CHAPTER 17 3180 UNITIZATION HANDBOOK

• Jurisdiction: United States

Federal Onshore Oil & Gas Pooling & Unitization - part 2
(Oct 2014)
CHAPTER 17
3180 UNITIZATION HANDBOOK

[Page 104]

UNITED STATES DEPARTMENT OF THE INTERIOR

BUREAU OF LAND MANAGEMENT

Washington, D.C. 20240

November 20, 1992

In Reply Refer To 3180 (610)

Instruction Memorandum No. 93-66

Expires 9/30/94

To:	All Field Offices
From:	Director
Subject:	Interim Guidance on Oil and Gas Units Administration

ISSUE: The Bureau of Land Management (BLM) Manual Section 3180 and Handbook H-3180-1 have been revised to implement the recommendations of a special BLM task force on exploratory units and to reflect other changes that have occurred in the units program since Manual 3180 was last released in 1986. However, since work remains to be done on several unit issues, the new Manual cannot yet be released in final form. Nonetheless, the revised units Manual, in its present form, contains updated policy and procedural guidance that should be made available to BLM field personnel.

OBJECTIVE: This Instruction Memorandum transmits the current final draft versions of Manual Section 3180 and Handbook H-3180-1 for use as interim guidance in administering the units program.

BACKGROUND AND POLICY: Release of this draft revised Manual for the units program is consistent with BLM's policy of providing up-to-date procedural guidance to our field personnel.

IMPLEMENTATION AND SCHEDULE: The attached final draft Manual Section 3180 and Manual H-3180-1 should be used as interim guidance until final versions of the units Manual/Handbook are completed and released. During the next few months, we will finish work on a more comprehensive version of Illustration 2 to the Handbook, which is a compilation of explanatory material and suggested forms designed to assist unit operators in submitting the various information and requests for approval required by the BLM. During this period, we will also try to resolve selected program issues related to the treatment of unleased Federal lands in units, the effective commitment of tracts to the unit agreement when minority working interest owner approval is unobtainable, the possible use of a self-certification procedure for subsequent joinders to the unit agreement, and the transition from exploratory to enhanced recovery unit operations.

While we complete revision of the Manual and Handbook for final publication, we encourage feedback on this revised guidance from you as well as from those in the industry who are affected by it.

[Page 105]

COORDINATION: preparation of the 3180 Manual was coordinated among BLM offices of the major oil and gas producing States through their respective representatives on the oil and Gas Agreements Task Force.

BUDGET IMPLICATIONS: Minimal.

CONTACT PERSONS: Wayne Stevens (916) 978-4735 or Rob Coleman (307) 775-6193.

Hillary A. Oden

Assistant Director

Energy and Mineral Resources

2 Attachments

1 - Interim Guidance-Draft BLM Manual Section 3180-Unitization (Exploratory (23 pp.)

2 - Interim Guidance-Draft BLM Handbook H-3180-1-Unitization Exploratory (126 pp.)

[Page 106]

BLM HANDBOOK H-3180-1 - UNITIZATION (EXPLORATORY)

NOTE TO USERS: The attached DRAFT BLM Handbook H-3180-1 is being issued as INTERIM GUIDANCE for those involved in administration of the oil and gas units program.

[Page 108]

Table of Contents

I. Introduction

II. Guidelines and Procedures

A. Procedures for Designation of Unit Area; Depth of Test Well

1. Application Letter

2. Geologic Report

3. Land Ownership Map

4. Special Unit Provisions

5. Review of the Application

B. Unit Area and Well Obligation

C. Approval of an Executed Unit Agreement

D. Operating Rights

E. Exploratory Drilling Operations

1. Diligent Drilling of a Unit Well

2. Further Drilling and Development

3. Multiple Test Well

4. Producible Wells Prior to Unitization

F. Determining Production in Paying Quantities

1. Paying Well Evaluations

2. Non-Paying Well/Recompletion Evaluations

G. Establishment or Revision of Participating Areas

1. Initial Participating Area

2. Revision of Participating Area

3. MMS Notification of Participating Area Approvals

H. Plan of Further Development and Operation

1. Purpose

2. Plan of Development

3. Summary of Operations

I. Procedures for Expansion or Contraction of Unitized Areas

1. Filing of the Request

2. Notification of Involved Parties

3. Request for Approval

4. Effective Date of Expansion or Contraction

5. Submission of Exhibits and Joinders

J. Suspensions

1. Unavoidable Delay

2. Suspension of Lease Terms

3. Suspension of Automatic Elimination Provisions of the Unit Agreement

K. Extensions of Time

L. Effect of Unit Agreement on Committed Lease Terms Lease Segregations and Lease Extensions€

M. Unleased Federal Lands

N. Termination

1. Automatic Termination

2. Voluntary Termination

[Page 109]

