CHAPTER 1 COMMUNITIZATION AND UNIT AGREEMENT— GLOSSARY —

• Jurisdiction: United States

Onshore Pooling and Unitization
(Jan 1997)
CHAPTER 1
COMMUNITIZATION AND UNIT AGREEMENT— GLOSSARY —

ABSTRACT OF TITLE

A collection of all the recorded instruments affecting the title to a tract of land.

ACQUIRED FEDERAL LANDS

Lands in Federal ownership which have never been "Public Domain" and those lands in Federal ownership which have once been public lands but have been disposed of as such and which the United States has later reacquired by purchase, condemnation, or donation.

API

American Petroleum Institute. The API through its research and engineering work, establishes operating and safety standards for all segments of the petroleum industry; issues specifications for manufacture of pipe, pressure vessels, and other equipment; and furnishes statistical and other information to government agencies having to do with the industry.

API GRAVITY

Gravity (weight per unit of volume) of crude oil or other liquid hydrocarbons as measured by a system recommended by the API. API gravity bears a relationship to true specific gravity, but it is more convenient to work with than the decimal fractions which would result if petroleum were expressed in specific gravity.

ASSIGNMENT

In law generally, a transfer. In oil and gas law, the most common usage refers to the assignment of an oil and gas lease.

AUTOMATIC ELIMINATION

All lands in a unit agreement not in a participating area on or before the fifth anniversary of the effective date of the first participating area shall be automatically eliminated from the unit agreement effective as of fifth anniversary. 30 CFR 226.12-2 .

BARREL OF OIL

42 U.S. Gallons

BASIC ROYALTY

The royalty reserved by the lessor (the Federal Government) when they issue an oil and gas lease. (Free of all development, drilling & operation costs)

COMMERCIAL WELL

A well capable of production in paying quantities which means:

a) Lease Terms — A well with sufficient production to cover current operating expenses, without regard to original drilling costs.

b) Unit Terms — A well with sufficient production to make a profit over the cost of drilling, equipping, completing and operating it.

COMMIT

A pledge, signified by signature, to join in or abide by an agreement.

COMMITMENT STATUS

The various possible commitment categories of a unit tract and its effect on operations are:

a) Fully Committed (FC) — indicates that all interest owners in that tract have signed. This includes the lessor, lessee of record, overrides, if any, and working interests if different from the lessee of record. The working interests must also have signed the operating agreement. A fully committed tract is eligible for all benefits under the unit.

b) Effectively Committed (FC) — indicates that all interest owners, except overrides, have signed. An effectively committed tract is also eligible for all benefits under the unit.

c) Partially Committed (PC) — in reference to a patented tract, it indicates the lessor (mineral interest owner) has not signed but the lessee and working interest have committed their interest. In reference to a State or Federal tract, it indicates the lessee of record has not signed but the working interest and lessor have committed their interests (Note: In some States, commitment by a lessee of record who owns no working interest is considered as unnecessary and the tract may be considered as effectively committed without such signature). A PC lease is not subject to any benefit by unit operations unless there are actual operations and/or production on the lease itself or it is included within and receives an allocation of production from a participating area. Unitized drilling is permissible on a PC tract but if unitized production is obtained on the PC tract and a participating area is established, the working interest operator must allocate the entire production to the participating area and also pay the noncommitted parties their just royalty on a leasehold basis.

d) Not Committed (NC) — any tract in which a working interest has not committed, regardless of other committed interest, is considered as not committed and is not subject to the Unit Agreement.

COMMON SOURCE OF SUPPLY

An underground reservoir, all parts of which are permeably connected so as to permit the migration of oil or gas or both from one portion thereof to another wherever and whenever pressure differentials are created as a result of the production of oil or gas from that producing formation.

COMMUNITIZATION AGREEMENT

An agreement to combine two or more mineral leases in order to have sufficient acreage to...