H. B. 4574
(By Delegates Douglas, Collins,
Stalnaker,
Heck, Everson,
Varner and Davis)
[Originating in the
Committee on Government Organization]
[February 25, 1998]
A BILL to amend and reenact sections two, three, four, five, seven,
eight, ten, eleven, twelve, fourteen and sixteen, article
nine, chapter twenty-two-c of the code of West Virginia, one
thousand nine hundred thirty-one, as amended; and to further
amend said article by adding thereto a new section, designated
section four-a, all relating to the oil and gas conservation
commission generally; revising definitions; reestablishing,
reconstituting and continuing the oil and gas conservation
commission; requiring that the appointed commission members
may not be employees of the division of environmental
protection; requiring at least one commission member possess
minimum educational and professional qualifications; providing
that the commissioner serve on the commission; providing for
termination of commission members under certain circumstances;
establishing quorum requirements; authorizing and prohibiting delegation of authority and providing the circumstances
therefor; establishing a termination date and requiring
submission of annual reports; expanding notice requirements;
revising hearing procedures; expanding minimum acreage
requirements for drilling units; transferring authority from
the oil and gas conservation commissioner to the oil and gas
conservation commission; and continuing the effect of existing
orders, determinations, and other lawful actions of the
commissioner and the commission under prior enactments of this
article.
Be it enacted by the Legislature of West Virginia:
That sections two, three, four, five, seven, eight, ten,
eleven, twelve, fourteen and sixteen, article nine, chapter twenty- two-c of the code of West Virginia, one thousand nine hundred
thirty-one, as amended, be amended and reenacted; and that said
article be further amended by adding thereto a new section,
designated section four-a, all to read as follows:
ARTICLE 9.OIL AND GAS CONSERVATION.
§22C-9-2. Definitions.
(a)Unless the context in which used clearly requires a
different meaning, as used in this article:
(1)"Commission" means the oil and gas conservation
commission and "commissioner" means the oil and gas conservation
commissioner as provided for in section four of this article;
(2)"Director" means the director of the division of
environmental protection or such other person to whom the director
has delegated authority or duties pursuant to sections six or
eight, article one, chapter twenty-two of this code and "chief"
means the chief of the office of oil and gas;
(3)"Person" means any natural person, corporation,
partnership, receiver, trustee, executor, administrator, guardian,
fiduciary or other representative of any kind, and includes any
government or any political subdivision or any agency thereof;
(4)"Operator" means any owner of the right to develop,
operate and produce oil and gas from a pool and to appropriate the
oil and gas produced therefrom, either for such person or for such
person and others; in the event that there is no oil and gas lease
in existence with respect to the tract in question, the owner of
the oil and gas rights therein shall be considered as "operator" to
the extent of seven eighths of the oil and gas in that portion of
the pool underlying the tract owned by such owner, and as "royalty
owner" as to one-eighth interest in such oil and gas; and in the
event the oil is owned separately from the gas, the owner of the
substance being produced or sought to be produced from the pool
shall be considered as "operator" as to such pool;
(5)"Royalty owner" means any owner of oil and gas in place,
or oil and gas rights, to the extent that such owner is not an
operator as defined in subdivision (4) of this section;
(6)"Independent producer" means a person who is actively
engaged in the production of oil and gas in West Virginia, but
whose gross revenue from such production in West Virginia does not
exceed five hundred thousand dollars per year a producer of crude
oil or natural gas whose allowance for depletion is determined
under section 613A of the federal Internal Revenue Code in effect
on the first day of July, one thousand nine hundred ninety-seven;
(7)"Oil" means natural crude oil or petroleum and other
hydrocarbons, regardless of gravity, which are produced at the well
in liquid form by ordinary production methods and which are not the
result of condensation of gas after it leaves the underground
reservoir;
(8)"Gas" means all natural gas and all other fluid
hydrocarbons not defined as oil in subdivision (7) of this section;
(9)"Pool" means an underground accumulation of petroleum or
gas in a single and separate natural reservoir (ordinarily a porous
sandstone or limestone). It is characterized by a single
natural-pressure system so that production of petroleum or gas from
one part of the pool affects the reservoir pressure throughout its
extent. A pool is bounded by geologic barriers in all directions,
such as geologic structural conditions, impermeable strata, and
water in the formations, so that it is effectively separated from
any other pools that may be presented in the same district or on
the same geologic structure;
(10) "Well" means any shaft or hole sunk, drilled, bored or
dug into the earth or underground strata for the extraction of oil
or gas;
(11)"Shallow well" means any well drilled and completed in a
formation above the top of the uppermost member of the "Onondaga
Group": Provided, That in drilling a shallow well the operator may
penetrate into the "Onondaga Group" to a reasonable depth, not in
excess of twenty feet, in order to allow for logging and completion
operations, but in no event may the "Onondaga Group" formation be
otherwise produced, perforated or stimulated in any manner;
(12)"Deep well" means any well, other than a shallow well,
drilled and completed in a formation at or below the top of the
uppermost member of the "Onondaga Group";
(13)"Drilling unit" means the acreage on which one well may
be drilled;
(14) "Waste" means and includes:
(A)Physical waste, as that term is generally understood in
the oil and gas industry;
(B)the The locating, drilling, equipping, operating or
producing of any oil or gas well in a manner that causes, or tends
to cause, a reduction in the quantity of oil or gas ultimately
recoverable from a pool under prudent and proper operations, or
that causes or tends to cause unnecessary or excessive surface loss
of oil or gas; or
(C)the The drilling of more deep wells than are reasonably
required to recover efficiently and economically the maximum amount
of oil and gas from a pool. Waste does not include gas vented or
released from any mine areas as defined in section two, article
one, chapter twenty-two-a of this code or from adjacent coal seams
which are the subject of a current permit issued under article two
of chapter twenty-two-a of this code: Provided, That nothing in
this exclusion is intended to address ownership of the gas;
(15)"Correlative rights" means the reasonable opportunity of
each person entitled thereto to recover and receive without waste
the oil and gas in and under his tract or tracts, or the equivalent
thereof; and
(16)"Just and equitable share of production" means, as to
each person, an amount of oil or gas or both substantially equal to
the amount of recoverable oil and gas in that part of a pool
underlying such person's tract or tracts.