O. Amendment of Approved Unit Agreement

P. Allocation of Production

Q. Drainage - Compensatory Royalty

R. Treatment of Existing Wells

S. Reporting Format for Unit Wells

T. Unit Activity Report

U. Lease Commitment Status

1. Fully Committed

2. Effectively Committed

3. Partially Committed

4. Not Committed

V. Designation of Agent

W. Designation of Suboperator

X. Successor Unit Operator

Y. Bankrupt Unit Operator

Z. Subsequent Joinder and Late Joinder

AA. Bond Requirements

AB. Development or Operation of Nonparticipating Lands

AC. Non-Federal Form of Unit Agreement

AD. Indian Land

1. Special Provisions in Unit Agreement

2. Procedures for Unitization of Indian Lands

AE. State Agencies

Illustrations

1. Form Letters and Notices Used in Units Administration

1-1. Unit Designation Letter

1-2A. Unit Approval Certification-Determination Page (Federal Form Agreement)

1-2B. Unit Approval Certification-Determination Page (Non-Federal Form Agreement)

1-2C. Unit Approval Letter

1-3. Non-Paying Well Determination Notice

1-4A. Initial Participating Area Approval Letter

1-4B. Participating Area Revision Approval Letter

1-5A. Request for Lands Automatically Eliminated From Unit

1-5B. Automatic Contraction Concurrence Letter

1-6A. Preliminary Approval for Unit Expansion Letter

1-6B. Final Approval for Unit Expansion Letter

1-7A. Automatic Unit Termination Notice for Cessation of Production

1-7B. Automatic Unit Termination Notice for Failure to Meet Drilling Requirements

1-7C. Voluntary Unit Termination Approval Letter

1-8A. Successor Operator Approval Letter

1-8B. Successor Operator Request Letter and Instrument

1-9A. Subsequent Joinder Approval Letter

1-9B. Late Joinder Approval Letter

[Page 110]

2. Guidelines and Suggested Formats for Operator Submissions

3. Numbering System for Approved Unit Agreements

4. Compensatory Royalty Provision in Unit Agreement for Unleased Federal Lands

5. Communitization Agreements in Units

6. AIRS/MRO Reporting Format for Unit Wells

7. Guidelines for the Unit Activity Report

8. Sample Text for State Land Provisions in the Unit Agreement

Bibliography

[Page 112]

I. Introduction.

The objective of unitization is to proceed with a program that will adequately and timely explore and develop all committed lands within the unit area without regard to internal ownership boundaries. Exploratory units normally embrace a prospective area that has been delineated on the basis of geological and/or geophysical inference. Exploratory unit agreements normally encompass all oil and gas interests in all formations within the unit area and provide for the allocation of unitized production to the committed lands reasonably proven to be productive of unitized substances in paying quantities on the basis of the surface acreage included within the controlling participating area. By effectively eliminating internal property boundaries within the unit area, unitization permits the most efficient and cost- effective means of developing the underlying oil and gas resources.

The BLM will approve the commitment of Federal lands to a unit agreement in the interest of conserving the natural resources, when it is determined to be necessary or advisable in the public interest. When such a determination is made and Federal lands are committed to the unit, the authorized officer has a responsibility to ensure that unit development proceeds in a way that continues to serve the public interest, regardless of whether the Federal lands comprise only a small fraction or a major part of the unit area.

The guidelines and procedures discussed in this Handbook apply generally to all unit agreements involving Federally-supervised leases, but specifically to those agreements that adopt the text of the form of agreement contained in 43 CFR 3186.1 . While reference is made throughout this Handbook to specific sections of the Federal form of unit agreement (43 CFR 3186.1 ), any such reference should be understood as applying also to the equivalent provision in a non-Federal form of agreement, if appropriate.

Section II of this Handbook discusses the general procedures to be followed in administering oil and gas exploratory unit agreements. As an aid to BLM personnel involved in units administration, the Handbook also provides, in Illustration 1, a recommended format for the various notices and approvals that are required during the life of a unit. Illustration 2 of the Handbook provides general guidance and suggested formats for submissions required from the unit operator. Further illustrations are included that provide supplemental guidance for managing units information, for treating communitized areas within units and for including special provisions in the unit agreement.

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II. Guidelines and Procedures.

A. Procedures for Designation of Unit Area; Depth of Test Well.

When requesting designation of an area as logically subject to development under a unit plan, an applicant must submit all required...