Law:Title 3. Oil And Gas (Texas)

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Subtitle C. Pooling And Cooperative Agreements

Contents

Chapter 101. Cooperative Development

Subchapter A. General Provisions

Section  101.001.  Definition.

In this chapter, "commission" means the Railroad Commission of Texas.

Acts 1977, 65th Leg., p. 2566, ch. 871, art. I, Sec. 1, eff. Sept. 1, 1977.



Section  101.002.  Existing Agreement Rights.

None of the provisions in this chapter restrict any of the rights that a person now may have to make and enter into unitization and pooling agreements.

Acts 1977, 65th Leg., p. 2566, ch. 871, art. I, Sec. 1, eff. Sept. 1, 1977.



Section 101.003.  Applicability. None Of The Provisions In This Chapter Impair T

he power of the commission to prevent waste under the oil and gas conservation laws of the state except as provided in Section 101.004 or repeal, modify, or impair any of the provisions of Sections 85.002 through 85.003, 85.041 through 85.055, 85.056 through 85.064, 85.125, 85.201 through 85.207, 85.241 through 85.243, 85.249 through 85.252, or 85.381 through 85.385, Subchapter J of Chapter 85, or Subchapter P of Chapter 91, relating to oil and gas conservation.

Acts 1977, 65th Leg., p. 2566, ch. 871, art. I, Sec. 1, eff. Sept. 1, 1977.

Amended by:

Acts 2007, 80th Leg., R.S., Ch. 816, Sec. 7, eff. September 1, 2007.



Section  101.004.  Conflict With Antitrust Acts.

(a) Agreements and operations under agreements which are in accordance with the provisions in this chapter, being necessary to prevent waste and conserve the natural resources of this state, shall not be construed to be in violation of the provisions of Chapter 15, Business & Commerce Code, as amended.

(b)  If a court finds a conflict between the provisions in this chapter and Chapter 15, Business & Commerce Code, as amended, the provisions in this chapter are intended as a reasonable exception to that law, necessary for the public interests stated in Subsection (a) of this section.

(c)  If a court finds that a conflict exists between the provisions in this chapter and Chapter 15, Business & Commerce Code, as amended, and finds that the provisions in this chapter are not a reasonable exception to said Chapter 15, it is the intent of the legislature that the provisions in this chapter, or any conflicting portion of them, shall be declared invalid rather than declaring Chapter 15, Business & Commerce Code, as amended, or any portion of it, invalid.

Acts 1977, 65th Leg., p. 2567, ch. 871, art. I, Sec. 1, eff. Sept. 1, 1977.



Subchapter B. Cooperative Agreements In Secondary Recovery Operations

Section  101.011.  Authorized Agreements For Separately Owned Properties.

Subject to the approval of the commission, as provided in this chapter, persons owning or controlling production, leases, royalties, or other interests in separate property in the same oil field, gas field, or oil and gas field may voluntarily enter into and perform agreements for either or both of the following purposes:

(1)  to establish pooled units, necessary to effect secondary recovery operations for oil or gas, including those known as cycling, recycling, repressuring, water flooding, and pressure maintenance and to establish and operate cooperative facilities necessary for the secondary recovery operations;

(2)  to establish pooled units and cooperative facilities necessary for the conservation and use of gas, including those for extracting and separating the hydrocarbons from the natural gas or casinghead gas and returning the dry gas to a formation underlying any land or leases committed to the agreement.

Acts 1977, 65th Leg., p. 2567, ch. 871, art. I, Sec. 1, eff. Sept. 1, 1977.



Section  101.012.  Persons Bound By Agreements.

Agreements for pooled units and cooperative facilities do not bind a landowner, royalty owner, lessor, lessee, overriding royalty owner, or any other person who does not execute them. The agreements bind only the persons who execute them, their heirs, successors, assigns, and legal representatives. No person shall be compelled or required to enter into such an agreement.

Acts 1977, 65th Leg., p. 2567, ch. 871, art. I, Sec. 1, eff. Sept. 1, 1977.



Section  101.013.  Commission Approval.