(b)Unless the context clearly indicates otherwise, the use
of the word "and" and the word "or" shall be interchangeable, as,
for example, "oil and gas" shall mean oil or gas or both.
§22C-9-3. Application of article; exclusions.
(a)Except as provided in subsection (b) of this section, the
provisions of this article shall apply to all lands located in this
state, however owned, including any lands owned or administered by
any government or any agency or subdivision thereof, over which the state has jurisdiction under its police power. The provisions of
this article are in addition to and not in derogation of or
substitution for the provisions of article six, chapter twenty-two
of this code.
(b)This article shall not apply to or affect:
(1)Shallow wells other than those utilized in secondary
recovery programs as set forth in section eight of this article;
(2)Any well commenced or completed prior to the ninth day of
March, one thousand nine hundred seventy-two, unless such well is,
after completion (whether such completion is prior or subsequent to
that date), : (i) deepened subsequent to that date to a formation
at or below the top of the uppermost member of the "Onondaga Group"
or (ii) involved in secondary recovery operations for oil under an
order of the commissioner entered pursuant to section eight of this
article;
(A)Deepened subsequent to that date to a formation at or
below the top of the uppermost member of the "Onondaga Group"; or,
(B)Involved in secondary recovery operations for oil under
an order of the commission entered pursuant to section eight of
this article;
(3)Gas storage operations or any well employed to inject gas
into or withdraw gas from a gas storage reservoir or any well
employed for storage observation; or
(4)Free gas rights.
(c)The provisions of this article shall not be construed to
grant to the commissioner or the commission authority or power to:
(1)Limit production or output, or prorate production of any
oil or gas well, except as provided in subdivision (6), subsection
(a), section seven of this article; or
(2)Fix prices of oil or gas.
§22C-9-4.Oil and gas conservation commissioner and commission;
commission membership; qualifications of members; terms
of members; vacancies on commission; meetings;
compensation and expenses; appointment and qualifications
of commissioner; general powers and duties.
(a)There is hereby continued as provided for in subsection
(h) of this section, the "Oil and Gas Conservation Commission"
which shall be composed of five members. The "oil and gas
conservation commission" shall be composed of five members. The
director of the division of environmental protection and the chief
of the office of oil and gas shall be members of the commission ex
officio. The remaining three members of the commission shall be
appointed by the governor, by and with the advice and consent of
the Senate, and may not be employees of the division of
environmental protection. Of the three members appointed by the
governor, one shall be an independent producer and at least one
shall be a public member not engaged in full-time employment in an
activity under the jurisdiction of the public service commission or
the federal energy regulatory commission. The third appointee
shall possess a degree from an accredited college or university in petroleum engineering or geology and must be a registered
professional engineer with particular knowledge and experience in
the oil and gas industry and shall serve as commissioner and as
chair of the commission. As soon as practical after appointment of
the members of the commission, the governor shall call a meeting of
the commission to be convened at the state capitol for the purpose
of organizing and electing a chair.
(b)The members of the commission appointed by the governor
shall be appointed for overlapping terms of six years each, except
that the original appointments shall be for terms of two, four and
six years, respectively. Each member appointed by the governor
shall serve until the members successor has been appointed and
qualified. Members may be appointed by the governor to serve any
number of terms. The members of the commission appointed by the
governor, before performing any duty hereunder, shall take and
subscribe to the oath required by section 5, article IV of the
constitution of West Virginia. Vacancies in the membership
appointed by the governor shall be filled by appointment by the
governor for the unexpired term of the member whose office is
vacant and such appointment shall be made by the governor within
sixty days of the occurrence of such vacancy. Any member appointed
by the governor may be removed by the governor in case of
incompetency, neglect of duty, gross immorality or malfeasance in
office. A commission member's appointment shall be terminated as a matter of law if that member fails to attend three consecutive
meetings. The governor shall appoint a replacement within thirty
days of the termination.
