State of Kansas Amends Unitization Rules
Governor Bill Graves recently signed into law a significant
modification of the oil and gas unitization and unit operations
regulations for the State of Kansas. Hopefully, the new law will
encourage operators to pursue unitization and also make the unitization
process easier and more possible in potentially difficult situations.
Primarily, three main changes occur within the text of the
statutes; 1) elimination of language limiting the voting power
of a majority working interest owner in certain cases, 2) lowering
the required approval of unit operations from 75% to 63% of working
interest owners and in the case of royalty ownership under projects
involving repressurization (secondary and tertiary recovery)
would lower confirmation from 75% to 63%. Where a project other
than repressuring process requires unitization for economic reasons
and to prevent waste and increase ultimate recovery of oil and
gas, affirmation by 75% of the royalty owners would be required,
and 3) allocation of more than 1/8th royalty interest to mineral
owners of unleased tracts, if such is the industry practice in
the area.
Previously, the rule concerning unit operation voting procedures
stated "… in no event shall the vote of a single working
interest owner control unless a single working interest owner
is liable for all the cost". This sentence has been eliminated
from the new text.
Required approval percentages will now fall under one of two
possible scenarios, 1) primary production, which has reached
a low economic level and abandonment is imminent without introduction
of artificial energy, and 2) the implementation of unitized management
while still in the developmental and/or profitable phases of
the project, in order to prevent waste, maximize the recovery
of oil and gas and be economically feasible. Under the initial
scenario, the required approval is now 63% of the working interest
participants and 63% of the royalty owners. The 63% requirement
of working interest owner approval applies in the second scenario
also, however, a 75% royalty approval is necessary. In both scenarios,
over-riding royalty ownership is excluded. Prior regulations
required a 75% approval in all cases.
In areas where royalty interests greater than 1/8th are prevalent,
the State Corporation Commission may grant a royalty interest
in line with the prevailing area interests for mineral interest
owners of unleased tracts within the unit boundaries
For a full text of the bill on the internet, search for Bill
#2826 at www.ink.org/public/legislative/. |
