Oklahoma § 52-87.8 - Horizontal wells – Allocation of costs, production, and

§ 52-87.8. Horizontal wells – Allocation of costs, production, and

proceeds – Application for approval.

A. Under the conditions contained in this section, the

Corporation Commission is authorized to allow multiunit horizontal

wells in any targeted reservoir or in more than one targeted

reservoir, or in a targeted reservoir and an adjacent common source

of supply, upon an appropriate finding by the Commission of the

necessity to comingle production from more than one targeted

reservoir or an adjacent common source of supply in such multiunit

horizontal well, in order to prevent waste and protect the

correlative rights of the owners of oil and gas rights.

B. Ownership, Allocation of Costs, Commingled Production, and

Proceeds.

The Commission shall require the allocation of the reasonable

drilling, completion and production costs associated with such

multiunit horizontal well to each of the affected units which the

well actually penetrates within the completion interval and shall

further require the allocation to each of the units affected by a

multiunit horizontal well of the commingled production, and the

proceeds from the sale thereof, from the completion interval of such

multiunit horizontal well, with any allocation to be in a manner

that will prevent waste and protect the correlative rights of the

owners of the oil and gas rights in each of the affected units which

the well actually penetrates within the completion interval.

1. The allocation factor for each affected unit shall be

determined by dividing the length of the completion interval located

within the affected unit by the entire length of the completion

interval in the subject multiunit horizontal well. The Commission

shall have the authority to adjust the allocation factors, based

upon reasonable testimony and evidence presented to the Commission,

if necessary to prevent waste and adequately protect the correlative

rights of the owners of the oil and gas rights in each of the

affected units.

2. Each party who participates as a working interest owner in a

multiunit horizontal well shall own an undivided interest in all

portions of the wellbore of the well and in the equipment on or in

the well in the same ratio that the party's allocated portion of the

total costs of the well and equipment bears to the total costs of

the well and equipment. The ownership of undivided interest

described in this paragraph shall not affect or prejudice the

ownership of oil and gas rights of the affected owners outside of

the targeted reservoir for the multiunit horizontal well.

3. A multiunit horizontal well shall be treated as a well in

each of the affected units and shall be subject to all of the rules

otherwise applicable to any other well in any of the affected units.

In allowing a multiunit horizontal well, the Commission, under

Section 87.1 of this title, may grant any necessary exceptions to

Oklahoma Statutes - Title 52. Oil and Gas

the permitted well location tolerances in each of the affected units

for the well and permit the well as an additional well in each of

the affected units. When an owner has drilled or proposes to drill

a multiunit horizontal well or wells and the owners of a present

right to drill in any of the affected units have not agreed to pool

their interests in the unit or units for the targeted reservoir, the

Commission, under Section 87.1 of this title, may, upon the filing

of a proper application therefor, require the owners to pool their

interests in the targeted reservoir in each affected unit on a

unitwide basis as to the respective unit in regard to the

development involving the portion of the multiunit horizontal well

or wells located within the affected unit. Furthermore, if the

Commission has previously entered an order pooling the interests of

owners in an affected unit in which a multiunit horizontal well or

wells have been drilled or are proposed to be drilled, the

Commission, under Section 87.1 of this title may, upon the filing of

a proper application therefor, amend the pooling order to the extent

necessary to have the pooling order cover the development involving

the portion of the multiunit horizontal well or wells located within

the affected unit.

4. The application shall include:

a.

the approximate anticipated location of the proposed

multiunit horizontal well or wells,

b.

a map or maps indicating the location of each

currently existing well in each affected unit which is

the subject of the application and the anticipated

location of each multiunit horizontal well currently

proposed to be drilled in each affected unit as a

result of the application and any other horizontal

well not included in the current application, but

anticipated to be necessary, based upon the

information and knowledge then available to the

applicant, for the full and efficient development and

operations of the targeted reservoir within the

affected units if the well or wells are approved by

the Commission upon the filing of a proper application

at a future date, and

c.

any applicable proposed allocation factor or factors

for allocating the costs, production and proceeds from

each proposed multiunit horizontal well under the

application.

5. Production from the completion interval in the targeted

reservoir from each of the affected units in which a multiunit

horizontal well is completed may be commingled in the wellbore of

the well and produced to the surface. The commingled production

from a multiunit horizontal well shall be allocated to each of the

Oklahoma Statutes - Title 52. Oil and Gas

affected units based upon the allocation factors approved by the

Commission.

6. In granting an application for a multiunit horizontal well

or wells, the Commission shall find, based on the testimony and

evidence presented, that given the information and knowledge then

available, the proposed multiunit horizontal well or wells will

prevent waste, protect correlative rights and likely will aid in the

full and efficient development of each of the affected units.

7. The wellbore royalty proceeds for a multiunit horizontal

well shall be allocated to each affected unit by multiplying the

royalty contribution factor of the unit by the wellbore royalty

proceeds, with the resulting product being the royalty proceeds for

that unit. Each royalty interest owner in an affected unit shall be

entitled to receive the owner's proportionate royalty share of the

allocated royalty proceeds for that unit.

8. The multiunit horizontal well shall be subject to the

provisions of the Product Revenue Standards Act (PRSA). The

operator of the multiunit horizontal well shall be the designated

royalty distributor pursuant to the PRSA for the multiunit

horizontal well, unless there is a diversity of operators in the

affected units from which the multiunit horizontal well is producing

and another operator in each of the affected units agrees to perform

separately the PRSA royalty distribution functions for the unit.

C. Application, Notice and Retained Jurisdiction.

Application for approval of a multiunit horizontal well shall be

in a form prescribed by the Commission. The application, and the

notice of hearing on the application, shall be served no less than

fifteen (15) days prior to the date of the hearing, by regular mail,

upon each person or governmental entity having the right to share in

production from each of the affected units covered by the

application, as well as other persons or governmental entities

required by the rules of the Commission. Upon approval of a

multiunit horizontal well, the Commission shall retain jurisdiction

over the well. The retained jurisdiction of the Commission set

forth herein shall neither preclude nor impair the right of any

affected party to obtain through the district courts of this state

any remedy or relief available at law or in equity for injuries

caused by any action or inaction of the applicant, operator or any

other affected party.

Added by Laws 2011, c. 54, § 4, emerg. eff. April 13, 2011. Amended

by Laws 2014, c. 400, § 2, emerg. eff. June 3, 2014; Laws 2017, c.

372, § 5.