(c)The commission shall meet at such times and places as
shall be designated by the chair. The chair may call a meeting of
the commission at any time, and shall call a meeting of the
commission upon the written request of two members or upon the
written request of the oil and gas conservation commissioner or the
chief of the office of oil and gas. Notification of each meeting
shall be given in writing to each member by the chair at least five
fourteen calendar days in advance of the meeting. Any three
members, one of which may be the chair constitute a quorum for the
transaction of any business as herein provided for. A majority of
the commission is required to determine any issue brought before
it. Three members of the commission, at least two of whom are
appointed members, shall constitute a quorum for the transaction of
any business.
(d)The board commission shall pay each member the same
compensation as is paid to members of the Legislature for their
interim duties as recommended by the citizens legislative
compensation commission and authorized by law for each day or
portion thereof engaged in the discharge of official duties and
shall reimburse each member for actual and necessary expenses
incurred in the discharge of official duties.
(e)The commission shall appoint the oil and gas conservation
commissioner and advise the commissioner regarding the duties and
authority under this article and consult with the commissioner
prior to his or her reaching any final decisions and entering
orders hereunder. However, the commissioner has full and final
authority under this article with the commission serving in an
advisory capacity to the commissioner. The commissioner shall
possess a degree from an accredited college or university in
petroleum engineering or geology and must be a registered
professional engineer with particular knowledge and experience in
the oil and gas industry.
(f)(e) The oil and gas commissioner commission is hereby
empowered and it is the commissioner's commission's duty to execute
and carry out, administer and enforce the provisions of this
article in the manner provided herein. Subject to the provisions of
section three of this article, the commissioner commission has
jurisdiction and authority over all persons and property necessary
therefor. The commissioner commission is authorized to make such
investigation of records and facilities as the commissioner
commission deems proper. In the event of a conflict between the
duty to prevent waste and the duty to protect correlative rights,
the commissioner's commission's duty to prevent waste shall be
paramount. The commissioner shall serve as secretary of the oil
and gas conservation commission.
(g) (f)Without limiting the commissioner's commission's
general authority, the commissioner commission shall have specific
authority to:
(1)Regulate the spacing of deep wells;
(2)Make and enforce reasonable rules and orders reasonably
necessary to prevent waste, protect correlative rights, govern the
practice and procedure before the commissioner commission and
otherwise administer the provisions of this article;
(3)Issue subpoenas for the attendance of witnesses and
subpoenas duces tecum for the production of any books, records,
maps, charts, diagrams and other pertinent documents, and
administer oaths and affirmations to such witnesses, whenever, in
the judgment of the commissioner commission, it is necessary to do
so for the effective discharge of the commissioner's commission's
duties under the provisions of this article; and
(4)Serve as technical advisor regarding oil and gas to the
Legislature, its members and committees, to the chief of office of
oil and gas, to the division of environmental protection and to any
other agency of state government having responsibility related to
the oil and gas industry.
(h) (g) After having conducted a preliminary performance
audit through its joint committee on government operations,
pursuant to article ten, chapter four of this code, the Legislature
hereby finds and declares that the oil and gas conservation commission should be continued and reestablished. Accordingly,
pursuant to the provisions of section five of said article, the oil
and gas conservation commission shall continue to exist until the
first day of July, one thousand nine hundred ninety-seven. The
commission may delegate to the commission staff the authority to
approve or deny an application for new well permits, to establish
drilling units or special field rules if:
(1)The application conforms to the rules of the commission;
and,
(2)No request for hearing has been received.
(h)The commission may not delegate its authority to:
(1)Propose legislative rules;
(2)Approve or deny an application for new well permits, to
establish drilling units or special field rules if the conditions
set forth in subsection (g) of this section are not met; or
(3)Approve or deny an application for the pooling of
interests within a drilling unit.
(i)Any exception to the field rules or the spacing of wells
which does not conform to the rules of the commission, and any
application for the pooling of interests within a drilling unit,
must be presented to and heard before the commission.
§22C-9-4a. Termination of commission; reports.
(a)The commission is hereby continued until the first of
July, two thousand one.
(b)On or before the thirty-first day of December, one
thousand nine hundred ninety-eight, and for the next two
consecutive years thereafter, the oil and gas conservation
commission shall submit a report annually to the joint committee on
government operations of its activities for the year and any
recommendations for improving the function of the commission.
§22C-9-5. Rules; notice requirements.
(a)The commissioner may promulgate such reasonable rules as
the commissioner may deem necessary or desirable commission may
propose rules for legislative approval in accordance with the
provisions of article three, chapter twenty-nine-a of this code, to
implement and make effective the provisions of this article and the
powers and authority conferred and the duties imposed upon the
commissioner commission under the provisions of this article and
for securing uniformity of procedure in the administration of the
provisions of article three, chapter twenty-nine-a of this code.
