{"data":{"id":"us-ky/krs-353.645","jurisdiction":"us-ky","citation":"KRS 353.645","heading":"Operation and development as a unit of oil and gas interests in a pool or","body":"pools -- Application for unit -- Hearing -- Unitization order -- Review under\nKRS 353.700.\nThis section applies to any lessee or owner of an oil and gas interest in a proposed unit.\n(1) The department, at its own discretion or upon the application of any lessee or owner\nof an oil and gas interest in a pool or pools of a proposed unit may, after notice to\nall lessees or owners of an oil and gas interest in a pool or pools o f a proposed unit,\nissue an order for the operation and development as a unit of any pool or pools, or\nany portion thereof, for the production of oil and associated gas in order to increase\ntheir ultimate recovery by unitized operation and development so that each owner in\nthe pool or pools shall have the opportunity to recover his fair and equitable share of\nthe recoverable oil and gas in the unit. The department may require a reasonable\napplication fee from a lessee or owner of an oil and gas interest app lying for a\nproposed unit.\n(2) The application for a unit shall include the following:\n(a) A description of the area to be included in the unit, with a map attached, and a\ndescription of the pool or pools, or portions thereof, to be included within the\nunit;\n(b) A statement of the nature of the unit operations contemplated;\n(c) A proposed allocation of production and reserves among the separately-owned\ntracts and interests contributed to the unit. Reserves shall be calculated by\nindustry standard methods su pported by geological and engineering data, as\ndetermined to be appropriate by the department. The department may require\nan independent third party to verify the calculations as to proposed allocation\nof production or reserves;\n(d) The procedure upon whic h wells and equipment of the separately -owned\ntracts and interests are to be used and compensated for in unit operations; and\n(e) Documentation that the application is approved by at least fifty -one percent\n(51%) ownership in the interests proposed for inclusion in the unit.\n(3) After notice in the manner established in this section, the department shall issue a\nfinal order establishing a unit and requiring unit operation and development if it\nfinds that:\n(a) 1. The unitized operation and development of a p ool or pools, or any\nportion thereof, for the production of oil and associated gas is reasonably\nnecessary in order to effectively carry on operations for enhanced\nrecovery, including but not limited to, increased density drilling, or\nsecondary recovery op erations by pressure -maintenance, repressuring,\ncycling, water flooding, tertiary recovery operations, or any combination\nof these, in order to substantially increase the ultimate recovery of oil\nand associated gas from the pool or pools within the unit, o r to protect\nthe correlative rights of affected mineral owners; and\n2. The value of the additional recovery of oil and associated gas exceeds\nthe estimated additional cost incident to conducting the operation; or\n(b) The unitized operation of the pool or pools within the unit will prevent waste\nand protect the correlative rights of the owners in the pool or pools within the\nunit.\n(4) Each well permitted to be drilled, deepened, reopened, or converted to an injection\nwell and operated in a unit shall conform to either the spacing standards established\nin KRS 353.610, or to other unit spacing that shall be established by the department.\n(5) All unit operations and production shall be deemed, for all purposes, as the condu ct\nof operations and production upon each of the separately -owned tracts and interests\nin the unit.\n(6) A unitization order issued in accordance with this section shall:\n(a) Authorize the unit operation of a pool or pools, including drilling, deepening,\nreopening, conversion to injection wells, and operation of all wells within the\nunit for the production of oil and gas from the unit:\n(b) Designate the unit operator of the operation;\n(c) Approve a unit operating agreement;\n(d) Provide for the allocation of production and reserves among all separately -\nowned tracts and interests in the unit;\n(e) Provide for the proportionate allocation of all reasonable costs and expenses\nof unit operations as these costs and expenses are set out in the approved\noperating agre ement. Costs and expenses shall be allocated among all\nparticipating owners of operating interests who elect to participate in the\nproportion that the separately -owned tracts and interests share in the\nproduction of the unit; and\n(f) Establish the spacing approved for the unit.\n(7) Any unitization order shall provide just and equitable alternatives whereby an\nowner of an operating interest who does not elect to participate in the risk and cost\nof developing the unit may elect to surrender his interest, or a  portion of it, to the\nparticipating owners on a reasonable basis and for a reasonable consideration,\nwhich if not agreed upon, shall be determined by the department; or elect to\nparticipate in the development of the unit on a carried basis on terms and co nditions\nwhich, if not agreed upon, shall be determined by the department to be just and\nreasonable. If a dispute arises as to the costs of operating and developing a unit,\nthen the department shall determine and apportion the costs within ninety (90) days\nafter the date of written notification to the department of the existence of the\ndispute; however, any person disputing an actual or proposed expenditure shall file\nnotice of the disputed costs within one (1) year after notice of the actual or proposed\nexpenditure was received by the person filing the dispute.\n(8) An order establishing a unit may be modified, altered, extended, vacated, or\notherwise amended by the department after notice as prescribed in this section and a\ndemonstration by affected persons  of a significant change of circumstances\nsupporting the amendment.\n(a) An amendment to extend or enlarge the unit area shall be agreed upon in\nwriting by documented owners of at least a fifty-one percent (51%) ownership\nin the interests in the pool or pools in the unit;\n(b) An amendment of a unitization order enlarging a unit shall allocate to each\ntract or interest in the unit, as amended, a portion of the total production of oil\nor gas, or both, from the unit so enlarged, in proportion to the contributio n of\nthe tract or interest to the unit during the remaining course of unit operations,\nand shall supersede and be in lieu of the allocation of production provided for\nin any previously -established unit and shall have an effective date provided\nfor in the order.\n(9) Wells drilled, deepened, or reopened for the injection of water, gas, or other fluids\ninto any subsurface formation shall be governed by applicable state and federal\nstatutes and regulations.\n(10) Any order or final determination of the departmen t under this section shall be\nsubject to review in accordance with KRS 353.700 and any administrative\nregulations promulgated thereunder.","path":["KRS Chapter 353"],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=47764","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:58:40Z","sha256":"7fada030c597e706a1d765b45e526ae94e68c04f82813e0d8a0e1e937b7360f1","source_id":"us-ky","stale":false,"prev":"us-ky/krs-353.640","next":"us-ky/krs-353.650"},"notice":"GroundRules: Original legal text. Not legal advice."}