying the lands outside each unit area, such segregation to be effective as of the anniversary date of such lease next ensuing after the expiration of ninety (90) days from the effective date of unitization; provided, however, that any such segregated lease as to the outside lands shall continue in force and effect for the primary term thereof, but not for less than two (2) years from the date of such segregation and so long thereafter as operations are conducted under the provisions of the lease. If any such lease provides for a lump-sum rental and if rentals become payable under any segregated lease covering the outside land, such lump-sum rental shall be prorated between such segregated leases on an acreage basis.

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

(n) 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 such tract until terminated in accordance with the provisions thereof.

(o) 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 for the account of the owners within the unit area, shall be the property of such owners in the proportion that the expenses of unit operations are charged.

(p) Subject to the limitations set forth in this section, and to such further limitations as may be set forth in the plan of unitization and operating plan, the operator of the unit shall have a first and prior lien for costs incurred pursuant to the plan of unitization and operating plan upon each owner's oil and gas rights and his share of unitized production to secure the payment of such owner's proportionate part of the costs of developing and operating the unit area. The lien may be established and enforced in the same manner as provided by W.S. 29-3-101 through 29-3-111. For such purposes any nonconsenting owner shall be deemed to have contracted with the unit operator for his proportionate part of the cost of developing and operating the unit area. A transfer or conversion of any owner's interest or any portion thereof however accomplished after the effective date of the order creating the unit, shall not relieve the transferred interest of said operator's lien on said interest for the cost and expense of unit operations.

(q) Notwithstanding any other provisions in this section to the contrary, any person who owns an interest in oil or gas within the unit area which is not subject to an oil and gas lease or similar contract, shall, with respect to seven-eighths of the interest, be deemed to be an owner obligated to pay all costs of unit operations attributable to the interest and shall be deemed to be a royalty owner to the extent of one-eighth of the interest free from the costs.

(r) The provisions of subsections (b) through (q) of this section shall never be applicable for the purpose of:

(i) Changing the terms of unit agreements under which waterflooding or other recovery operations involving the introduction of extraneous forms of energy into a pool have been conducted prior to the effective date of this section or changing the rights of either any person who has executed or ratified a preexisting unit agreement or any person who, being qualified to become a party to a preexisting unit agreement and having received an opportunity to become a party thereto, has failed or refused to execute or ratify the agreement; or

(ii) Subjecting the interest of any person in the oil and gas in the unit area to a unit agreement which allocates unit production to such interest under a formula based solely upon the surface acreage of the separate tracts within the unit area.

(s) A certified copy of any order of the commission entered under the provisions of this section shall be entitled to be recorded in the office of the county clerk for the counties where all or any portion of the unit area is located, and such recordation shall constitute notice thereof to all persons.

(t) If any section, subsection, sentence or clause of this section is adjudged to be unconstitutional or invalid, such adjudication shall not affect any other portions of this section which can be given effect without the unconstitutional or invalid provision, and to this end the provisions of this section are severable.