(b)Notwithstanding the provisions of section two, article
seven, chapter twenty-nine-a of this code, any notice required
under the provisions of this article shall be given at the
direction of the commissioner commission by (1) personal or
substituted service and if such cannot be had then by (2) or by
certified United States mail, addressed, postage prepaid, to the
last-known mailing address, if any, of the person being served,
with the direction that the same be delivered to addressee only, return receipt requested, and if there be no known mailing address
or if the notice is not so delivered then by (3) publication of
such notice as a Class II legal advertisement in compliance with
the provisions of article three, chapter fifty-nine of this code,
and the publication area for such publication shall be the county
or counties wherein any land which may be affected by such order is
situate. In the case of providing notice upon the filing of an
application with the commission, the commission shall cause notice
to be published as a Class II legal advertisement in compliance
with the provisions of article three, chapter fifty-nine of this
code, and the publication area for such publication shall be the
county or counties wherein any land which may be affected by such
order is situate.
In addition, the commissioner commission shall mail a copy of
such notice to all other persons who have specified to the
commissioner commission an address to which all such notices may be
mailed. The notice shall issue in the name of the state, shall be
signed by the commissioner one of the commission members, shall
specify the style and number of the proceeding, the time and place
of any hearing and shall briefly state the purpose of the
proceeding. Each notice of a hearing must be provided no fewer than
twenty days preceding the hearing date. Personal or substituted
service and proof thereof may be made by an officer authorized to
serve process or by an agent of the commissioner commission in the same manner as is now provided by the "West Virginia Rules of Civil
Procedure for Trial Courts of Record" for service of process in
civil actions in the various courts of this state.
A certified copy of any pooling order entered under the
provisions of this article shall be presented by the commissioner
commission to the clerk of the county commission of each county
wherein all or any portion of the pooled tract is located, for
recordation in the record book of such county in which oil and gas
leases are normally recorded. Such The recording of such the order
from the time noted thereon by such clerk shall be notice of the
order to all persons.
§22C-9-7. Drilling units and the pooling of interests in drilling
units in connection with deep oil or gas wells
.
(a)Drilling units.
(1)After one discovery deep well has been drilled
establishing a pool, an application to establish drilling units may
be filed with the commissioner commission by the operator of such
discovery deep well or by the operator of any lands directly and
immediately affected by the drilling of such discovery deep well,
or subsequent deep wells in said pool , and the commissioner shall
promptly schedule a hearing on said application. Each application
shall contain such information as the commissioner may prescribe by
reasonable rules promulgated by the commissioner prescribed by
reasonable rules proposed by the commission in accordance with the
provisions of section five of this article.
(2)Upon the filing of an application to establish drilling
units, notice of the hearing shall be given by the commissioner.
Each notice shall specify the date, time and place of hearing,
describe the area for which a spacing order is to be entered, and
contain such other information as is essential to the giving of
proper notice.
Upon the filing of an application to establish drilling units,
the commission shall provide notice to all interested parties in
accordance with this subsection. If the application does not
conform to the existing rules of the commission, then the
commission shall set a hearing and provide notice to all interested
parties. If the application conforms to the rules of the
commission, the commission shall provide notice of the filing of
the application to all interested parties. Each notice shall
describe the area for which a spacing order is to be entered in
recognizable, narrative terms; contain such other information as is
essential to the giving of proper notice, including the time and
date and place of a hearing, if any; include a statement that any
party has a right to a hearing before the commission; and include
a statement that any request for hearing must be filed with the
commission within fifteen days of receipt of notice. If no request
for hearing has been received within the fifteen days following
receipt of the notice, the commission may proceed to process the
application. If a request for hearing has been received by the commission, then the commission shall set a hearing and provide
notice to all interested parties.
(3)On the date specified in such notice, the commissioner
shall hold a public hearing to determine The commission shall
determine the area to be included in such spacing order and the
acreage to be contained by each drilling unit, the shape thereof,
and the minimum distance from the outside boundary of the unit at
which a deep well may be drilled thereon. At such hearing the
commissioner The commission shall consider:
(i) (A)The surface topography and property lines of the
lands underlaid by the pool to be included in such order;
(ii) (B)The plan of deep well spacing then being employed or
proposed in such pool for such lands;
(iii) (C)The depth at which production from said pool has
been found;
(iv) (D)The nature and character of the producing formation
or formations, and whether the substance produced or sought to be
produced is gas or oil or both;
(v) (E)The maximum area which may be drained efficiently
and economically by one deep well; and
(vi) (F)Any other available geological or scientific data
pertaining to said pool which may be of probative value to the
commissioner commission in determining the proper deep well
drilling units therefor.
