TITLE 47

MINES AND MINING

CHAPTER 3

OIL AND GAS WELLS — GEOLOGIC INFORMATION, AND PREVENTION OF WASTE

47-321.   unit operations. (1) An agreement for the unit or cooperative development or operation of a field, pool, or part thereof may be submitted to the department for approval as being in the public interest or reasonably necessary to prevent waste or protect correlative rights. Such approval shall constitute a complete defense to any suit charging violation of any statute of the state relating to trusts and monopolies on account thereof or on account of operations conducted pursuant thereto. The failure to submit such an agreement to the department for approval shall not for that reason imply or constitute evidence that the agreement or operations conducted pursuant thereto are in violation of laws relating to trusts and monopolies.

(2)  The department, upon its own determination or upon application of an owner, shall conduct a hearing to consider the need for unit operation of an entire pool or portion thereof to increase ultimate recovery of oil and gas from that pool or portion thereof. The department shall issue an order requiring unit operation if it finds that:

(a)  Unit operation of the pool or portion thereof is reasonably necessary to prevent waste or to protect correlative rights;

(b)  Unit operation of the pool or portion thereof is reasonably necessary for maintaining or restoring reservoir pressure or to implement cycling, water flooding, enhanced recovery, horizontal drilling, dewatering or a combination of these operations or other operations or objectives to be cooperatively pursued with the goal of increasing the ultimate recovery of oil and gas; and

(c)  The estimated cost to conduct the unit operation will not exceed the value of the estimated recovery of additional oil and gas resulting from unit operation.

(3)  An application for requesting an order providing for the operation as a unit of one (1) or more pools or parts thereof in a field shall contain:

(a)  A plat map showing the proposed unit, the existing spacing units, and the well or wells within the units;

(b)  The names and addresses of all persons owning mineral interests and working interests in the proposed unit;

(c)  An affidavit that the applicant, by certified mail, notified all persons owning unleased mineral interests and working interests in the proposed unit at least sixty (60) days prior to filing the application with the department of the applicant’s intention to make the application;

(d)  A proposed plan of unit operations for the proposed unit that contains the information in subsection (5) of this section; and

(e)  A proposed operating agreement that is consistent with the proposed plan of unit operations.

(4)  An application for unit operations shall be subject to the procedures set forth in section 47-328, Idaho Code.

(5)  An order for a unit operation must be upon just and reasonable terms and conditions and shall prescribe a plan for unit operations that includes all of the following:

(a)  A description of the vertical and horizontal limits of the unit area;

(b)  A statement of the nature of the operation contemplated;

(c)  A provision for the supervision and conduct of the unit operation that designates an operator of the unit and provides a means to remove the operator and designate a successor operator;

(d)  A provision to protect correlative rights, allocating to each separately owned tract in the unit area a just and equitable share of the production that is produced and saved from the unit area, other than production used or unavoidably lost in the conduct of the unit operation;

(e)  A provision for credits and charges to adjust among working interest owners in the unit area for their interest in wells, tanks, pumps, machinery, materials and equipment that contribute to the unit operation;

(f)  A provision establishing how the costs of unit operation, including capital investments and costs of terminating the unit operation, shall be determined and charged to each working interest owner or the interest of each owner, including a provision establishing how, when, and by whom the share of unit production allocated to an owner who does not pay the share of those costs charged to that owner or to the interest of that owner may be sold and the proceeds applied to the payment of that owner’s share of those costs, and how accounts will be settled upon termination of the unit;

(g)  A provision, if necessary, for carrying or otherwise financing an owner who elects to be carried or otherwise financed, which allows owners who carry or otherwise finance to recover up to three hundred percent (300%) of the unit costs attributed to an owner who elects to be carried or otherwise financed payable out of that owner’s share of the production;

(h)  A time when the unit operation is to commence and the manner in which, and the circumstances under which, the unit operation is to terminate and the unit is to be dissolved; and

(i)  Additional provisions found to be appropriate to carry on the unit operation, to prevent waste, and to protect correlative rights.

(6)  An order for a unit operation may provide for a unit operation of less than the whole of a pool as long as the unit area is of size and shape reasonably required for that purpose and the conduct thereof will have no significant adverse effect upon other portions of the pool.

