A news article concerning forced integration of mineral rights in New Mexico.
October 31, 2008 by Edify
Leasing cools off in the Marcellus Shale. Lowered bonuses, and lowered expectations.
About Haynesville Shale – Horizontal Drilling Animation
October 31, 2008 by EdifyAn illuminating video prepared by the Louisiana Oil, and Gas Association. See link below:
Drilling A Natural Gas Well, From A to Z.
October 31, 2008 by EdifyThe Louisiana Oil, and Gas Association has authored a very enlightening article on the specific steps of drilling a natural gas well. Moreover, the article discusses what a mineral owner’s expectations may be. A small portion of the information is applicable to the Haynesville Shale prospect. However, almost all the information is germane to any well, regardless of the State. See link below:
The Forced Integration of Mineral Interests.
April 14, 2008 by EdifyThis blog will strive to help illuminate the reader of several subtopics regarding forced integration of an owner’s mineral interests. Please do not hesitate to comment, or ask any questions.
Code of Alabama 1975, Section 9-17-13
April 14, 2008 by EdifySection 9-17-13
Integration of interests; cycling operations; orders of board; procedures.
(a) When any mineral or other related interests deriving from two or more separately owned tracts of land are embraced within an established or a proposed drilling or production unit, or when there are separately owned interests in all or a part of an established or proposed drilling or production unit, or any combination of such, the persons owning the interests therein may validly agree to integrate or pool the interests and to develop the interests and associated lands as a drilling or production unit. Where, however, the owners have not agreed to so integrate or pool the interests, the board shall, for the prevention of waste or to avoid the drilling of unnecessary wells, require the persons owning such interests to do so and to develop their interests and the associated lands as a drilling or production unit.
(b) The board, in order to prevent waste and avoid the drilling of unnecessary wells, may permit or require the cycling of gas in any pool or portion thereof and is also authorized to permit or require the introduction of gas or other substance into an oil or gas reservoir for the purpose of repressuring the reservoir, maintaining pressure or carrying on enhanced recovery operations. The board may require pooling or integration of all the interests in or associated with the tracts, when reasonably necessary in connection with cycling operations.
(c) All orders requiring integration, pooling, cycling, repressuring, pressure maintenance or enhanced recovery operations shall be made after notice and hearing and shall be upon terms and conditions that are just and reasonable and which will afford to the person owning each such interest associated with each tract the opportunity to recover or receive his or her just and equitable share of the oil and gas in the pool without unnecessary expense and will prevent or minimize reasonably avoidable drainage from each developed unit which is not equalized by counterdrainage. The portion of the production allocated to each tract or interest included in an integrated or pooled unit formed by an integration or pooling order shall, when produced, be considered as if it had been produced from the tract or interest by a well drilled thereon; and any operations conducted within or with respect to the pooled or integrated unit pursuant to the pooling or integration order shall be deemed for all purposes to be the conduct of operations for the production of oil or gas or both from each tract or interest within the unit. All orders requiring pooling or integration shall, among other things, provide all of the following:
(1) That the actual and reasonable costs of developing and operating the pooled integrated unit (including a reasonable charge for supervision) and, if applicable, a risk compensation fee (as hereinafter provided) shall be charged to the separately owned tracts or interests in the unit in the same proportion that such tracts or interests share in production from the unit.
(2) That such costs and fee (if any) chargeable to a tract or interest shall be paid by the person or persons not entitled to share in production free of development and operating costs and who, in the absence of the pooling or integration order, would be responsible for the expense of developing and operating the tract or interest and that person’s or persons’ interest in the separately owned tract or interest shall be primarily responsible therefor.
(3) That, if any nonconsenting owner shall fail or refuse to pay the costs and/or fee (if any) chargeable to his or her tract or interest, the costs and/or fee shall be recoverable solely out of the production allocable to the tract or interest, provided, however, that this limitation shall not apply to a nonconsenting owner who has furnished the operator with a notarized statement agreeing to pay his or her proportionate share of the drilling and completion costs for a unit well as hereinafter provided.