To carry out the purposes of this article, the commissioner
shall, upon proper application, notice and hearing as herein
provided, and if satisfied after such hearing that drilling units
should be established, If the commission determines that drilling
units should be established, the commission shall enter an order
establishing drilling units of a specified and approximately
uniform size and shape for each pool subject to the provisions of
this section.
(4)When it is determined that an oil or gas pool underlies
an area for which a spacing order is to be entered, the
commissioner commission shall include in such order all lands
determined or believed to be underlaid by such pool and exclude all
other lands.
(5)No drilling unit established by the commissioner
commission shall be smaller than the maximum area which can be
drained efficiently and economically by one deep well: Provided,
That if at the time of a hearing to establish drilling units, there
is not sufficient evidence from which to determine the area which
can be drained efficiently and economically by one deep well, the
commissioner commission may enter an order establishing temporary
drilling units for the orderly development of the pool pending the
obtaining of information necessary to determine the ultimate
spacing for such pool.
(6)An order establishing drilling units shall specify the minimum distance from the nearest outside boundary of the drilling
unit at which a deep well may be drilled. The minimum distance
provided shall be the same in all drilling units established under
said order with necessary exceptions for deep wells drilled or
being drilled at the time of the filing of the application. If the
commissioner commission finds that a deep well to be drilled at or
more than the specified minimum distance from the boundary of a
drilling unit would not be likely to produce in paying quantities
or will encounter surface conditions which would substantially add
to the burden or hazard of drilling such deep well, or that a
location within the area permitted by the order is prohibited by
the lawful order of any state agency or court, the commissioner
commission is authorized after notice and hearing to make an order
permitting the deep well to be drilled at a location within the
minimum distance prescribed by the spacing order. In granting
exceptions to the spacing order, the commissioner commission may
restrict the production from any such deep well so that each person
entitled thereto in such drilling unit shall not produce or receive
more than his just and equitable share of the production from such
pool.
(7)An order establishing drilling units for a pool shall
cover all lands determined or believed to be underlaid by such
pool, and may be modified by the commissioner commission from time
to time, to include additional lands determined to be underlaid by such pool or to exclude lands determined not to be underlaid by
such pool. An order establishing drilling units may be modified by
the commissioner commission to permit the drilling of additional
deep wells on a reasonably uniform pattern at a uniform minimum
distance from the nearest unit boundary as provided above. Any
order modifying a prior order shall be made only after application
by an interested operator and notice and hearing as prescribed
herein for the original order: Provided, That drilling units
established by order shall not exceed one hundred sixty acres for
an oil well or six hundred forty acres for a gas well: Provided,
however, That the commission may exceed the acreage limitation by
ten percent if the applicant demonstrates that the area would be
drained efficiently and economically by a larger drilling unit.
(8)After the date of the notice of hearing called to
establish drilling units, After the date an application to
establish drilling units has been filed with the commission, no
additional deep well shall be commenced for production from the
pool until the order establishing drilling units has been made,
unless the commencement of the deep well is authorized by order of
the commissioner commission.
(9)The commissioner commission shall, within forty-five days
after the filing of an application to establish drilling units for
a pool subject to the provisions of this section, either enter an
order establishing such drilling units, or dismiss the application, or for good cause, continue the application process.
(10)As part of the order establishing a drilling unit, the
commissioner commission shall prescribe just and reasonable 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 order integrating the royalty
interests.
(11)If a hearing has been held on an application submitted
pursuant to this subsection, the order shall be a final order. If
no hearing has been held, the commission shall issue a proposed
order and shall provide a copy of the proposed order, together with
notice of the right to appeal and request a hearing, to all
interested parties. Any party aggrieved by the proposed order may
appeal the proposed order to the full commission and request a
hearing. Notice of appeal and request for hearing shall be made in
accordance with section ten of this article within fifteen days of
entry of the order. If no appeal and request for hearing has been
received within fifteen days, the proposed order shall become
final.
(b)Pooling of interests in drilling units.
(1)When two or more separately owned tracts are embraced
within a drilling unit, or when there are separately owned
interests in all or a part of a drilling unit, the interested
persons may pool their tracts or interests for the development and operation of the drilling unit. In the absence of voluntary pooling
and upon application of any operator having an interest in the
drilling unit, and after notice and hearing, the commissioner the
commission shall set a hearing and provide notice to all interested
parties. Each notice shall describe the area for which an order is
to be entered in recognizable, narrative terms; contain such other
information as is essential to the giving of proper notice,
including the time and date and place of a hearing. After the
hearing, the commission shall enter an order pooling all tracts or
interests in the drilling unit for the development and operation
thereof and for sharing production therefrom. Each such pooling
order shall be upon terms and conditions which are just and
reasonable and in no event shall drilling be initiated on the tract
of an unleased royalty owner without such the owner's written
consent.
