27-505. Pooling of interests
A. When two or more separately owned tracts of land are embraced within an
established drilling unit, persons owning the drilling rights therein and the right to
share in the production therefrom may agree to pool their interests and develop their
lands as a drilling unit. If the persons do not agree to pool their interests, the
commissioner may, for prevention of waste, for protection of correlative rights, or to
avoid drilling of unnecessary wells, enter an order pooling and integrating their
interests for the development of their lands as a drilling unit. Orders effectuating such
pooling shall be made after notice and hearing, and shall be upon terms and conditions
which will afford the owner of each tract the opportunity to recover or receive his just
and equitable share of the oil and gas in the pool without unnecessary
expense. Operations incident to drilling a well upon any portion of a unit covered by a
pooling order shall be deemed for all purposes to be the conduct of such operations upon
each separately owned tract in the unit by the several owners thereof. The portion of the
production allocated to the owner of each tract included in a drilling unit formed by a
pooling order shall, when produced, be considered as if it had been produced from the
tract by a well drilled thereon. If such pooling is effectuated, the cost of development
and operation of the pooled unit chargeable by the operator to other interested owners
shall be limited to the actual and reasonable expenditures required for that purpose,
including a reasonable charge for supervision. As to owners who refuse to agree upon
pooling, the order shall provide for reimbursement for costs chargeable to each such
owner out of, and only out of, production from the unit belonging to such owner. In
event of dispute relative to such costs, the commissioner shall upon notice to all
interested parties and hearing thereon, determine the proper costs. Appeals may be taken
from the determination as from any other order of the commissioner. If one or more of
the owners drills and operates, or pays the expense of drilling and operating the well
for the benefit of others, then, in addition to any other rights conferred by the pooling
order, the owner or owners so drilling or operating shall have a lien on the share of
production from the unit accruing to the interest of each of the other owners for the
payment of his proportionate share of the expenses. All the oil and gas subject to the
lien, or so much thereof as necessary, shall be marketed and sold by the creditor and the
proceeds applied in payment of the expenses secured by the lien, with the balance if any
payable to the debtor.
B. The commissioner shall, in all instances where a unit has been formed from lands
or areas of more than one ownership, require the operator, upon request of an owner, but
subject to the right of the operator to market production and collect the proceeds with
respect to an owner in default, as provided in subsection A, to deliver to the owner or
his assigns his proportionate share of the production from the well common to the
drilling unit. The owner receiving his share shall provide at his own expense proper
receptacles for the receipt and storage thereof.
C. If the persons owning and drilling or exercising other rights in separate tracts
embraced within a drilling unit fail to agree upon the pooling of the tracts and drilling
of a well on the unit, and if the commissioner is without authority to require pooling as
provided by this section, then, subject to all other applicable provisions of this
article, the owner of each tract embraced within the drilling unit may drill on his
tract, but the allowable production from the tract shall be the proportion of the
allowable production for the full drilling unit as the area of such separately owned
tract bears to the full drilling unit.
D. An agreement for repressuring or pressure-maintenance operations, cycling or
recycling operations, including extraction and separation of liquid hydrocarbons from
natural gas in connection therewith, or for carrying on any other method of unit or
cooperative development or operation of a field or pool or a part of either, is
authorized and may be performed, and shall not be held or construed to violate any
statutes of this state relating to trusts, monopolies or contracts and combinations in
restraint of trade, if, after notice and a public hearing, the agreement is approved by
the commissioner as being in the public interest, protective of correlative rights, and
reasonably necessary to increase ultimate recovery or to prevent waste of oil or gas. The
agreements shall bind only the persons who execute them, and their heirs, successors,
assigns, and legal representatives.
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