(4) That, when the full amount of any charge made against a separately owned tract or interest is not paid when due by the person or persons primarily responsible therefor, as provided above, then 13/16ths (or if said tract or interest is leased, the working interest fraction or percent if it is greater) of the oil and gas production allocated to the separately owned tract or interest may be appropriated by the operator and marketed and sold for the payment of the charge, but that a 3/16ths part (or the actual landowner royalty if it is less) of the unit production allocated to each separately owned tract or interest shall in all events be regarded as royalty and shall, if there be no reasonable question as to good and merchantable title, be distributed to and among, or the proceeds thereof paid to, the person or persons owning royalty or unleased mineral interests (as the case may be) in the tract or interest free and clear of the development and operating costs and of any risk compensation fee and free and clear of any lien for the payment of the costs and fee.
(5) That any person owning any overriding royalty, oil and gas payment, royalty in excess of 3/16ths of production, or other interests, who is not primarily responsible for payment of the development and operating costs or risk compensation fee (if any), shall, to the extent of any payment or deduction therefor from his or her share, be subrogated to all the rights of the operator with respect to the interest or interests primarily responsible for the payment.
Additionally, if the operator, or the operator together with the consenting owners, shall own a majority in interest of the drilling and operating rights in the integrated or pooled unit, and the operator has made a good faith effort to (i) negotiate with each nonconsenting owner to have the owner’s interest voluntarily integrated or pooled into the unit, (ii) notify each nonconsenting owner of record of the names of all owners of drilling rights who have agreed to integrate or pool any interests in the unit, (iii) ascertain the address of each nonconsenting owner, (iv) give each nonconsenting owner written notice of the proposed operation, specifying the work to be performed, the proposed location, proposed depth, objective formation and the estimated cost of the proposed operation, and (v) to offer each nonconsenting owner the opportunity to lease or farm out on reasonable terms or participate in the cost and risk of developing and operating the unit well involved on reasonable terms, then the pooling or integration order shall, if the operator so requests, also provide that, if any nonconsenting owner (a) does not pay his or her proportionate share of the drilling and completion costs for any unit well within 30 days after commencement of actual drilling operations, or prior to reaching total depth, whichever is earlier, or at such other time as may be contracted between the parties, or, alternatively, (b) does not, on or before commencement of actual drilling operations, provide the operator with a notarized statement agreeing to pay the costs, then there shall be charged to the tract or interest of the nonconsenting owner a risk compensation fee equal to 150 percent of the tract’s or interest’s share of the actual and reasonable costs of drilling, reworking (prior to initial commercial production), testing, plugging back, deepening (but not below that depth specified in the permit for the well), and completing (through the wellhead) said well; provided, however, that no risk compensation fee shall be chargeable against the tract or interest of any nonconsenting owner who owned of record a tract or interest in the unit prior to the time notice was given unless, at the pooling or integration hearing, it is shown, by a United States mail certified mail return receipt card or by other evidence deemed sufficient by the board, that the nonconsenting owner was given actual notice of the pooling or integration hearing and unless it is also shown that the notice given to the owner specifically stated that the operator was requesting that the board impose a risk compensation fee in accordance with the provisions of this section. In the event that a nonconsenting owner who has provided the operator with a notarized statement agreeing to pay his or her proportionate share of the drilling and completion costs for a unit well does not fully pay the costs within 30 days after commencement of actual drilling operations or prior to reaching total depth, whichever is earlier, or on or before such other time as may be contracted between the parties, then any unpaid balance of the costs shall bear interest at the rate of one and one-half percent per month, and the nonconsenting owner shall be personally liable for the unpaid balance together with interest thereon and also for any attorney’s fees, court costs, or other expenses incurred by the operator in attempting to collect the unpaid balance and interest thereon; and, additionally, the operator shall have the right, if the well is a producer, to appropriate, market, and sell the nonconsenting owner’s share of production for the payment of the amounts due by that owner. The value of any production appropriated by the operator under the authority of any integration or pooling order shall be calculated at the market price in the field (after deduction for taxes and for cleansing, transportation, compression, and processing costs) at the time such production is received by the operator or placed to his or her credit. Unless the pooling or integration order (or an amendment thereto) shall specify otherwise or unless the affected parties shall agree otherwise, production from any pooled or integrated unit formed by a pooling or integration order shall be allocated to each separately owned tract or interest in the unit in the proportion that the acreage of each tract or interest