(2)All operations, including, but not limited to, the
commencement, drilling or operation of a deep well, upon any
portion of a drilling unit for which a pooling order has been
entered, shall be deemed for all purposes the conduct of such
operations upon each separately owned tract in the drilling unit by
the several owners thereof. That portion of the production
allocated to a separately owned tract included in a drilling unit
shall, when produced, be deemed for all purposes to have been
actually produced from such tract by a deep well drilled thereon.
(3)Any pooling order under the provisions of this subsection
(b) shall authorize the drilling and operation of a deep well for
the production of oil or gas from the pooled acreage; shall
designate the operator to drill and operate such deep well; shall
prescribe the time and manner in which all owners of operating
interests in the pooled tracts or portions of tracts may elect to
participate therein; shall provide that all reasonable costs and
expenses of drilling, completing, equipping, operating, plugging
and abandoning such deep well shall be borne, and all production
therefrom shared, by all owners of operating interests in
proportion to the net oil or gas acreage in the pooled tracts owned
or under lease to each owner; and shall make provisions for payment
of all reasonable costs thereof, including a reasonable charge for
supervision and for interest on past-due accounts, by all those who
elect to participate therein.
(4)No drilling or operation of a deep well for the
production of oil or gas shall be permitted upon or within any
tract of land unless the operator shall have first obtained the
written consent and easement therefor, duly acknowledged and placed
of record in the office of the county clerk, for valuable
consideration of all owners of the surface of such tract of land,
which consent shall describe with reasonable certainty, the
location upon such tract, of the location of such proposed deep
well, a certified copy of which consent and easement shall be submitted by the operator to the commission.
(5)Upon request, any such pooling order shall provide just
and equitable alternatives whereby an owner of an operating
interest who does not elect to participate in the risk and cost of
the drilling of a deep well may elect:
(i) (A)Option 1. To surrender such interest or a portion
thereof to the participating owners on a reasonable basis and for
a reasonable consideration, which, if not agreed upon, shall be
determined by the commissioner commission; or
(ii) (B)Option 2. To participate in the drilling of the deep
well on a limited or carried basis on terms and conditions which,
if not agreed upon, shall be determined by the commissioner
commission to be just and reasonable.
(6)In the event a nonparticipating owner elects Option 2,
and an owner of any operating interest in any portion of the pooled
tract shall drill and operate, or pay the costs of drilling,
completing, equipping and operating a deep well for the benefit of
such nonparticipating owner as provided in the pooling order, then
such operating owner shall be entitled to the share of production
from the tracts or portions thereof pooled accruing to the interest
of such nonparticipating owner, exclusive of any royalty or
overriding royalty reserved in any leases, assignments thereof or
agreements relating thereto, of such tracts or portions thereof, or
exclusive of one eighth of the production attributable to all unleased tracts or portions thereof, until the market value of such
nonparticipating owner's share of the production, exclusive of such
royalty, overriding royalty or one eighth of production, equals
double the share of such costs payable by or charged to the
interest of such nonparticipating owner.
(7)If a dispute shall arise as to the costs of drilling,
completing, equipping and operating a deep well, the commissioner
commission shall determine and apportion the costs, within ninety
days from the date of written notification to the commissioner
commission of the existence of such dispute.
(8)The commission shall, within forty-five days after the
filing of an application, enter an order, dismiss the application,
or for good cause, continue the application process.
§22C-9-8. Secondary recovery of oil; unit operations.
(a)Upon the application of any operator in a pool productive
of oil and after notice and hearing, the commissioner the
commission shall set a hearing and provide notice to all interested
parties. Each notice shall describe the area for which an order is
to be entered in recognizable, narrative terms; contain such other
information as is essential to the giving of proper notice,
including the time and date and place of a hearing. After the
hearing, the commission may enter an order requiring the unit
operation of such pool in connection with a program of secondary
recovery of oil, and providing for the unitization of separately owned tracts and interests within such pool, but only after finding
that:
(1)The order is reasonably necessary for the prevention of
waste and the drilling of unnecessary deep wells;
(2)the The proposed plan of secondary recovery will increase
the ultimate recovery of oil from the pool to such an extent that
the proposed secondary recovery operation will be economically
feasible;
(3)the The production of oil from the unitized pool can be
allocated in such a manner as to ensure the recovery by all
operators of their just and equitable share of such production; and
(4)the The operators of at least three fourths of the
acreage (calculating partial interests on a pro rata basis for
operator interests on any parcel owned in common) and the royalty
owners of at least three fourths of the acreage (calculating
partial interests on a pro rata basis for royalty interests on any
parcel owned in common) in such pool have approved the plan and
terms of unit operation to be specified by the commissioner
commission in its order, such approval to be evidenced by a written
contract setting forth the terms of the unit operation and executed
by said operators and said royalty owners, and filed with the
commissioner on or before the day set for hearing commission. The
order requiring such unit operation shall designate one operator in
the pool as unit operator and shall also make provision for the proportionate allocation to all operators of the costs and expenses
of the unit operation, including reasonable charges for supervision
and interest on past-due accounts, which allocation shall be in the
same proportion that the separately owned tracts share in the
production of oil from the unit. In the absence of an agreement
entered into by the operators and filed with the commissioner
commission providing for sharing the costs of capital investment in
wells and physical equipment, and intangible drilling costs, the
commissioner commission shall provide by order for the sharing of
such costs in the same proportion as the costs and expenses of the
unit operation: Provided, That any operator who has not consented
to the utilization unitization shall not be required to contribute
to the costs or expenses of the unit operation, or to the cost of
capital investment in wells and physical equipment, and intangible
drilling costs, except out of the proceeds from the sale of the
production accruing to the interest of such operator: Provided,
however, That no credit to the well costs shall be adjusted on the
basis of less than the average well costs within the unitized area:
Provided further, That no order entered under the provisions of
this section requiring unit operation shall vary or alter any of
the terms of any contract entered into by operators and royalty
owners under the provisions of this section.
