§ 15-72-304 - Integration orders generally. - Arkansas Statutes

15-72-304. Integration orders generally.

(a) All orders requiring integration shall be made after notice and hearing and shall be upon terms and conditions which are just and reasonable and which will afford the owner of each tract or interest in the drilling unit 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 counter drainage.

(b) In the event the drilling of a well has not been commenced or, if commenced, the well has not been completed as a well capable of producing oil and gas in commercial quantities on the lands comprising the drilling unit on the effective date of the order requiring integration, the order shall:

(1) Authorize the drilling or completion and the equipping and operation of a well on the drilling unit;

(2) Provide who shall drill, complete, and operate the well;

(3) Prescribe the time and manner in which all owners in the drilling unit who may desire to pay their share of the costs of such operations and participate therein may elect to do so;

(4) Provide that an owner who does not affirmatively elect to participate in the risk and cost of the operations shall transfer his or her rights in the drilling unit and the production from the unit well to the parties who elect to participate therein for a reasonable consideration and on a reasonable basis which shall be determined, in the absence of agreement between the parties, by the Oil and Gas Commission. The transfer may be either a permanent transfer or may be for a limited period pending recoupment out of the share of production attributable to the interest of the nonparticipating owner by the participating parties of an amount equal to the share of the costs that would have been borne by the nonparticipating party had he or she participated in the operations, plus an additional sum to be fixed by the commission.

(c) In the event there is a well capable of producing oil or gas in commercial quantities on the lands comprising the drilling unit on the effective date of the order requiring integration, the order shall:

(1) Authorize the operation of the well;

(2) Provide who shall operate the well; and

(3) Provide that within the time stipulated in the order any owner in the drilling unit who did not participate in the drilling of the well shall either reimburse the drilling parties in cash for his or her share of the actual cost of drilling, completing, and equipping the well or shall transfer his or her rights in such drilling unit and the production from the well to the drilling parties until those parties have received out of the share of production attributable to the interest so transferred an amount equal to the share of the costs that would have been borne by the transferring party had he or she participated in drilling, completing, equipping, and operating the well, plus an additional sum to be fixed by the commission.

(d) In the event there is an unleased mineral interest or interests in any drilling unit, the owner thereof shall be regarded as the owner of a royalty interest to the extent of a one-eighth (1/8) interest in and to the unleased mineral interest. This royalty interest shall not be affected by the provisions of subsections (b) and (c) of this section.