Arizona § 27-504 - Drilling units; rules and regulations; exceptions

§ 27-504. Drilling units; rules and regulations; exceptions

A. For the prevention of waste, to protect and enforce the correlative rights of owners in a pool, and to avoid augmentation and accumulation of risks arising from drilling an excessive number of wells, or reduced recovery which might result from too small a number of wells, the commission shall, after a hearing, establish a drilling unit or units for each pool. The establishment of a unit for gas shall be limited to the production of gas.

B. Each well permitted to be drilled on a drilling unit shall be drilled under the applicable rules and regulations and in accordance with the applicable spacing pattern prescribed by the commission. Exceptions to the rules and spacing pattern may be granted where it is shown, after notice and hearing, that the unit is partly outside the pool or, for some other reason, a well so located on the unit would be non-productive. Exceptions permitting a proposed well to be drilled on an unorthodox location may be granted on the basis of topography or terrain without notice or hearing.

C. If an exception is granted, the commission shall take action which will offset any advantage which the person securing the exception may have over other producers by reason of drilling the well as an exception, and so that drainage from developed units to the tract with respect to which the exception is granted will be prevented or minimized, and the producer of the well drilled as an exception will be allowed to produce no more than a just and equitable share of the oil and gas in the pool.