TITLE 47

MINES AND MINING

CHAPTER 3

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

47-320.  Integration of tracts — Orders of department. (1) When two (2) or more separately owned tracts are embraced within a spacing unit, or when there are separately owned interests in all or a part of a spacing unit, the interested persons may integrate their tracts or interests for the development and operation of the spacing unit. In the absence of voluntary integration, the department, upon the application of any owner in that proposed spacing unit, shall order integration of all tracts or interests in the spacing unit for drilling of a well or wells, for development and operation thereof and for the sharing of production therefrom. The department, as a part of the order establishing a spacing unit, may prescribe the terms and conditions upon which the royalty interests in the unit shall, in the absence of voluntary agreement, be deemed to be integrated without the necessity of a subsequent separate order integrating the royalty interests. Each such integration order shall be upon the just and reasonable terms and conditions set forth in this section.

(2)  All operations, including, but not limited to, the commencement, drilling, or operation of a well upon any portion of a spacing unit for which an integration order has been entered, shall be deemed for all purposes the conduct of such operations upon each separately owned tract in the spacing unit by the several owners thereof. That portion of the production allocated to a separately owned tract included in a spacing unit shall, when produced, be deemed, for all purposes, to have been actually produced from such separately owned tract by a well drilled thereon.

(3)  Each such integration order shall authorize the drilling, equipping and operation, or operation, of a well or wells on the spacing unit; shall designate an operator for the integrated unit; shall prescribe the time and manner in which all the owners in the spacing unit may elect to participate therein; and shall make provision for the payment by all those who elect to participate therein of the reasonable actual cost thereof, plus a reasonable charge for supervision and interest. Each such integration order shall provide for the three (3) following options:

(a)   Working interest owner. An owner who elects to participate as a working interest owner shall pay the proportionate share of the actual costs of drilling and operating a well allocated to the owner’s interest in the spacing unit. Working interest owners who share in the costs of drilling and operating the well are entitled to their respective shares of the production of the well. The operator of the integrated spacing unit and working interest owners shall enter into an approved joint operating agreement. The department shall deem the joint operating agreement as just and reasonable if the agreement is based on a standard industry form, such as those supplied by the American association of professional landmen, and if the operator demonstrates to the department that any amendments to the standard form are not prejudicial to working interest owners.

(b)  Nonconsenting working interest owner. An owner who refuses to share in the risk and actual costs of drilling and operating the well, but desires to participate as a working interest owner, is a nonconsenting working interest owner. The operator of the integrated spacing unit shall be entitled to recover a risk penalty of up to three hundred percent (300%) of the nonconsenting working interest owner’s share of the cost of drilling and operating the well under the terms set forth in the integration order. After all the costs have been recovered by the consenting owners in the spacing unit, the nonconsenting owner is entitled to his respective shares of the production of the well and shall be liable for his pro rata share of costs as if the nonconsenting owner had originally agreed to pay the costs of drilling and operating the well. The operator of the integrated spacing unit and nonconsenting working interest owners shall enter into a joint operating agreement. The department shall deem the joint operating agreement as just and reasonable if the agreement is based on a standard industry form, such as those supplied by the American association of professional landmen, and if the operator demonstrates to the department that any amendments to the standard form are not prejudicial to nonconsenting working interest owners.

(c)  Base entitlement. If an owner fails to make an election within the election period set forth in the integration order, the operator shall compensate such owner for the owner’s share of production with the following just and reasonable terms, provided that nothing in this paragraph shall be deemed to prevent the operator and owners from voluntarily agreeing to different lease terms before or after the entry of an integration order:

(i)   Such owner shall receive a minimum one-eighth (1/8) royalty of any gas, oil, or natural gas liquids produced, proportionate to the owner’s interest in the integrated unit.

(ii)  Royalty payments shall comply with the terms of section 47-331, Idaho Code.

(iii) The operator of an integrated spacing unit shall pay such owner the highest bonus payment per acre that the operator paid to another owner in the spacing unit prior to the filing of the integration application.

