TITLE 30. MINERALS, OIL, AND GAS AND ENVIRONMENTAL QUALITY

SUBTITLE I. MINERALS, OIL, AND GAS

CHAPTER 2. LEASES AND CONTRACTS

PART II. LEASES BY STATE OR POLITICAL SUBDIVISIONS

SUBPART A. STATE MINERAL BOARD

30:129      Powers, duties, and authority of board; pooling agreements; operating units; fees

A. The board shall have full supervision of all mineral leases granted by the state, in order that it may determine that the terms of these leases are fully complied with, and it has general authority to take any action for the protection of the interests of the state. The board shall take all appropriate action, including the recovery of non-producing leased acreage whenever possible, to assure that undeveloped or non-producing state lands and water bottoms are reasonably and prudently explored, developed, and produced for the public good. It may institute actions to annul a lease upon any legal ground. The board has authority to enter into agreements or to amend a lease in whatever manner may most benefit the state. It may join in pooling and unitization agreements covering state lands and water bottoms, and mineral and royalty rights in, to, and under state lands and water bottoms either alone or in conjunction with any other lease, mineral, or royalty rights in and under any other property, so as to create, by the agreement, one or more pooled units. The board may agree in the event of production of minerals from any unit so created, that the state shall receive and accept on account of production, whether or not production is from any part of the state property within the unit, a share of unit production or proceeds proportionate to that part of the production or proceeds which the state is fairly entitled to receive under the unit agreement. In determining this proportionate part which the state may receive, the board may consider the surface acreage, the estimated original reserves in place, the estimated ultimate recovery, sand thickness, porosity, permeability as determined by approved engineering practices, and any other relevant factors. This proportionate share of unit production or proceeds shall be in lieu of all other royalties or other payments which would accrue to the state on account of production from, or attributable to, any part of the state property included in the unit. The office of mineral resources may collect a fee of five hundred dollars to cover the cost of docketing and advertising any instrument related to the administration of mineral leases under the provisions of this Part. In addition, the office may collect a fee of thirty- five dollars per hour for each hour or portion thereof spent in verification of claims, disputes, or questions pertaining to the terms, conditions, obligations, and duties expressed or implied in the state mineral lease.

B. (1)(a) "Operating unit" as herein used means that number of surface acres of land which, under regular or special rules of the commissioner of conservation or other authority having control in the premises, or by agreement of the lessors, lessees, and mineral and royalty owners, may be pooled and unitized for development and operation as a unit. An agreement creating an operating unit may provide for cycling, recycling, pressure maintenance, or re-pressuring in fields productive of oil, gas, and gas from which condensate, distillate, or other product may be separated or extracted.

(b) "Reworking operations" means the good faith downhole work performed on a well after its completion in a good faith effort to secure production where there has been none, restore production that has ceased, or increased production.

(c) "Commencement of operations for the drilling of a well" means actual spudding in of a well with drilling equipment adequate for the good faith drilling of a well to a depth that is reasonably calculated to establish oil and gas production affecting the lands where such well is commenced.

(2) The commencement of operations for the drilling of a well, the conducting of reworking operations, or production of minerals on any portion of a unit which embraces all or any part of the property covered by a contract of lease in effect on August 1, 1991 or thereafter shall have the same effect, under the terms of the lease as if it had occurred on the lands embraced by the lease.

(3) However, each contract of lease entered into by the board after August 1, 1991, shall contain a clause, commonly referred to as a "Pugh clause", which shall provide that the commencement of operations for the drilling of a well, the conducting of reworking operations, or production of minerals, on any portion of a unit which embraces all or any part of the property covered by such lease shall maintain the lease in effect under the terms of the lease only as to the part of the leased property embraced by the unit. The clause may provide that the acreage outside the unit(s) may be maintained by any means covered by the lease, but if by rental payments, then such payment may be reduced proportionately to the amount of acreage included in the unit as it bears to the total acreage in the lease, provided that the rental per acre on the outside acreage shall not be less than one-half of the cash payment paid for the lease per acre nor shall the lease on the non-unitized acreage be extended more than two years beyond the primary term.

Amended by Acts 1950, No. 46, 1; Acts 1986, No. 764, 1. Amended by Acts 1991, No. 786, 1, eff. July 19, 1991; Acts 1997, No. 229, 1; Acts 2002, 1st Ex.Sess., No. 106, 1, eff. April 18, 2002.