Opinion ID: 1307933
Heading Depth: 2
Heading Rank: 1

Heading: whether the unit must be dissolved since water injection has ceased

Text: Petitioners contend that the unit was created for the sole or at least the primary purpose of secondary recovery operations, and that since secondary recovery operations ceased in 1971, the unit must be dissolved. The original Plan of Unitization, circulated among and approved by more than 75%  but less than 100%  of the royalty and mineral interest owners, clearly called for secondary recovery operations by means of water injection. The plan, however, also provided that the working interest owners could discontinue or change the method of operation according to the dictates of good engineering or production practices. The statute under which compulsory unitization was secured, K.S.A. 55-1304, quoted at length earlier in this opinion, provides that unitization may be imposed by the commission if it finds that (1) primary production from a pool or a part thereof sought to be unitized has reached a low economic level and, without introduction of artificial energy, abandonment of oil or gas wells is imminent; or (2) the unitized management, operation and further development of the pool ... is economically feasible and reasonably necessary to prevent waste within the reservoir and thereby increase substantially the ultimate recovery of oil or gas.... The 1968 order of the corporation commission included both findings, stated in separate sentences in paragraph No. 4, quoted in full above. Thus, the commission made two findings which would support and authorize its unitization order: The need for the introduction of artificial energy; and the need for unitized management, operation and development to prevent waste. The separation of the two distinct findings in the statute by a semicolon and the conjunction or clearly shows that the legislature intended that compulsory unitization could be imposed by the corporation commission upon either finding  need for introduction of artificial energy or the need for unitized management, operation and development. This has been the interpretation followed by at least one commentator on the statute. Professor Ernest E. Smith, commenting in The Kansas Unitization Statute: Part I, 16 Kan. L. Rev. 567 (1968), says: Under the terms of the Kansas statute two types of field conditions will warrant the issuance of a unitization order. The first field condition is met when `the primary production from a pool or a part thereof sought to be unitized has reached a low economic level and, without introduction of artificial energy, abandonment of oil or gas wells is imminent.' The second exists whenever `the unitized management, operation and further development of the pool or the part thereof sought to be unitized is economically feasible and reasonably necessary to prevent waste within the reservoir and thereby increase substantially the ultimate recovery of oil or gas.' In general, the first field condition seems to contemplate a pool which is ripe for unitized secondary recovery operations, and the second, a pool which will be less wastefully and more economically operated under a unit plan during the primary stage of its development. However, the definitions of the field conditions seem to overlap considerably; and, upon closer examination, it is not clear whether they are in fact referring to two different types of relatively uncommon situations or whether, together, they were intended to permit unitization of virtually every reservoir in the state. The latter interpretation seems the more likely one. .... The problem of defining the precise scope of the first field condition warranting a unitization order may, however, be largely academic; for the second type of field condition which warrants such an order is defined so broadly that it may very well include every oil and gas field in the state, and apply to both primary and secondary recovery operations. According to the statute a unitization order may be issued if the commission finds that `the unitized management, operation and further development of the pool or the part thereof sought to be unitized is economically feasible and reasonably necessary to prevent waste within the reservoir and thereby increase substantially the ultimate recovery of oil and gas.' In virtually every reservoir, waste can be prevented and the ultimate recovery of oil and gas substantially increased through a program of unitization, whether it is begun immediately after discovery as a part of primary development or as a secondary recovery operation at a time when primary production has almost played out. The only question may concern the economic feasibility of unitized operations in a particular field. 16 Kan. L. Rev. at 569, 573-74. We point out, however, that the Corporation Commission in its 1982 order did not find that unitization must continue for either of the reasons for which unitization was originally decreed. Instead, it found that Article 26, section 26.1, of the original Plan of Unitization provided that the unit would continue in effect until at least 65% of the working interest group owners determine that unitized substances can no longer be produced in paying quantities or that unit operations are no longer feasible; that the working interest owners (Misco) had not made that determination; and that, therefore, the order for unitization must remain in effect until such time as the determinations as set forth in Article 26, section 26.1, of the Unitization Plan are met. The cessation of water flooding does not automatically require the dissolution of a unit established under 55-1301 et seq. The introduction of artificial energy into a reservoir is intended to move the recoverable hydrocarbons from place to place, and, one hopes, to move them away from the water injection wells and toward the producing wells, thus increasing recovery. The initial injection of large quantities of water into an oil-bearing strata may move the oil to positions where it can thereafter be recovered through ordinary or primary recovery methods. Under the Plan of Unitization approved by the commission, the operator may change its method of operation from time to time; and the commission found that the cessation of water injection in 1971 followed good engineering practice. The evidence supports this finding. (The evidence does not indicate whether the continuance of this method of production since 1971, and the reduction of the number of producing wells to six, follows good engineering practice and constitutes prudent development of the unit. The commission made no finding in this regard.) We hold that the mere cessation of water injection does not, in itself, require the dissolution of the unit.