(5)The commission shall, within forty-five days after the
filing of an application to establish unit operators for a pool subject to the provisions of this section, enter an order
establishing such unit operators, dismiss the application, or for
good cause, continue the application process.
§22C-9-10. Hearing procedures.
(a)Upon receipt of an application for an order of the
commissioner for which a hearing is required by the provisions of
this article, the commissioner shall set a time and place for such
hearing not less than ten and not more than thirty days thereafter.
Upon receipt of a request for hearing, the commission shall set a
time and place for such hearing not less than twenty and not more
than forty-five days thereafter. Any scheduled hearing may be
continued by the commissioner commission upon the commissioner's
commission's own motion or for good cause shown by any party to the
hearing. All interested parties shall be entitled to be heard at
any hearing conducted under the provisions of this article.
(b)All of the pertinent provisions of article five, chapter
twenty-nine-a of this code shall apply to and govern the hearing
and the administrative procedures in connection with and following
such hearing, with like effect as if the provisions of said article
five were set forth in extenso in this subsection.
(c)Any such hearing shall be conducted by the commissioner
commission. For the purpose of conducting any such hearing, the
commissioner commission shall have the power and authority to issue
subpoenas and subpoenas duces tecum which shall be issued and served within the time, for the fees and shall be enforced, as
specified in section one, article five of said chapter
twenty-nine-a, and all of the said section one provisions dealing
with subpoenas and subpoenas duces tecum shall apply to subpoenas
and subpoenas duces tecum issued for the purpose of a hearing
hereunder.
(d) At any such hearing any interested person parties may
represent themselves or be represented by an attorney-at-law
admitted to practice before any circuit court of this state. Upon
request by the commissioner commission, the commissioner commission
shall be represented at such a hearing by the attorney general or
the attorney general's assistants without additional compensation.
The commissioner commission, with the written approval of the
attorney general, may employ special counsel to represent the
commissioner commission at any such hearing.
(e)After any such hearing and consideration of all of the
testimony, evidence and record in the case, the commissioner
commission shall render a decision in writing. The written decision
of the commissioner commission shall be accompanied by findings of
fact and conclusions of law as specified in section three, article
five, chapter twenty-nine-a of this code, and a copy of such
decision and accompanying findings and conclusions shall be served
by certified mail, return receipt requested, upon all interested
persons parties and their attorney of record, if any.
The decision of the commissioner commission shall be final
unless reversed, vacated or modified upon judicial review thereof
in accordance with the provisions of section eleven of this
article.
§22C-9-11.Judicial review; appeal to supreme court of
appeals; legal representation for
commissioner
commission.
(a)Any person party adversely affected by a decision an
order of the commissioner rendered after a hearing held in
accordance with the provisions of section ten of this article
commission shall be entitled to judicial review thereof. All of the
pertinent provisions of section four, article five, chapter
twenty-nine-a of this code, shall apply to and govern such judicial
review with like effect as if the provisions of said section four
were set forth in extenso in this section.
(b)The judgment of the circuit court shall be final unless
reversed, vacated or modified on appeal to the supreme court of
appeals in accordance with the provisions of section one, article
six, chapter twenty-nine-a of this code, except that
notwithstanding the provisions of said section one the petition
seeking such review must be filed with said supreme court of
appeals within thirty days from the date of entry of the judgment
of the circuit court.
(c)Legal counsel and services for the commissioner
commission in all appeal proceedings in any circuit court and the supreme court of appeals shall be provided by the attorney general
or the attorney general's assistants and in any circuit court by
the prosecuting attorney of the county as well, all without
additional compensation. The commissioner commission, with the
written approval of the attorney general, may employ special
counsel to represent the commissioner commission at any such appeal
proceedings.
§22C-9-12. Injunctive relief.
