27-532

27-532. Order; units and unit areas; plan of
unitization

The order of the commission shall define the area of the pool or portion thereof to
be included within the unit area and prescribe with reasonable detail the plan of
unitization applicable thereto. Each unit and unit area shall be limited to all or a
portion of a single pool. Only so much of a pool as has been defined and determined to
be productive of oil and gas by actual drilling operations may be so included within the
unit area. A unit may be created to embrace less than the whole of a pool only where it
is shown by the evidence that the area to be so included within the unit area is of such
size and shape as may be reasonably required for the successful and efficient conduct of
the unitized method of operation for which the unit is created, and that the conduct
thereof will have no material adverse effect upon the remainder of such pool. The plan
of unitization for each such unit and unit area shall be one suited to the needs and
requirements of the particular unit dependent upon the facts and conditions found to
exist with respect thereto. In addition to such other terms, provisions, conditions and
requirements found by the commission to be reasonably necessary or proper to effectuate
or accomplish the purpose of this article, and subject to the further requirements
hereof, each such plan of unitization shall contain fair, reasonable and equitable
provisions for:

1. The efficient unitized management or control of the further development and
operation of the unit area for the recovery of oil and gas from the pool affected. Under
such a plan the actual operations within the unit area may be carried on in whole or in
part by the unit itself, or by one or more of the lessees within the unit area as the
unit operator subject to the supervision and direction of the unit, dependent upon what
is most beneficial or expedient. The designation of the unit operator shall be by vote
of the lessees in the unit in a manner provided in the plan of unitization and not by the
commission.

2. The division of interest or formula for the apportionment and allocation of the
unit production, among and to the several separately owned tracts within the unit area
such as will reasonably permit persons otherwise entitled to share in or benefit by the
production from such separately owned tracts to produce and 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 consideration acreage, the quantity of oil and gas recoverable
therefrom, location on the structure, its probable productivity of oil and gas in the
absence of unit operations, the burden of operations to which the tract will or is likely
to be subjected, or so many of said factors, or such other pertinent engineering,
geological or operating factors, as may be reasonably susceptible of
determination. "Unit production" as that term is used in this article means and includes
all oil and gas produced from a unit area from and after the effective date of the order
of the commission creating the unit regardless of the well or tract within the unit area
from which the same is produced.

3. The manner in which the unit and the further development and operation of the
unit area shall or may be financed and the basis, terms and conditions on which the cost
and expense thereof shall be apportioned among and assessed against the tracts and
interest made chargeable therewith, including a detailed accounting procedure governing
all charges and credits incident to such operations. Upon and subject to such terms and
conditions as to time and rate of interest as may be fair to all concerned, reasonable
provision shall be made in the plan of unitization for carrying or otherwise financing
lessees who are unable to meet promptly their financial obligations in connection with
the unit.

4. The procedure and basis upon which wells, equipment and other properties of the
several lessees within the unit area are to be taken over and used for unit operations,
including the method of arriving at the compensation therefor, or of otherwise
proportionately equalizing or adjusting the investment of the several lessees in the
project as of the effective date of unit operation.

5. The supervision and conduct of the unit operations, in respect to which each
person shall have a vote with a value corresponding to the percentage of the costs of
unit operations chargeable against the interest of such person.

6. The time when the plan of unitization shall become effective.

7. The time when and the conditions under which and the method by which the unit
shall or may be dissolved and its affairs wound up.