KRS § 353.652 — KY Code / Title XXVIII / Chapter 353 / Section 353.652
353.652 Unit operation of pool -- Procedure
Status: in_force

353.652 Unit operation of pool -- Procedure.

(1) Upon the application of any operator in a deep well pool productive of oil or gas, or

both, and other minerals which may be associated and produced therewith and after

notice given by the commission to all persons reasonably known to own an interest

in the oil or gas in the pool, and after a hearing conducted in accordance with KRS

Chapter 13B, the commission may enter a final order requiring the unit operation of

a pool or of any portion or combinations thereof within a field. The unit operation

shall be in connection with a program designed to avoid the drilling of unnecessary

wells, or otherwise to prevent waste, or to increase the ultimate recovery of the

unitized minerals by additional recovery methods. The final order shall provide for

the unitization of separately-owned tracts and interests within the pool or pools, but

only after finding that:

(a) The order is reasonably necessary for the prevention of waste;

(b) The proposed plan of unitized operation will increase the ultimate recovery of

oil or gas, or both, from the pool and will be economically feasible;

(c) The production of oil or gas, or both, from the unitized pool can be allocated

in a manner to insure the recovery by all owners of their just and equitable

share of the production; and

(d) A contract incorporating the unitization agreement has been signed or in

writing ratified or approved by the owners of at least seventy-five percent

(75%) in interest in the pool as costs are shared under the terms of the order

and by seventy-five percent (75%) in interest in the pool as production is to be

allocated of the royalty in the unit area, and a contract incorporating the

required arrangements for operations has been signed or in writing ratified or

approved by the owners of at least seventy-five percent (75%) in interest in

the pool as costs are shared, and the commission has made a finding to that

effect either in the final order or a supplemental order.

(2) The final order requiring the unit operation shall designate one (1) operator as unit

operator and shall also make provision for the proportionate allocation to all

operators of the costs and expenses of the unit operation, including a reasonable

charge for supervision, which allocation shall be in the proportion that the

separately-owned tracts share in the production from the unit. In the absence of an

agreement entered into by the operators and filed with the commission providing for

sharing the costs of capital investments in wells and physical equipment, and

intangible drilling costs, the commission shall provide by order for the sharing of

the costs in the same proportion as the costs and expenses of the unit operation, but

any operator who has not consented to the unitization shall not 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 from the sale of the production accruing to the interest of the

operator exclusive of any royalty or overriding royalty interest.

(3) The commission, after notice and hearing as provided above may from time to time

by entry of a new or amending final order enlarge the unit area by approving

agreements adding to the area a pool or any portion or combinations thereof not

previously included. Any new or amended final order shall not become effective

unless and until:

(a) All of the terms and provisions of the unitization agreement relating to the

extension or enlargement of the unit area or to the addition of pools or

portions or combinations thereof to unit operations have been fulfilled and

satisfied and evidence thereof has been submitted to the commission; and

(b) The extension or addition effected by the order has been agreed to in writing

by the owners of at least seventy-five percent (75%) in interest in the pool as

costs are shared in the pool or pools or portions or combinations thereof to be

added to unit operations by the order and by seventy-five percent (75%) in

interest in the pool as production is to be allocated of the royalty owners in the

pool, pools, portions, or combinations and evidence thereof has been

submitted to the commission.

(4) Any agreement, in providing for allocation of production from the unit area, shall

first allocate to each pool or added portion a portion of the total production of oil

and gas, or both, from all pools affected within the area, as enlarged, the allocation

to be in proportion to the contribution which added pool or portions or extensions

thereof are expected to make, during the remaining course of unit operations, to the

total production of oil or gas, or both, of the unit as enlarged. The remaining portion

of unit production shall be allocated among the separately-owned tracts within the

previously established unit area in the same proportions as those specified prior to

the enlargement.