bears to the total acreage of the unit; and under the circumstances allocation of production on this basis shall be considered as a just and reasonable allocation which will afford to each person owning each tract or interest within the unit the opportunity to recover or receive his or her just and equitable share of the oil and gas produced from the unit. Nothing herein or in any order issued pursuant hereto shall be construed to subject any nonconsenting owner who is subject to a risk compensation fee, as hereinabove provided, to any personal liability for any damages caused by or resulting from any negligent act or other tort committed by the operator or by any consenting owner in the course of developing and operating a pooled or integrated unit; nor shall anything herein or in any order issued pursuant hereto prevent the operator and any other owner or owners in the unit from entering into any agreement that contains provisions respecting the pooling, integration, or development of their tracts or interests in the pooled or integrated unit that differ from the above provisions or from the provisions contained in any pooling or integration order. As used herein, the term “operator” shall mean the person designated by the board to be in charge of developing and operating a drilling or production unit; the term “nonconsenting owner” shall mean an owner who owns a tract or interest in a drilling or production unit and who has not, on or before the date a pooling or integration order is entered with respect to such unit, reached an agreement with the operator relative to the terms and conditions which will govern the manner in which his or her said tract or interest shall be developed and operated; the term “consenting owner” shall mean an owner who has so reached such an agreement with the operator; the term “owner” shall mean a person who, if a pooling or integration order had not been entered, would be an owner as that term is defined elsewhere in this article; the terms “costs of developing” and “development costs” shall include, among other things, the costs of drilling, equipping, reworking, testing, plugging back, deepening, and completing the initial unit well and any subsequent unit well but shall not include any costs incurred in connection with the acquisition of any oil and gas leases covering tracts or interests in the unit; and the term “actual and reasonable costs” means actual expenditures not in excess of what are reasonable.
Subsection (c) shall apply only to unitization of interests within a drilling unit and shall not apply to fieldwide or poolwide units, which are authorized and governed under the provisions of Article 3 of this chapter.
(d) Should the owners of separate tracts or interests embraced within a drilling or production unit fail to agree upon the integration or pooling of the tracts or interests associated with the tracts and the drilling of a well on that unit, and should it be established that the board is without authority to require integration or pooling as provided for in this section, then subject to all other applicable provisions of this article, the owner of the interest or interests associated with each tract embraced within the drilling or production unit may drill on his or her tract; but the allowable production from that tract or interest shall be such proportion of the allowable production for the full drilling or production unit as the area of the separately owned tract associated with the separately owned interest bears to the full drilling or production unit.
(e) Agreements made in the interest of conservation of oil or gas, or both, or for the prevention of waste, between and among owners or operators, or both, owning separate interests in the same oil or gas pool, or in any area that appears from geological or other data to be underlain by a common accumulation of oil or gas, or both, and agreements between and among the owners or operators, or both, and royalty owners therein of the pool or area or any part thereof as a unit for establishing and carrying out a plan for the cooperative development and operation thereof, when the agreements are approved by the board, are hereby authorized and shall not be held or construed to violate any of the statutes of this state relating to trusts, monopolies, or contracts and combinations in restraint of trade.
(Acts 1945, No. 1, p. 1, §13; Acts 1979, No. 79-621, p. 1101, § 1; Acts 1989, No. 89-916, p. 1810; Acts 1990, No. 90-104, p. 114, §3; Act 2000-714, p. 1517, §1.)
Chapter 400-7-2
April 14, 2008 by EdifyALABAMA STATE OIL AND GAS BOARD
GOVERNING PRACTICE AND PROCEDURE AND FORCED
INTEGRATION OR FORCED POOLING
ADMINISTRATIVE CODE
CHAPTER 400-7-2
RULES AND REGULATIONS GOVERNING FORCED
INTEGRATION OR FORCED POOLING
TABLE OF CONTENTS
400-7-2-.01 Forced Integration Or Forced Pooling
400-7-2-.01 Forced Integration Or Forced Pooling. Where owners have not agreed to develop their lands and interests as a drilling unit, and it is proposed that the Board establish or the Board establishes such unit and orders them to do so, the following rules shall apply as between the operator and all nonconsenting owners. These rules shall apply for the duration of the forced integrated or forced pooled unit where no agreement in writing has been reached to integrate or pool their interests and develop their lands as a drilling unit.
(1) Duration of Orders.
(a) All forced integration or forced pooling orders issued by the Board shall expire six (6) months from the date of issuance of said order unless a well has been spudded on the unit, or unless a well has been reentered on the unit, or a well capable of producing oil or gas is located on said unit at the end of said six (6) month period.
(b) All forced integration or forced pooling orders issued by the Board shall expire six (6) months after all wells drilled on the unit have been plugged and abandoned.