(a) Agreements for pooled units and cooperative facilities are not legal or effective until the commission finds, after application, notice, and hearing:

(1)  that the agreement is necessary to accomplish the purposes specified in Section 101.011 of this code;

(2)  that it is in the interest of the public welfare as being reasonably necessary to prevent waste and to promote the conservation of oil or gas or both;

(3)  that the rights of the owners of all the interests in the field, whether signers of the unit agreement or not, would be protected under its operation;

(4)  that the estimated additional cost, if any, of conducting the operation will not exceed the value of additional oil and gas so recovered, by or on behalf of the several persons affected, including royalty owners, owners of overriding royalties, oil and gas payments, carried interests, lien claimants, and others as well as the lessees;

(5)  that other available or existing methods or facilities for secondary recovery operations or for the conservation and utilization of gas in the particular area or field concerned or for both are inadequate for the purposes; and

(6)  that the area covered by the unit agreement contains only that part of the field that has reasonably been defined by development, and that the owners of interests in the oil and gas under each tract of land in the area reasonably defined by development are given an opportunity to enter into the unit on the same yardstick basis as the owners of interests in the oil and gas under the other tracts in the unit.

(b)  A finding by the commission that the area described in the unit agreement is insufficient or covers more acreage than is necessary to accomplish the purposes of this chapter is grounds for the disapproval of the agreement.

Acts 1977, 65th Leg., p. 2568, ch. 871, art. I, Sec. 1, eff. Sept. 1, 1977.



Section  101.014.  Jointly Owned Properties.

None of the provisions in this chapter shall be construed to require the approval of the commission of voluntary agreements for the joint development and operation of jointly owned property.

Acts 1977, 65th Leg., p. 2568, ch. 871, art. I, Sec. 1, eff. Sept. 1, 1977.



Section  101.015.  Commission Regulation.

An agreement executed under the provisions of this chapter is subject to any valid order or rule of the commission relating to location, spacing, proration, conservation, or other matters within the authority of the commission, whether adopted prior to or subsequent to the execution of the agreement.

Acts 1977, 65th Leg., p. 2568, ch. 871, art. I, Sec. 1, eff. Sept. 1, 1977.



Section  101.016.  Permissible Provisions.

(a) An agreement authorized by this chapter may provide for the location and spacing of input wells and for the extension of leases covering any part of land committed to the unit as long as operations for drilling or reworking are conducted on the unit or as long as production of oil or gas in paying quantities is had from any part of the land or leases committed to the unit. However, no agreement may relieve an operator from the obligation to develop reasonably the land and leases as a whole committed to the unit.

(b)  An agreement authorized by this chapter may provide that the dry gas after extraction of hydrocarbons may be returned to a formation underlying any land or leases committed to the agreement and may provide that no royalties are required to be paid on the gas so returned.

Acts 1977, 65th Leg., p. 2568, ch. 871, art. I, Sec. 1, eff. Sept. 1, 1977.



Section  101.017.  Prohibited Provisions.

(a) No agreement authorized by this chapter may attempt to contain the field rules for the area or field, or provide for or limit the amount of production of oil or gas from the unit properties, those provisions being solely the province of the commission.

(b)  No agreement authorized by this chapter may provide directly or indirectly for the cooperative refining of crude petroleum, distillate, condensate, or gas, or any by-product of crude petroleum, distillate, condensate, or gas. The extraction of liquid hydrocarbons from gas, and the separation of the liquid hydrocarbons into propanes, butanes, ethanes, distillate, condensate, and natural gasoline, without any additional processing of any of them, is not considered to be refining.

(c)  No agreement authorized by this chapter may provide for the cooperative marketing of crude petroleum, condensate, distillate, or gas, or any by-products of them.

Acts 1977, 65th Leg., p. 2569, ch. 871, art. I, Sec. 1, eff. Sept. 1, 1977.



Section  101.018.  Effect Of Approval Outside Of Unit.

The approval of an agreement authorized by this chapter shall not of itself be construed as a finding that operations of a different kind or character in the portion of the field outside of the unit are wasteful or not in the interest of conservation.

Acts 1977, 65th Leg., p. 2569, ch. 871, art. I, Sec. 1, eff. Sept. 1, 1977.



Subchapter C. Public Land

Section  101.051.  Authority Of Commissioner Of General Land Office.

