CHAPTER 26 MODEL SECONDARY UNIT FORMS

JurisdictionUnited States
Federal Onshore Oil & Gas Pooling & Unitization - part 2
(Oct 2014)

CHAPTER 26
MODEL SECONDARY UNIT FORMS

[Page 374]

UNIT AGREEMENT AND PLAN OF UNITIZATION FOR THE DEVELOPMENT AND OPERATION OF THE _________________________ UNIT AREA

COUNTY OF _________________________

STATE OF _________________________

TABLE OF CONTENTS

Preliminary Recitals

1. Enabling Act and Regulations

2. Unit Area

3. Expansion of Unit Area

4. Unitized Land and Unitized Substances

5. Tracts Qualified for Participation

6. Unit Operator

7. Resignation or Removal of Unit Opertor

8. Successor Unit Operator

9. Accounting Provisions and Unit Operating Agreement

10. Rights and Obligations of Unit Operator

11. Plan of Operation

12. Participation and Allocation of Production

13. Royalty Settlement

14. Rental Settlement

15. Conservation

16. Drainage

17. Gauge of Merchantable Oil

18. Leases and Contracts Conformed and Extended

19. Convenants Run With Land

20. Effective Date

21. Term

22. Termination by Working Interest Owners

23. Rate of Prospecting, Development and Production

24. Appearances

25. Notices

26. No Waiver of Certain Rights

27. Unavoidable Delay

28. Non-Discrimination

29. Loss of Title

30. Subsequent Joinder

31. Counterparts

32. Royalty Owner's Taxes

33. No Partnership

34. Border Agreements

35. Correction of Errors

36. Special Surface Stipulations

Exhibit "A" - Map of Unit Area

Exhibit "B" - Schedule of Ownership

Exhibit "C" - Tract Participation

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CONTRACT NO. _______________

THIS AGREEMENT, entered into as of the ______ day of _______________, 19 ___, by and between the parties subscribing, ratifying, or consenting hereto, and herein referred to as the "parties hereto,"

WITNESSETH:

WHEREAS, the parties hereto are the owners of working, royalty, or other oil and gas interests in the Unit Area subject to this Agreement; and

WHEREAS, the term "Working Interest" as used herein shall mean the interest held in Unitized Substances or in lands containing Unitized Substances by virtue of a lease, operating agreement, fee title, or otherwise, which is chargeable with and obligated to pay or bear all or a portion of the costs of drilling, developing, producing, and operating the land under the unit or cooperative agreement. "Royalty Interest" as used herein shall mean a right to, or interest in, any portion of the Unitized Substances or proceeds thereof other than a Working Interest. The owner of oil and gas rights that are free of lease or other instrument conveying the Working Interest rights to another shall be regarded as a Working Interest Owner to the extent of a seven-eighths (7/8ths) interest in and to such oil and gas rights, and as a Royalty Interest Owner to the extent of the remaining one-eighth (1/8th) interest therein; and

WHEREAS, the Mineral Leasing Act of February 25, 1920, 41 Stat. 437, as amended, 30 U.S.C., Secs. 181 et seq., authorizes Federal lessees and their representatives to unite with each other, or jointly or separately with others, in collectively adopting and operating a cooperative or unit plan of development or operation of any oil or gas pool, field or like area, or any part thereof for the purposes of more properly conserving the natural resources thereof whenever determined and certified by the Secretary of the Interior of the United States, hereinafter referred to as "Secretary," to be necessary or advisable in the public interest; and

WHEREAS, the State Statute, _______________, empowers the Board of Oil and Gas Conservation, State of _______________, hereinafter referred to as the "Board," upon application, to determine the need for and make orders providing for the operation as a unit of one or more pools, or parts thereof, in a field after approval of __________ percent ( ________ ) of the parties involved, which order shall be binding on all parties in said Unit Area; and

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WHEREAS, the parties hereto hold sufficient interests in the _______________ Unit Area covering the land hereinafter described to give reasonably effective control of operations herein; and

WHEREAS, it is the purpose of the parties hereto to conserve natural resources, prevent waste, and secure other benefits obtainable through development and operation of the area subject to this Agreement under the terms, conditions, and limitations herein set forth;

NOW, THEREFORE, in consideration of the premises and the promises herein contained, the parties hereto commit to this Agreement their respective interests in the below-defined Unit Area, and agree severally among themselves as follows:

1. ENABLING ACT AND REGULATIONS.

The Mineral Leasing Act of February 25, 1920, as amended, supra, and all valid, pertinent regulations including operating and unit plan regulations, heretofore issued there under or valid, pertinent, and reasonable regulations hereafter issued there under are accepted and made a part of this Agreement as to Federal Lands, provided such regulations are not inconsistent with the terms of this Agreement; and as to non-Federal Lands, the oil and gas operating regulations in effect as of the effective date hereof governing drilling and producing operations, not inconsistent with the terms hereof or the laws of the State of _______________, are hereby accepted and made a part of this Agreement.

