Okla. Stat. tit. 52, § 52-87.9

A. Horizontal Well Unitization for Targeted Reservoirs.

Under limited circumstances and conditions contained in this

section, the Corporation Commission is authorized to unitize a

Oklahoma Statutes - Title 52. Oil and Gas Page 74

targeted reservoir for the drilling of horizontal wells to the end

that a greater ultimate recovery of oil and gas may be had

therefrom, waste is prevented, and the correlative rights of the

owners are protected. Unless and until a unit created pursuant to

this section is effective, nothing in this section shall prohibit

the drilling of a horizontal well within a drilling and spacing unit

created pursuant to Section 87.1 of this title.

B. Prerequisites for Unitization.

Upon the filing of an appropriate application, and after notice

and hearing, the Commission shall determine if:

1. The proposed unitization of the targeted reservoir is

reasonably calculated to increase the ultimate recovery of oil and

gas from the targeted reservoir through the use of horizontal well

technology to drill one or more horizontal wells in the unit;

2. The use of horizontal well technology to drill the

horizontal well or wells in the targeted reservoir is feasible, will

prevent waste, will protect correlative rights and will with

reasonable probability result in the increased recovery of

substantially more oil and gas from the targeted reservoir within

the unit than would otherwise be recovered;

3. The estimated additional cost, if any, of conducting the

horizontal well operations is not anticipated to exceed the value of

the additional oil and gas to be recovered; and

4. The unitization and the use of horizontal well technology to

drill one or more horizontal wells is for the common good and will

result in the general advantage of the owners of the oil and gas

rights within the unit.

Upon making these findings, the Commission may enter an order

creating the unit and providing for the unitized operation of the

targeted reservoir described in the order, all upon terms and

conditions as may be shown by the evidence to be fair, reasonable,

equitable and which are necessary or proper to protect and safeguard

the respective rights and obligations of the several persons

affected, including royalty owners, owners of overriding royalties

and others, as well as the lessees. The application shall set forth

a description of the proposed unit with a map or plat thereof

attached, shall allege the existence of the facts required to be

found by the Commission as provided in this subsection and shall

have attached thereto a recommended plan of development which is

applicable to the proposed unit and which is fair, reasonable and

equitable.

C. Size of the Unit.

Each unit shall be two governmental sections. However, the

Commission may expand the size of the unit by including additional

governmental sections up to a maximum unit size of four governmental

sections, if for good cause shown the Commission finds the expansion

of the unit size beyond two governmental sections is necessary to

Oklahoma Statutes - Title 52. Oil and Gas Page 75

prevent waste, to protect correlative rights and will result in the

increased recovery of substantially more oil and gas from the

targeted reservoir than would otherwise be recovered based upon, but

not necessarily limited to:

1. Geological features existing within the proposed unit;

2. The proposed location or orientation of the horizontal

wells;