Subject to the approval specified in Section 101.052 of this code, the Commissioner of the General Land Office, on behalf of the State of Texas or of any fund belonging to the state, may execute contracts committing to the agreements declared lawful by the provisions of this chapter (1) the royalty interests in oil or gas or both reserved to the state, or any fund of the state, by law, in any patent, in any contract of sale, or under the terms of any oil and gas lease lawfully issued by an official, board, agent, agency, or authority of the state or (2) the free royalty interests, whether leased or unleased, reserved to the state pursuant to Section 51.201 or 51.054 of this code.

Acts 1977, 65th Leg., p. 2569, ch. 871, art. I, Sec. 1, eff. Sept. 1, 1977. Amended by Acts 1987, 70th Leg., ch. 948, Sec. 33, eff. Sept. 1, 1987.



Section  101.052.  Necessary Approval By Other Persons And State Agencies.

(a) An agreement that commits (1) the royalty interests in land set apart by the constitution and laws of this state for the permanent free school fund and the several asylum funds, in river beds, inland lakes, and channels, and the area within tidewater limits, including islands, lakes, bays, inlets, marshes, reefs, and the bed of the sea, or (2) the free royalty interests, whether leased or unleased, reserved to the state pursuant to Section 51.201 or 51.054 of this code, must be approved by the School Land Board.

(b)  An agreement that covers land leased for oil and gas under the Relinquishment Act, codified as Subchapter F in Chapter 52 of this code, must be executed by the owners of the soil.

(c)  An agreement that commits the royalty interests in land or areas other than those covered by Subsections (a) and (b) of this section must be approved by the board, official, agent, agency, or authority of the state vested with authority to lease or to approve the leasing of the land or areas for oil and gas.

Acts 1977, 65th Leg., p. 2569, ch. 871, art. I, Sec. 1, eff. Sept. 1, 1977. Amended by Acts 1987, 70th Leg., ch. 948, Sec. 34, eff. Sept. 1, 1987.

Chapter 102. Pooling

Subchapter A. General Provisions

Section  102.001.  Title.

This chapter may be cited as the Mineral Interest Pooling Act.

Acts 1977, 65th Leg., p. 2570, ch. 871, art. I, Sec. 1, eff. Sept. 1, 1977.



Section  102.002.  Definitions.

In this chapter:

(1)  "Mineral" means and is limited to oil and gas.

(2)  "Commission" means the Railroad Commission of Texas.

Acts 1977, 65th Leg., p. 2570, ch. 871, art. I, Sec. 1, eff. Sept. 1, 1977.



Section  102.003.  Application To Certain Reservoirs.

The provisions of this chapter do not apply to any reservoir discovered and produced before March 8, 1961.

Acts 1977, 65th Leg., p. 2571, ch. 871, art. I, Sec. 1, eff. Sept. 1, 1977.



Section  102.004.  Application To Public Land.

(a) The provisions of this chapter do not apply to land owned by the State of Texas nor to land in which the State of Texas has an interest directly or indirectly.

(b)  The provisions of this chapter do not amend, repeal, change, alter, or affect in any manner the authority or jurisdiction of the Commissioner of the General Land Office or the State of Texas with respect to any land or interest in land in which the Commissioner of the General Land Office has jurisdiction.

(c)  The provisions of this chapter do not amend, repeal, change, alter, or affect in any manner the authority, jurisdiction, or consent of the Commissioner of the General Land Office on the pooling of any interest now subject to the jurisdiction, authority, or consent of the Commissioner of the General Land Office.

(d)  With the approval or consent first obtained, or at the instance of the Commissioner of the General Land Office, or any board or agency having jurisdiction, the land in which the State of Texas has an interest as described in this chapter may be pooled under the provisions of this chapter.

Acts 1977, 65th Leg., p. 2571, ch. 871, art. I, Sec. 1, eff. Sept. 1, 1977.



Subchapter B. Requirements And Procedure For Pooling

Section  102.011.  Authority Of Commission.