(a)Whenever it appears to the commissioner commission that
any person has been or is violating or is about to violate any
provision of this article, any reasonable rule promulgated by the
commissioner commission hereunder or any order or final decision of
the commissioner commission, the commissioner commission may apply
in the name of the state to the circuit court of the county in
which the violations or any part thereof has occurred, is occurring
or is about to occur, or the judge thereof in vacation, for an
injunction against such person and any other persons who have been,
are or are about to be, involved in any practices, acts or
omissions, so in violation, enjoining such person or persons from
any such violation or violations. Such application may be made and
prosecuted to conclusion whether or not any such violation or
violations have resulted or shall result in prosecution or
conviction under the provisions of section fourteen of this
article.
(b)Upon application by the commissioner commission, the
circuit courts of this state may by mandatory or prohibitory
injunction compel compliance with the provisions of this article,
the reasonable rules promulgated by the commissioner commission
hereunder and all orders and final decisions of the commissioner
commission. The court may issue a temporary injunction in any case
pending a decision on the merits of any application filed. Any
other section of this code to the contrary notwithstanding, the
state shall not be required to furnish bond or other undertaking as
a prerequisite to obtaining mandatory, prohibitory or temporary
injunctive relief under the provisions of this article.
(c)The judgment of the circuit court upon any application
permitted by the provisions of this section shall be final unless
reversed, vacated or modified on appeal to the supreme court of
appeals. Any such appeal shall be sought in the manner and within
the time provided by law for appeals from circuit courts in other
civil actions.
(d)The commissioner commission shall be represented in all
such proceedings by the attorney general or the attorney general's
assistants and in such proceedings in the circuit courts by the
prosecuting attorneys of the several counties as well, all without
additional compensation. The commissioner commission, with the
written approval of the attorney general, may employ special
counsel to represent the commissioner commission in any such proceedings.
(e)If the commissioner commission shall refuse or fail to
apply for an injunction to enjoin a violation or threatened
violation of any provision of this article, any reasonable rule
promulgated by the commissioner commission hereunder or any order
or final decision of the commissioner commission within ten days
after receipt of a written request to do so by any person who is or
will be adversely affected by such violation or threatened
violation, the person making such request may apply in his own
behalf for an injunction to enjoin such violation or threatened
violation in any court in which the commissioner commission might
have brought suit. The commissioner commission shall be made a
party defendant in such application in addition to the person or
persons violating or threatening to violate any provision of this
article, any reasonable rule promulgated by the commissioner
commission hereunder or any order or final decision of the
commissioner commission. The application shall proceed and
injunctive relief may be granted without bond or other undertaking
in the same manner as if the application had been made by the
commissioner commission.
§22C-9-14. Penalties.
(a)Any person who violates any provision of this article,
any of the reasonable rules promulgated by the commissioner
commission hereunder or any order or any final decision of the commissioner commission, other than a violation covered by the
provisions of subsection (b) of this section, shall be guilty of a
misdemeanor, and, upon conviction thereof, shall be fined not more
than one thousand dollars, and each day that a violation continues
shall constitute a new and separate violation.
(b)Any person who, for the purpose of evading any provision
of this article, any of the reasonable rules promulgated by the
commissioner commission hereunder or any order or final decision of
the commissioner commission, shall make or cause to be made any
false entry or statement in a report required under the provisions
of this article, any of the reasonable rules promulgated by the
commissioner commission hereunder or any order or final decision of
the commissioner commission, or shall make or cause to be made any
false entry in any record, account or memorandum required under the
provisions of this article, any of the reasonable rules promulgated
by the commissioner commission hereunder or any order or any final
decision of the commissioner commission, or who shall omit, or
cause to be omitted, from any such record, account or memorandum,
full, true and correct entries, or shall remove from this state or
destroy, mutilate, alter or falsify any such record, account or
memorandum, shall be guilty of a misdemeanor, and, upon conviction
thereof, shall be fined not more than five thousand dollars, or
imprisoned in the county jail not more than six months, or both
fined and imprisoned.
(c)Any person who knowingly aids or abets any other person
in the violation of any provision of this article, any of the
reasonable rules promulgated by the commissioner commission
hereunder or any order of final decision of the commissioner
commission, shall be subject to the same penalty as that prescribed
in this article for the violation by such other person.
§22C-9-16.Rules, orders and permits remain in effect.
(a)All orders, determinations, rules, permits, grants,
contracts, certificates, licenses, waivers, bonds, authorizations
and privileges which have been issued, made, granted or allowed to
become effective pursuant to any prior enactment of this article
and which are in effect on the effective date of this article shall
continue in effect according to their terms until modified,
terminated, superseded, set aside or revoked pursuant to this
article, by a court of competent jurisdiction, or by operation of
law.
(b)Orders and actions of the commission or commissioner in
the exercise of functions amended by this enactment are subject to
judicial review to the same extent and in the same manner as if
such orders and actions had been by the commission or commissioner
exercising such functions immediately preceding the enactment of
this article.
NOTE: Strike-throughs indicate language that would be
stricken from the present law, and underscoring indicates new language that would be added. §22C-9-16 has been completely
rewritten; therefore, strike-throughs and underscoring have been
omitted.