3. The length of the laterals of the proposed horizontal wells;

4. The proposed use of multilateral wells; or

5. Any combination thereof.

D. Ownership of Oil and Gas Rights within the Unit.

Where there are, or may thereafter be, two or more separately

owned tracts within the unit, each owner of oil and gas rights

within the unit shall own an interest in the unit of the same

character as the ownership of the owner in the separately owned

tract. From and after the effective date of the order of the
r

5. Any combination thereof.

D. Ownership of Oil and Gas Rights within the Unit.

Where there are, or may thereafter be, two or more separately

owned tracts within the unit, each owner of oil and gas rights

within the unit shall own an interest in the unit of the same

character as the ownership of the owner in the separately owned

tract. From and after the effective date of the order of the

Commission creating the unit and subject to the provisions of any

pooling order covering the unit, the interest of each owner in the

unit shall be defined as the percentage of interest owned in each

separate tract by the owner, multiplied by the proportion that the

acreage in each separately owned tract bears to the entire acreage

of the unit. The costs incurred in connection with and the

production and proceeds from the wells in the unit shall be

allocated to each separate tract in the unit and shall be borne or

shared by the owners in each separate tract based upon and

determined by the interest of each owner in the tract. However, if

a well or wells already exist within the area of the proposed unit

which are producing or have produced or appear to be productive from

the targeted reservoir being unitized, the Commission may adjust the

sharing of future costs incurred in connection with and future

production and proceeds from any existing well or any subsequent

well in the proposed unit in any manner deemed necessary by the

Commission in order to protect the correlative rights of the owners

within any existing well or any subsequent well or within the unit,

including providing for the sharing of future costs incurred in

connection with and future production and proceeds from any existing

well or any subsequent well in a manner different from any other

well in the unit so long as the various methods of sharing future

costs, production and proceeds from the existing and subsequent

wells in the unit prevents waste and protects the correlative rights

of all the affected owners. For the purpose of this section, any

owner or owners of oil and gas rights in and under an unleased tract

of land within the unit, unless the owner has relinquished the

drilling rights or working interest of the owner in the applicable

targeted reservoir in the tract of land under a pooling order

entered by the Commission which order remains in effect, shall be

regarded as a lessee to the extent of a seven-eighths (7/8) interest

Oklahoma Statutes - Title 52. Oil and Gas Page 76

in and to the rights and a lessor to the extent of the remaining

one-eighth (1/8) interest therein.

E. The Plan of Development.

The application shall include a proposed plan of development.

Based upon the facts and conditions found to exist with respect to a

proposed unit, the Commission shall determine the necessary terms,

provisions, conditions and requirements to be included in the plan

of development for the unit. If a well or wells already exist

within the area of the proposed unit which are producing or have

produced or appear to be productive from the targeted reservoir

being unitized, the plan of development shall also include:

1. Any adjustments to the sharing of future costs incurred in

connection with future development and production, and the sharing

of proceeds, from any existing well or any subsequent well which the

Commission determines to be necessary in order to be fair,

reasonable and equitable, and to protect the correlative rights of

the owners, considering the existing development in and the prior

and anticipated future production from the targeted reservoir within

the unit; and

2. The procedure and basis upon which existing wells, equipment

and other properties of the several lessees within the unit area are

to be taken over and used for the unit operations, including the

method of arriving at the compensation therefor, or of otherwise

proportionately equalizing or adjusting the investment of the
ed future production from the targeted reservoir within

the unit; and

2. The procedure and basis upon which existing wells, equipment

and other properties of the several lessees within the unit area are

to be taken over and used for the unit operations, including the

method of arriving at the compensation therefor, or of otherwise

proportionately equalizing or adjusting the investment of the

several lessees in the project as of the effective date of unit

operation.

F. Order of the Commission.

The order of the Commission creating the unit shall:

1. Designate the size and shape of the unit;

2. Set forth the drilling pattern and setbacks for the unit,

including the permitted well location tolerances for the permitted

wells within the unit;

3. Approve and adopt the plan of development for the unit, with

a copy thereof attached to the order and include any necessary

special allocation factors for allocating the costs, production and

proceeds from the proposed unit resulting from existing wells or

subsequent wells, or both;

4. Designate the unit operator; and

5. Provide for the conditions upon which the unit, and the

order creating the unit, shall terminate.

G. Consent by Owners.

No order of the Commission creating a unit pursuant to this

section shall become effective unless and until the proposed

unitization has been consented to in writing, and the written

consent submitted to the Commission, by lessees of record of not

less than sixty-three percent (63%) of the working interest in the

targeted reservoir in each spacing unit in the area to be included

Oklahoma Statutes - Title 52. Oil and Gas Page 77

in the unit and by owners of record of not less than sixty-three

percent (63%), exclusive of any royalty interest owned by any lessee

or by any subsidiary of any lessee, of the one-eighth (1/8) royalty

interest in the targeted reservoir in each spacing unit in the area

to be included in the unit in an express writing separate from the

oil and gas lease. The Commission shall make a finding in the order

creating the unit as to whether the requisite consent has been

obtained. Where the requisite consent has not been obtained at the

time the order creating the unit is entered, the Commission shall,

upon application and notice, hold any additional and supplemental

hearings as may be requested or required to determine if and when

the requisite consent has been obtained and the date the unitization

will become effective. In the event lessees and royalty owners, or

either, owning the required percentage interest in and to the unit

area have not so consented to the unitization within a period of six

(6) months from and after the date on which the order creating the

unit is entered, the order creating the unit shall cease to be of

further force and effect and shall be revoked by the Commission.

