§ 15-72-302 - Just and equitable shares -- Preventing waste, avoiding risks, etc. -- Drilling units. - Arkansas Statutes

15-72-302. Just and equitable shares -- Preventing waste, avoiding risks, etc. -- Drilling units.

(a) Whether or not the total production from a pool is limited or prorated, no rule, regulation, or order of the Oil and Gas Commission shall be such in terms or effect:

(1) That it shall be necessary at any time for the producer from or the owner of a tract of land in the pool, in order that he or she may obtain the tract's just and equitable share of the production of the pool, as the share is set forth in this section, to drill and operate any well or wells on the tract in addition to the well or wells as can without waste produce the share; or

(2) As to occasion net drainage from a tract unless there is drilled and operated upon the tract a well or wells in addition to the wells thereon as can without waste produce the tract's just and equitable share, as set forth in this section, of the production of the pool.

(b) (1) For the prevention of waste and to avoid the augmenting and accumulation of risks arising from the drilling of an excessive number of wells, after a hearing the commission shall establish a drilling unit or units for each pool except in those pools that, prior to February 20, 1939, have been developed to an extent and where conditions are such that it would be impracticable or unreasonable to use a drilling unit at the present stage of development.

(2) (A) As used in this subchapter, "drilling unit" means a single governmental section or the equivalent unless a larger or smaller area is requested by an owner, as defined in 15-72-102, within the drilling unit to be established and a larger or smaller area is established by order of the commission. The drilling unit shall constitute a developed unit as long as a well is located thereon that is capable of producing oil or gas in paying quantities.

(B) The commission shall have the continuing authority to:

(i) Designate the number of wells that may be drilled and produced within a drilling unit; and

(ii) Regulate the spacing among multiple wells drilled and produced within a drilling unit.

(c) (1) Each well permitted to be drilled upon any drilling unit shall be drilled at a location that is in compliance with rules adopted by the commission, with such exception as may be reasonably necessary where it is shown, after notice and an opportunity for a hearing, and the commission finds that a well drilled at a different location is likely to prevent waste or protect correlative rights of owners within the unit, or both.

(2) Whenever an exception is granted, the commission shall take action to offset any advantage that the person securing the exception may have over other producers by reason of drilling the well as an exception, and so that drainage from developed units to the tract with respect to which the exception is granted will be prevented or minimized and the producer of the well drilled as an exception will be allowed to produce no more than his or her just and equitable share of the oil and gas in the pool, as the share is set forth in this section.

(d) (1) Subject to the reasonable requirements for prevention of waste, a producer's just and equitable share of the oil and gas in the pool, also sometimes referred to as a tract's just and equitable share, is that part of the authorized production for the pool, whether it is the total that could be produced without any restriction on the amount of production or whether it is an amount less than that which the pool could produce if no restriction on amount were imposed, which is substantially in the proportion that the quantity of recoverable oil and gas in the developed area of the producer's tract in the pool bears to the recoverable oil and gas in the total developed area of the pool, insofar as these amounts can be practically ascertained.

(2) To that end, the rules, regulations, permits, and orders of the commission shall be such as will prevent or minimize reasonably avoidable net drainage from each developed unit, that is, drainage that is not equalized by counter drainage and will give to each producer the opportunity to use his or her just and equitable share of the reservoir energy.

(e) (1) After public hearing held pursuant to notice given as required by law and by any rules or orders of the commission, the commission may establish a drilling unit as defined in subsection (b) of this section for an exploratory well to be drilled therein.

(2) Any drilling unit so established shall be composed of a governmental section or the equivalent thereof unless a larger or smaller area is requested by an owner, as defined in 15-72-102, within the drilling unit to be established and a larger or smaller area is established by order of the commission, determined by the commission to be prospective of oil or gas, or both. The commission shall have the authority to integrate separately owned tracts embraced therein when the owners thereof fail or refuse voluntarily to do so provided that persons who own at least an undivided fifty percent (50%) interest in the right to drill and produce oil or gas, or both, from the total proposed unit area agree thereto.

(3) However, any such order of the commission and drilling unit as established for exploratory purposes thereunder shall remain in force for a period no longer than the later of one (1) year following the effective date thereof or one (1) year following the cessation of drilling operations or production within the unit, whereupon the order of the commission and the provisions thereof shall automatically terminate.