(7)  The department, upon its own determination or upon the application of an owner, may for good cause terminate a unit operation and dissolve the unit on just and equitable terms. If not terminated earlier, the unit operation shall be terminated upon final cessation of production from the pool or unitized portion thereof, the plugging and abandonment of unit wells and facilities, and reclamation of the surface.

(8)  An order requiring a unit operation shall not become effective until: the plan for unit operations approved by the department has been signed and approved in writing by the owners who, under the department’s order, will be required to pay at least sixty-seven percent (67%) of the costs of the unit operation; the plan has been signed and approved in writing by the working interest owners of at least sixty-seven percent (67%) of the production of the unit operations; and the department has made a finding in the order that the plan for unit operations has been so approved.

(9)  An order providing for unit operation may be amended by an order of the department in the same manner and subject to the same conditions as an original order providing for the unit operation.

(10) The department may issue an order for the unit operation of a pool or pools or parts thereof that includes a unit created by a prior order of the department or by voluntary agreement. This subsequent order, in providing for the allocation of the unit’s production, must treat first the unit area previously created as a single tract and then allocate, in the same proportions as those specified in the prior order, the portion of the new unit’s production allocated to the previous unit among the separately owned tracts included in the previously created unit area.

(11) The department may approve additions to the unit of portions of a pool not previously included within the unit and may extend the unit area as reasonably necessary to prevent waste or to protect correlative rights. The department may approve exclusions from the unit area as reasonably necessary to prevent waste or to protect correlative rights. An order adding to or excluding from a unit area must be upon just and reasonable terms, which shall be determined by the application of the terms set forth in section 47-320(3), Idaho Code.

(a)  An order that amends a plan of unit operations and adds an area to a previously established unit shall not become effective until: the amended plan of unit operations has been signed and approved in writing by the owners who will be required to pay at least sixty-seven percent (67%) of the costs of the unit operation in the area to be added; the amended plan has been signed and approved in writing by the working interest owners of at least sixty-seven percent (67%) of the production of the unit operations; and the department has made a finding in the order that the plan for unit operations has been so approved.

(b)  An order providing for an exclusion from a unit area may not become effective until: an amended plan of unit operations excluding an area from the unit has been approved in writing by the owners in the original unit area who are required to pay at least sixty-seven percent (67%) of the costs of unit operations; the amended plan has been approved in writing by the working interest owners in the original unit area required to pay at least sixty-seven percent (67%) of the production of the unit operations; and the department has made a finding in the order that the plan for unit operations has been so approved.

(12) Operations, including the commencement, drilling or operation of a well upon a portion of a unit area, are deemed conducted on each separately owned tract in the unit area by the owner or owners thereof. That portion of a unit’s production allocated to a separately owned tract in a unit area, when produced, is deemed produced from a well drilled on that tract. Operations conducted under an order of the department providing for a unit operation shall constitute fulfillment of expressed or implied obligations of a lease or contract covering lands within the unit area to the extent that compliance with those obligations is not possible without a further order of the department.

(13) That portion of unit production allocated to a tract and the proceeds of sale for that portion are deemed the property and income of the several persons to whom or to whose credit that portion is allocated or payable under the order providing for unit operation.

(14) A division order or other contract relating to a sale or purchase of production from a separately owned tract or combination of tracts remains in force and applies to oil and gas allocated to the tract until terminated in accordance with provisions of the order providing for unit operation or in accordance with the terms of such division order or other contract.

(15) Except to the extent that all affected parties agree, an order providing for unit operation does not result in a transfer of all or part of a person’s title to the oil and gas rights in a tract in the unit area.

(16) Except to the extent that all affected parties agree, all property, whether real or personal, that may be acquired in the conduct of a unit operation hereunder is deemed acquired for the account of the owners within the unit area and is deemed the property of the owners in the proportion that the expenses of the unit operation are charged.

(17) The formation of a unit and the operation of the unit under an order of the department shall not be in violation of any statute of this state relating to trusts, monopolies, contracts or combinations in the restraint of trade.

History:

[(47-321) 47-323, added 1963, ch. 148, sec. 9, p. 433; am. 2015, ch. 66, sec. 1, p. 176; am. 2016, ch. 48, sec. 6, p. 137; am. and redesig. 2017, ch. 271, sec. 14, p. 693; am. 2023, ch. 283, sec. 8, p. 858.]