H. Notice.

The application for the creation of a horizontal well

unitization under this section, and the notice of hearing on the

application, shall be served no less than fifteen (15) days prior to

the date of the hearing, by regular mail, upon each person or

governmental entity having the right to share in production from the

proposed unit covered by the application, as well as other persons

or governmental entities required by Commission rules. Any person

aggrieved by any order of the Commission made pursuant to this

section may appeal therefrom to the Supreme Court of the State of

Oklahoma upon the same conditions, within the same time and in the

same manner as is provided for in this title, for the taking of

appeals from the orders of the Commission made thereunder.

I. Pooling of the Unit.

From and after the effective date of an order creating a unit

pursuant to this section and subject to the provisions of the order

in regard to the matters to be found by the Commission in the

creation of the unit and the provisions of the applicable plan of
r as is provided for in this title, for the taking of

appeals from the orders of the Commission made thereunder.

I. Pooling of the Unit.

From and after the effective date of an order creating a unit

pursuant to this section and subject to the provisions of the order

in regard to the matters to be found by the Commission in the

creation of the unit and the provisions of the applicable plan of

development, an owner of the right to drill for and produce oil or

gas from the unit may request the Commission to pool the oil and gas

interests of the owners in the unit on a unitwide basis pursuant to

the provisions of subsection (e) of Section 87.1 of this title in

regard to the development of the unit.

J. Effect on Existing Spacing Units and Pooling Orders.

From and after the effective date of an order creating a unit

pursuant to this section, the operation of any well producing from

the targeted reservoir within the unit defined in the order by

persons other than the unit operator, or except in the manner and to

the extent provided in the order creating the unit shall be unlawful

Oklahoma Statutes - Title 52. Oil and Gas Page 78

and is hereby prohibited. Once the order of the Commission creating

a unit pursuant to this section becomes effective, the unit so

created shall supersede any drilling and spacing unit previously

formed by the Commission pursuant to Section 87.1 of this title for

the same targeted reservoir within the area of the new unit. Any

pooling order which was entered by the Commission pursuant to

subsection (e) of Section 87.1 of this title covering any drilling

and spacing unit superseded by a unit created pursuant to this

section and which was in effect at the time of the creation of the

unit shall remain in full force and effect as to any oil and gas

interests in the targeted reservoir which were relinquished and

transferred by operation of law under the pooling order. However,

further development of the targeted reservoir in the area of the

unit created pursuant to this section shall not be subject to any of

the other provisions of any prior pooling order, but shall be

governed by and pursuant to the order creating the unit, including

the applicable plan of development, and any subsequent pooling order

covering the unit.

K. Payment of Proceeds.

Units created pursuant to this section shall be subject to the

terms and provision of the PRSA.

L. The Commissioners of the Land Office.

The Commissioners of the Land Office, or other proper board or

officer of the state having the control and management of state

land, and the proper board or officer of any political, municipal,

or other subdivision or agency of the state, are hereby authorized

and shall have the power on behalf of the state or of any political,

municipal, or other subdivision or agency thereof, with respect to

land or oil and gas rights subject to the control and management of

the respective body, board, or officer, to consent to or participate

in any unitization created pursuant to the Extended Horizontal Well

Development Act.

M. Retained Jurisdiction.

Upon the creation of a unit pursuant to this section, and

approval of the plan of development in connection therewith, the

Commission shall retain jurisdiction over the unit and the plan of

development. The retained jurisdiction of the Commission set forth

herein shall neither preclude nor impair the right of any affected

party to obtain through the district courts of this state any remedy

or relief available at law or in equity for injuries caused by any

action or inaction of the applicant, operator or any other affected

party.