2. UNIT AREA.

The area specified on the plat attached hereto marked Exhibit "A" is hereby designated and recognized as constituting the Unit Area containing __________ acres, more or less.

Exhibit "A" shows, in addition to the boundary of the Unit Area, the boundaries and identity of tracts and leases in said area to the extent known to the Unit Operator. Exhibit "B" attached hereto is a schedule showing to the extent known to the Unit Operator the acreage, percentage, and kind of ownership of oil and gas interests in all land in the Unit Area. Exhibit "C" attached hereto is a schedule showing the percentage of participation credited to each Tract in the Unit Area based upon a presumed one hundred percent (100%) commitment. (Tract means each parcel of land described as such and given a Tract Number in Exhibit "B.") However, nothing herein or in said schedule or map shall be construed as a representation by any party as to the ownership of any interest other than such interest or interests as are shown in said map or schedule as owned by such party. Exhibits "A" and "B" shall be revised by the Unit Operator whenever changes in the Unit Area render such revision necessary, or when requested by the BLM Authorized Officer, hereinafter referred to as "AO," or by the Board. In such case, not less than four (4) copies of the revised exhibits shall be filed with the AO.

3. EXPANSION OF UNIT AREA.

Any enlargement of the Unit Area shall require approval by the AO, and shall be in accordance with the provisions of _______________ State Statutes. The Unit Area may, with the approval of the AO, be expanded to include therein any additional lands whenever such expansion is necessary or advisable to conform with the purposes of this Agreement. Subject to such approval of the AO, any such expansion may be accomplished by the Unit Operator negotiating an agreement or agreements with the owners of such lands fixing the tract participation of each tract

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and providing for the commitment of the interest of such owners to this agreement and to the Unit Operating Agreement, the Unit Operator acting on behalf of the Working Interest Owners collectively after having been duly authorized by them as provided for in the Unit Operating Agreement. Whenever the Unit Area is enlarged so as to admit additional land qualified for participation, Exhibit "C" shall be revised as set forth in Section 12, Participation and Allocation of Production. Any such expansion shall be effected in the following manner:

(a) Unit Operator, on its own motion, after preliminary concurrence by the AO, or on demand of the AO, shall prepare a notice of proposed expansion describing the contemplated changes in the boundaries of the Unit Area, the reasons therefore, and the proposed effective date thereof, preferably the first day of the month subsequent to the date of notice.

(b) Said notice shall be delivered to the proper AO, and copies thereof mailed to the last known address of each Working Interest Owner, lessee, and lessor whose interests are affected, advising that thirty (30) days will be allowed for submission to the Unit Operator of any objections.

(c) Upon expiration of the thirty (30) day period provided in the preceding item (b) hereof, Unit Operator shall file with the AO evidence of mailing of the notice of expansion and a copy of any objections thereto which have been filed with the Unit Operator, together with an application and appropriate joinder with a sufficient number of copies for approval of such expansion.

(d) After due consideration of all pertinent information, the expansion shall, upon approval by the AO, become effective as of the date prescribed in the notice thereof or such other appropriate date as determined by the AO.

4. UNITIZED LAND AND UNITIZED SUBSTANCES.

All lands, including unleased Federal land, committed to this Agreement as provided in Section 5, Tracts Qualified for Participation, as to the Unitized Formation defined immediately below, shall constitute land referred to herein as "Unitized Land," land subject to this Agreement. All oil and gas in and produced from the Unitized Formation is unitized under the terms of this Agreement and herein is called "Unitized Substances."

The Unitized Formation shall mean the __________ Formation as identified by the log run in the _______________ Well, located in the ________, of Section ______, Township ________, Range _______________, ____________________ County, _______________, with the top of the Unitized Formation being found at a depth of ________ feet below the surface and the base of the...

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