California's New Unitization Law
Authors: Wanvig James L. 
Published: December 2007

This paper was prepared for the 43rd Annual California Regional Meeting of the Society of Petroleum Engineers of AIME to be held in Bakersfield, Calif., Nov. 8–10, 1972. Permission to copy is restricted to an abstract of not more than 300 words. Illustrations may not be copied. The abstract should contain conspicuous acknowledgment of where and by whom the paper is presented. Publication elsewhere after publication in the JOURNAL OF PETROLEUM TECHNOLOGY or the SOCIETY OF publication in the JOURNAL OF PETROLEUM TECHNOLOGY or the SOCIETY OF PETROLEUM ENGINEERS JOURNAL is usually granted upon requested to the Editor PETROLEUM ENGINEERS JOURNAL is usually granted upon requested to the Editor of the appropriate journal, provided agreement to give proper credit is made.

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After forty years of often tumultous and occasionally bitter internecine political battles within the oil industry, which had prevented the adoption of, first, prorationing, and, later, compulsory unitization, California in 1971 quietly adopted a fieldwide majority rule compulsory unitization law. While the new statute does not apply to every pool in the State, and contains some unusual requirements that may make its application difficult in some situations, nevertheless its adoption marks a new phase of political relationships within the oil industry in California and leaves Texas the only major producing state not having some form of fieldwide compulsory unitization law.

In 1931, exactly four decades before the adoption of the new unitization law, the well-remembered Sharkey bill was enacted. depth of the great depression, crude was in over supply, and at least in some states, both underground and above ground waste were serious problems. A number of states turned to problems. A number of states turned to prorationing, as did the California prorationing, as did the California legislature. Under the referendum procedure, the matter was placed before procedure, the matter was placed before the people in the 1932 election. A bitter billboard battle ensued and to this day Californians who were there talk of the sharks on the sign boards, representing the major companies supporting the Sharkey bill. On election day, the voters resoundingly rejected "oil control" in favor of "free enterprise."

One of the telling arguments against the Sharkey bill evidently was that the oil conservation commission would have been made up largely of oil men. A few years later, therefore, in 1939, another attempt was made to adopt prorationing in the so-called Atkinson prorationing in the so-called Atkinson bill. This time the commission was to be made up of the state Directors of Natural Resources, Public Works, and Finance. While this blunted one of the main arguments against the Sharkey bill, there was another referendum battle and the voters again overturned the legislature's enactment.