Cal. PRC § 3322 — California Code / Code prc / Division 3 / Chapter 1 / Article 5.5 / Section 3322
Section 3322
Status: in_force

An order of the supervisor requiring unit operation, pursuant to Section 3321, may include lands owned by any person as defined in Section 3316.1, and shall contain such provisions as may be necessary or proper to protect, safeguard, and adjust the respective rights and obligations of the persons affected, including but not limited to lessees, operators, independent contractors, lien claimants, owners of mineral rights, royalties, working interests, production payments, mortgages, or deeds of trust. The order shall include:

(a) A description of the area embraced, termed the “unit area”;

(b) A general statement of the nature of the applicable repressuring plan and the specifications therefor adopted by the supervisor to arrest or ameliorate subsidence to be prescribed in a separate order of the supervisor requiring repressuring operations;

(c) That as a condition to the continued production by the owners or operators of oil or gas from such pool or pools, they shall initiate and conduct such repressuring operations as shall be prescribed in a separate order or orders of the supervisor;

(d) A formula for the apportionment and allocation of the unit production among and to the several separately owned tracts within the unit area such as reasonably will permit persons otherwise entitled to share in or benefit by the production from such separately owned tracts to produce or receive, in lieu thereof, their fair, equitable and reasonable share of the unit production or other benefits thereof. A separately owned tract’s fair, equitable, and reasonable share of the unit production shall be measured by the value of each such tract for oil and gas purposes and its contributing value to the unit in relation to like values of other tracts in the unit, taking into account acreage, the quantity and quality of oil and gas recoverable therefrom, location on structure, its probable productivity of oil and gas in the absence of unit operations, the burden of operation to which the tract will or is likely to be subjected, or so many of such factors, and such other pertinent engineering geological, or operating factors as may be reasonably susceptible of determination;

Pending the adoption of a final formula for apportionment and allocation of unit production as above provided (which final formula must be adopted not later than 18 months from the effective date of the order of the supervisor requiring unit operation), an interim formula may be adopted based upon the gross oil production in the unit area during the calendar year preceding the date of such order of the supervisor, which shall be effective until the adoption of the final formula as above provided. The final formula, when adopted, shall be retroactive to the effective date of the order requiring unit operation and adjustment shall be made in the apportionment and allocation of production during such interim period in accordance with the final formula so adopted.

(e) Provisions for financing the unit and the further development and operation of the unit area and the basis, terms, and conditions on which the cost and expense thereof shall be apportioned among and assessed against the tracts and all interests therein, including a detailed accounting procedure governing all charges and credits incident to all operations within the unit. The expense of unit operation shall be chargeable to the separately owned tracts in the same proportion that such tracts share in the unit production, and the expenses chargeable to a tract shall be paid by the person who in the absence of unit operation would be responsible for the expense of developing and operating such tract. Subject to such terms and conditions as to time and rate of interest as may be fair to all concerned, reasonable provisions shall be made in the order for carrying or otherwise financing persons who are unable promptly to meet their financial obligations in connection with the unit repressuring operations, and upon application made prior to the entry of the order, for carrying a nonassenting working interest owner affected by a final order of the supervisor under Section 3321;

(f) A provision for the credits and charges to be made in the adjustment among the owners or operators of tracts within the unit area for their respective investments in wells, tanks, pumps, machinery, materials, and equipment contributed to the unit operation by the respective owners or operators. The net amount chargeable against the owner or operator of a separately owned tract shall be considered expenses of unit operation chargeable against such tract;

(g) A provision appointing an operating committee to have general overall management and control of the unit, including voting procedures, the conduct of its business and affairs and the operations to be carried on by it for the primary purpose of ameliorating or arresting subsidence, subject to the applicable repressuring plan, the specifications therefor and the unit order adopted by the supervisor. Such operating committee shall be composed of the persons primarily liable for the payment of the expenses of unit operation, or their representatives, which committee shall, within the time specified in the order, appoint a person to be known as the “unit operator,” who shall, under the direction and supervision of the operating committee, be responsible for the management and conduct of the unit operation;

(h) A provision specifying the method of voting upon any motion before the operating committee and the majority in number of votes necessary in order to carry a motion;

(i) That each vote upon a motion by the operating committee shall have a value corresponding to the percentage of the expense of unit operation borne by the person voting or his principal pursuant to the provisions of subdivision (e) of this section;

(j) If the operating committee fails to appoint the unit operator within the time specified in an order issued pursuant to this article, the supervisor shall appoint the unit operator;

(k) The time the unit operation shall commence, and the manner in which and the circumstances under which the unit operation shall terminate;

(l) Such additional provisions not inconsistent with this article which the supervisor deems appropriate for the accomplishment of the proposed plan of repressuring operations for the purpose of arresting or ameliorating subsidence within the unit area and the protection of all interested parties.