When two or more separately owned tracts of land are embraced in a common reservoir of oil or gas for which the commission has established the size and shape of proration units, whether by temporary or permanent field rules, and where there are separately owned interests in oil and gas within an existing or proposed proration unit in the common reservoir and the owners have not agreed to pool their interests, and where at least one of the owners of the right to drill has drilled or has proposed to drill a well on the existing or proposed proration unit to the common reservoir, the commission, on the application of an owner specified in Section 102.012 of this code and for the purpose of avoiding the drilling of unnecessary wells, protecting correlative rights, or preventing waste, shall establish a unit and pool all of the interests in the unit within an area containing the approximate acreage of the proration unit, which unit shall in no event exceed 160 acres for an oil well or 640 acres for a gas well plus 10 percent tolerance.

Acts 1977, 65th Leg., p. 2571, ch. 871, art. I, Sec. 1, eff. Sept. 1, 1977.



Section  102.012.  Owners Authorized To Apply For Pooling.

The following interested owners may apply to the commission for the pooling of mineral interests:

(1)  the owner of any interest in oil and gas in an existing proration unit or with respect to a proposed unit;

(2)  the owner of any working interest; or

(3)  any owner of an unleased tract other than a royalty owner.

Acts 1977, 65th Leg., p. 2571, ch. 871, art. I, Sec. 1, eff. Sept. 1, 1977.



Section  102.013.  Required Voluntary Pooling Offer.

(a) The applicant shall set forth in detail the nature of voluntary pooling offers made to the owners of the other interests in the proposed unit.

(b)  The commission shall dismiss the application if it finds that a fair and reasonable offer to pool voluntarily has not been made by the applicant.

(c)  An offer by an owner of a royalty or any other interest in oil or gas within an existing proration unit to share on the same yardstick basis as the other owners within the existing proration unit are then sharing shall be considered a fair and reasonable offer.

Acts 1977, 65th Leg., p. 2572, ch. 871, art. I, Sec. 1, eff. Sept. 1, 1977.



Section  102.014.  Productive Acreage Equal To Standard Proration Unit.

(a) The commission shall not require the owner of a mineral interest, the productive acreage of which is equal to or in excess of the standard proration unit for the reservoir, to pool his interest with others unless requested by the holder of an adjoining mineral interest, the productive acreage of which is smaller than such pattern, who has not been provided a reasonable opportunity to pool voluntarily.

(b)  If the conditions specified in Subsection (a) of this section exist, the commission shall pool the smaller tract with adjacent acreage on a fair and reasonable basis and may authorize a larger allowable for the unit if it exceeds the size of the standard proration unit for the reservoir.

Acts 1977, 65th Leg., p. 2572, ch. 871, art. I, Sec. 1, eff. Sept. 1, 1977.



Section  102.015.  Prohibited Provisions In Operating Agreement.

A pooling agreement, offer to pool, or pooling order is not considered fair and reasonable if it provides for an operating agreement containing any of the following provisions:

(1)  preferential right of the operator to purchase mineral interests in the unit;

(2)  a call on or option to purchase production from the unit;

(3)  operating charges that include any part of district or central office expense other than reasonable overhead charges; or

(4)  prohibition against nonoperators questioning the operation of the unit.

Acts 1977, 65th Leg., p. 2572, ch. 871, art. I, Sec. 1, eff. Sept. 1, 1977.



Section  102.016.  Notice Of Hearing.

On the filing of an application for pooling of interests into a unit under the provisions of this chapter, at least 30 days notice before hearing on the application shall be given to all interested parties, including notice by publication if there are unknown owners or owners whose whereabouts are unknown. The notice shall be given in the manner and form prescribed by the commission.

Acts 1977, 65th Leg., p. 2572, ch. 871, art. I, Sec. 1, eff. Sept. 1, 1977.



Section  102.017.  Pooling Order.

(a) After notice and hearing, all orders effecting the pooling shall be made on terms and conditions that are fair and reasonable and will afford the owner or owners of each tract or interest in the unit the opportunity to produce or receive his fair share.

(b)  Each order shall:

(1)  describe the land included in the unit, identifying the reservoir to which it applies;

(2)  designate the location of the well; and

(3)  appoint an operator for the unit.

Acts 1977, 65th Leg., p. 2572, ch. 871, art. I, Sec. 1, eff. Sept. 1, 1977.