(2) Compliance with Well Permit Requirements Prior to Issuance of Order. Prior to the issuance of an order providing for the forced integration or forced pooling of a unit, an operator shall comply with requirements for obtaining a well permit with the exception of the filing of an affidavit of ownership or control on Form OGB 2. Furthermore, the completed permit application and other forms required to obtain a well permit shall be filed at least fourteen (14) days prior to the hearing at which the petition for forced integration and forced pooling will be conducted.
(3) Request by Forced Integrated or Forced Pooled Nonconsenting Owner for Order Allowing Him to Pay His Pro Rata Share of Costs. If, after notice of the proposed forced integration or forced pooling of a unit in accordance with Rule 400 7 1 .11, a nonconsenting owner desires to participate by paying his pro rata share of the costs of drilling, equipping, and operating the well, including a reasonable charge for supervision, on such unit, but such nonconsenting owner has received no offer from the operator to so participate or has received an offer which he deems unreasonable, he may appear at the public hearing at which such action is to be considered and request the Board to condition its order so as to allow such nonconsenting owner to so participate and the Board may so condition its order.
(4) Development and Operation of Nonconsenting Owner’s Interest. The operator appointed by the Board to develop and operate the forced integrated or forced pooled unit shall bear the cost of development and operation of such unit. In the event of production, the operator may recover his costs out of production attributable to each nonconsenting owner, as provided by law, except in cases wherein nonconsenting owners participate as provided in Rule 400-7-2-.01(3). Anything herein to the contrary notwithstanding, these rules shall not affect agreements between the operator and consenting owners.
(5) Accounting and Furnishing of Information. Upon receipt of a written request by the nonconsenting owner, the operator designated by the Board to develop and operate a forced integrated or forced pooled unit shall:
(a) Submit a statement of costs to such nonconsenting owner.
1. Such statement, such as that provided by the Council of Petroleum Accountants Societies Accounting Procedures (COPAS) rules, shall be in the same form and submitted at the same time as furnished by the operator to consenting owners within the same unit.
2. In the event there are no consenting owners in the same unit, the operator shall submit a statement of costs on or before the last day of each month to each nonconsenting owner in the unit. Such statement shall be in a form which reflects the total of such costs incurred during the indicated billing period with respect to development of the forced integrated or forced pooled unit, and shall indicate all charges and credits, summarized by appropriate classifications of costs, except that unusual charges and credits shall be separately identified and fully described in detail.
(b) Furnish each nonconsenting owner with such information regarding the unit operations as hereinafter set forth.
1. Each nonconsenting owner shall be notified of the dates of the following events within twenty (20) days after the occurrence of such events:
(i) Commencement of drilling operations,
(ii) Suspension of drilling operations,
(iii) Shutting in of the well as an oil or gas well,
(iv) Plugging of the well,
(v) Commencement of production.
2. The following information shall be furnished to each nonconsenting owner within thirty (30) days after the information is available: The gross amount of monthly production from the forced integrated or forced pooled unit and the value thereof. If the production is sold by the operator, the value for the purposes of these rules shall be the sale price received by the operator.
(c) Within twenty (20) days after receipt of a written request for such, the operator will advise each nonconsenting owner as to whether or not royalty due by such nonconsenting owner to his lessors will be paid by the operator.
(6) Access to Information and Unit Premises by Nonconsenting Owners. After the date upon which a nonconsenting owner’s pro rata share of the total costs through completion of the well have been recovered by the operator, the operator shall, upon receipt of written request, furnish, within thirty (30) days thereafter, such nonconsenting owner with copies of drilling reports, well logs, and other such information as is furnished to consenting owners, and shall make available for inspection samples of cores or cuttings. Further, after such costs have been recovered, the nonconsenting owner shall have access to the unit premises at all reasonable times, at his sole risk, to inspect or observe operations.
(7) Changes in Ownership. Upon a transfer of any interest of a nonconsenting owner, subsequent to the Board’s order of forced integration or forced pooling, such new owner shall submit a duly and properly certified copy of an instrument affecting such transfer to the operator and, upon receipt of such copy, the operator shall take appropriate action to insure that such new owner is thereafter treated in all respects in a manner not inconsistent with these rules.
Author: S. Marvin Rogers
Statutory Authority: Code of Ala. 1975, §§9 17 1 et seq.
History: New Rule: Filed April 11, 2000; effective May 16, 2000. Amended: Filed March 19, 2002; effective April 23, 2002. Amended: Filed February 6, 2006; effective March 13, 2006.