(iv)  The operator shall avoid, to the maximum extent possible, any use of surface lands belonging to owners integrated under this subsection. Where such use cannot be reasonably avoided, use of surface lands, and compensation for such use, shall be governed by section 47-334, Idaho Code.

(v)   The operator shall comply with the requirements of sections 47-319, 47-332, 47-333, and 47-334, Idaho Code.

(vi)  An integration order including the terms specified in this subsection fulfills the department’s obligation to integrate mineral interests upon just and reasonable terms.

(4)  An application for an order integrating the tracts or interests in a spacing unit shall substantially contain and be limited to only the following:

(a)  The applicant’s name and address;

(b)  A description of the spacing unit to be integrated;

(c)  A geologic statement concerning the likely presence of hydrocarbons;

(d)  A statement that the proposed drill site is leased;

(e)  A statement of the proposed operations for the spacing unit, including the name and address of the proposed operator;

(f)  A proposed joint operating agreement;

(g)  A list of all uncommitted owners in the spacing unit to be integrated under the application, including names and addresses;

(h)  An affidavit indicating that at least sixty-seven percent (67%) of the mineral interest acres in the spacing unit support the integration application by leasing or participating as a working interest owner;

(i)  An affidavit stating the highest bonus payment paid to a leased owner in the spacing unit being integrated prior to filing the integration application; and

(j)  A resume of efforts documenting the applicant’s good faith efforts on at least two (2) separate occasions within a period of time no less than sixty (60) days to inform uncommitted owners of the applicant’s intention to develop the mineral resources in the proposed spacing unit and desire to reach an agreement with uncommitted owners in the proposed spacing unit. Provided however, if any owner requests no further contact from the applicant, the applicant will be relieved of further obligation to attempt contact to reach agreement with that owner. At least one (1) contact must be by certified U.S. mail sent to an owner’s last known address. If an owner is unknown or cannot be found, the applicant must publish a legal notice of its intention to develop and request that the owner contact the applicant in a newspaper of general circulation in the county where the proposed spacing unit is located. The resume of efforts should indicate the applicant has made reasonable efforts to reach an agreement with all uncommitted owners in the proposed spacing unit. Reasonable efforts are met by complying with this subsection.

(5)  At the time the integration application is filed with the department, the applicant shall certify that, for uncommitted owners who are unknown or cannot be found, a notice of the application was published in a newspaper in the county where the proposed spacing unit is located. Each published notice shall include notice to the affected uncommitted owner of the opportunity to respond to the application and the deadline by which a response must be filed with the department.

(6)  An operator who has not been able to obtain consent from sixty-seven percent (67%) of the mineral interest acres in the spacing unit may nevertheless apply for an integration order under this section if all of the conditions set forth in this subsection have been met. The department shall issue an integration order, which shall affect only the unit area described in the application, if it finds that the operator has met all of the following conditions:

(a)  The operator has obtained consent from at least fifty-five percent (55%) of mineral interest acres;

(b)  The operator has negotiated diligently and in good faith for a period of at least one hundred twenty (120) days prior to his application for an integration order; and

(c)  The uncommitted owners in the affected unit shall receive from the operator mineral lease terms and conditions that are no less favorable to the lessee than those set forth in section 47-331(2), Idaho Code.

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

(8)  An integration order shall be in effect for a term of five (5) years and as long thereafter as oil and gas operations are being conducted by the operator, unless extended by the department upon application of the operator. Any application to amend or extend an integration order shall comply with the notice requirements of section 47-328(3)(b), Idaho Code. For purposes of such notice, all parties receiving the base entitlement set forth in subsection (3)(c) of this section shall be considered uncommitted owners.

(9)  The entry of an integration order does not inhibit the right of mineral interest owners to pursue claims against the operator for damages to person, property, or water rights.

History:

[(47-320) 47-322, added 1963, ch. 148, sec. 8, p. 433; am. 2016, ch. 48, sec. 5, p. 135; am. 2017, ch. 121, sec. 2, p. 281; am. and redesig. 2017, ch. 271, sec. 13, p. 690; am. 2023, ch. 283, sec. 7, p. 855.]