Section  102.018.  Acreage Subject To Pooling.

The commission shall pool only the acreage which at the time of its order reasonably appears to lie within the productive limits of the reservoir.

Acts 1977, 65th Leg., p. 2573, ch. 871, art. I, Sec. 1, eff. Sept. 1, 1977.



Subchapter C. Rights In A Pooled Unit

Section  102.051.  Ownership Of Production.

(a) For the purpose of determining the portions of production owned by the persons owning interests in the pooled unit, the production shall be allocated to the respective tracts within the unit in the proportion that the number of surface acres included within each tract bears to the number of surface acres included in the entire unit.

(b)  Notwithstanding the provisions in Subsection (a) of this section, if the commission finds that allocation on a surface-acreage basis does not allocate to each tract its fair share, the commission shall allocate the production so that each tract will receive its fair share, which for any nonconsenting owner shall be no less than he would receive under a surface-acreage allocation.

Acts 1977, 65th Leg., p. 2573, ch. 871, art. I, Sec. 1, eff. Sept. 1, 1977.



Section  102.052.  Drilling And Completion Costs.

(a) As to an owner who elects not to pay his proportionate share of the drilling and completion costs in advance, the commission shall make provision in the pooling order for reimbursement solely out of production, to the parties advancing the costs, of all actual and reasonable drilling, completion, and operating costs plus a charge for risk not to exceed 100 percent of the drilling and completion costs.

(b)  If there is a dispute relative to the costs, the commission shall determine the proper costs and their allocation among working interest owners after due notice to interested parties and a hearing on the costs.

Acts 1977, 65th Leg., p. 2573, ch. 871, art. I, Sec. 1, eff. Sept. 1, 1977.



Section  102.053.  Effect Of Operations.

(a) The operations on and production from any portion of a unit for which a pooling order has been entered shall be considered for all purposes the conduct of the operations on and production from each separately owned tract in the pooled unit. If a gas well on a pooled unit is shut-in, it shall be considered that the shut-in gas well is on each separately owned tract in the pooled unit.

(b)  If only part of a tract is included in the unit, operations on, production from, or a shut-in gas well on the unit shall maintain an oil and gas lease on the tract as to the part excluded from the unit only if the lease would be maintained had the unit been created voluntarily under the provisions of the lease.

Acts 1977, 65th Leg., p. 2573, ch. 871, art. I, Sec. 1, eff. Sept. 1, 1977.



Subchapter D. Dissolution Of Unit

Section  102.081.  Dissolved With Consent Of Owners.

A unit established by order of the commission under this chapter may not be modified or dissolved subsequently without the consent of all mineral owners affected, except as necessary to permit its enlargement as provided in Subchapter B of this chapter.

Acts 1977, 65th Leg., p. 2573, ch. 871, art. I, Sec. 1, eff. Sept. 1, 1977.



Section  102.082.  Automatic Dissolution.

A unit is automatically dissolved:

(1)  one year after its effective date if no production or drilling operations have been had on the unit;

(2)  six months after the completion of a dry hole on the unit; or

(3)  six months after cessation of production from the unit.

Acts 1977, 65th Leg., p. 2574, ch. 871, art. I, Sec. 1, eff. Sept. 1, 1977.



Section  102.083.  Termination Of Pooled Lease.

On termination of a lease pooled by order of the commission under authority granted by this chapter, interests covered by the lease are considered pooled as unleased mineral interests.

Acts 1977, 65th Leg., p. 2574, ch. 871, art. I, Sec. 1, eff. Sept. 1, 1977.



Subchapter E. Judicial Review

Section  102.111.  Right To Appeal.

A person affected by an order of the commission adopted under the authority of this chapter is entitled to judicial review of that order in a manner other than by trial de novo.

Acts 1977, 65th Leg., p. 2574, ch. 871, art. I, Sec. 1, eff. Sept. 1, 1977.



Section  102.112.  Venue.

Appeal shall be to the district court of the county in which the land or any part of the land covered by the order is located and not elsewhere, notwithstanding the provisions of Sections 85.241 through 85.243 of this code.

Acts 1977, 65th Leg., p. 2574, ch. 871, art. I, Sec. 1, eff. Sept. 1, 1977.


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