{"data":{"id":"us-ky/krs-353.651","jurisdiction":"us-ky","citation":"KRS 353.651","heading":"Vertical and horizontal deep wells -- Establishment and regulation of","body":"drilling units -- Pooling of interests -- Exceptions.\nThe following provisions of this section and the administrative regulations promulgated\npursuant thereto shall apply to any vertic al deep well and any horizontal deep well as\nindicated:\n(1) Drilling units for vertical deep wells:\n(a) The commission shall, after notice and a hearing, to be conducted in\naccordance with KRS Chapter 13B, regulate the drilling and location of\nvertical dee p wells in a pool and the production therefrom so as to prevent\nreasonably avoidable net drainage from each developed unit (that is, drainage\nwhich is not equalized by counterdrainage) so that each owner in a pool shall\nhave the right and opportunity to re cover his or her fair and equitable share of\nthe recoverable oil and gas in the pool;\n(b) For the prevention of waste, to protect and enforce the correlative rights of the\nowners in a pool, and to avoid the augmenting and accumulation of risks\narising from  the drilling of an excessive number of wells, the commission\nshall, after notice and a hearing, to be conducted in accordance with KRS\nChapter 13B, establish drilling units for vertical deep wells in each pool. The\nspacing of vertical deep wells in proved oil and gas fields shall be governed by\nadministrative regulations promulgated for that particular field or other\nadministrative regulation promulgated by the commission. Vertical deep wells\ndrilled in areas not covered by special field administrative reg ulations shall be\ngoverned by statewide administrative regulations promulgated by the\ncommission or orders of the commission issued after a hearing;\n(c) Each vertical deep well permitted to be drilled in any drilling unit shall be\ndrilled in accordance with:\n1. The administrative regulations promulgated by the commission; and\n2. A spacing pattern fixed by the commission for the well or the pool in\nwhich the vertical deep well is located, as applicable, with any\nexceptions that may be reasonably necessary wh ere it is shown, in\naccordance with administrative regulations promulgated by the\ncommission, that the unit is partly outside the pool or for some other\nreason a well otherwise located on the unit would not be likely to\nproduce in paying quantities, or top ographical conditions are such as to\nmake the drilling at the location unduly burdensome, or other similar\ncause. Whenever an exception is granted, the commission shall take\naction as will offset any advantage which the person securing the\nexception may ha ve over other owners by reason of the drilling of the\nwell as an exception;\n(d) No drilling unit established by the commission shall be smaller than the\nmaximum area which can be drained efficiently by one (1) vertical deep well\nso as to produce the reason able maximum recoverable oil or gas in the area,\nunless an exception is granted in accordance with administrative regulations\npromulgated by the commission; and\n(e) An order establishing a drilling unit for a vertical deep well may be modified,\naltered, ex tended, amended, or vacated by the commission after notice and\nhearing as prescribed above.\n(2) Drilling units for horizontal deep wells:\n(a) For the prevention of waste and for the protection and enforcement of the\ncorrelative rights of the owners in a po ol, the commission shall, after notice\nand hearing conducted in accordance with KRS Chapter 13B and with the\nadministrative regulations of the commission, establish drilling units for\nhorizontal deep wells. Drilling units shall be based on the information\nprovided to or requested by the commission;\n(b) Each horizontal deep well permitted to be drilled on a drilling unit established\nby the commission shall be drilled in accordance with the administrative\nregulations promulgated by the commission and any orde rs of the\ncommission; and\n(c) The establishment of any horizontal deep well unit shall be on terms that are\nfair, reasonable, equitable, and which are necessary or proper to protect and\nsafeguard the respective rights and obligations of the working interest owners\nand the royalty owners based on the evidence before the commission.\n(3) Pooling of interests in drilling units:\n(a) When two (2) or more separately owned tracts are embraced within a drilling\nunit, or when there are separately owned interests in all or a part of a drilling\nunit, the interested persons may pool their tracts or interests for the\ndevelopment and operation of the drilling unit. In the absence of voluntary\npooling and upon application of any operator having an interest in the drilling\nunit, and after the commission has given notice to all persons reasonably\nknown to own an interest in the oil or gas in the drilling unit, and after a\nhearing conducted in accordance with KRS Chapter 13B, the commission\nshall enter an order pooling all tracts or interests in the drillin g unit for the\ndevelopment and operation thereof and for the sharing of production\ntherefrom. Each pooling order shall be upon terms and conditions which are\njust and reasonable;\n(b) All operations, including, but not limited to, the commencement, drilling , or\noperation of a deep well, upon any portion of a drilling unit for which a\npooling order has been entered, shall be deemed for all purposes the conduct\nof those operations upon each separately owned tract in the drilling unit by the\nseveral owners ther eof. That portion of the production allocated to a\nseparately owned tract included in a drilling unit shall, when produced, be\ndeemed for all purposes to have been actually produced from the tract by a\ndeep well drilled thereon;\n(c) Any pooling order under  the provisions of subsection (3) of this section shall\nauthorize the drilling and operation of a deep well for the production of oil or\ngas from the pooled acreage; shall designate the operator to drill and operate\nthe deep well; shall prescribe the time and manner in which all owners of\noperating interests in the pooled tracts or portions of tracts may elect to\nparticipate therein; shall provide that all reasonable costs and expenses of\ndrilling, completing, equipping, operating, plugging, and abandoning the deep\nwell shall be borne, and all production therefrom shared, by all owners of\noperating interests in proportion to the acreage in the pooled tracts owned or\nunder lease to each owner; and shall make provision for payment of all\nreasonable costs there of, including reasonable charge for supervision and for\ninterest on past due accounts, by all those who elect to participate therein.\nUpon the application of any operator having an interest in the drilling unit, the\nperson or persons selected to drill and operate the deep well shall be\ndetermined by competitive bids;\n(d) Upon request, any pooling order shall provide just and equitable alternatives\nwhereby an owner of an operating interest who does not elect to participate in\nthe risk and cost of the drillin g of a deep well may elect to surrender his\ninterest or a portion thereof to the participating owners on a reasonable basis\nand for a reasonable consideration, which, if not agreed upon, shall be\ndetermined by the commission; or to participate in the drill ing of the deep\nwell on a limited or carried basis on terms and conditions which, if not agreed\nupon, shall be determined by the commission to be just and reasonable;\n(e) If an operator owning an interest in a pooled drilling unit elects not to\nparticipate in the risk and cost of drilling of a deep well thereon, and another\noperator owning an interest therein, shall drill and operate, or pay the costs of\ndrilling and operating a deep well as provided in the commission's order, then\nthe operating owner shall be entitled to the share of production from the tracts\nor portions thereof accruing to the interest of the nonparticipating owner,\nexclusive of any royalty or overriding royalty reserved in any leases,\nassignments thereof or agreements relating thereto, o f the tracts or portions\nthereof, or exclusive of the prevailing royalty of the production attributable to\nall unleased tracts or portions thereof, until the market value of the\nnonparticipating owner's share of the production, exclusive of any royalty,\noverriding royalty or the prevailing royalty of production, equals three (3)\ntimes the share of the costs payable by or charged to the interest of the\nnonparticipating owner; and\n(f) If a dispute shall arise as to the costs of drilling and operating a deep w ell, the\ncommission shall determine and apportion the costs, within ninety (90) days\nfrom the date of written notification to the commission of the existence of\nsuch dispute.\n(4) This section shall not apply to wells drilled, deepened, or reopened for the injection\nof water, gas, or other fluids into any subsurface formation.","path":["KRS Chapter 353"],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=44255","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:58:40Z","sha256":"ca0c8e95feaceaef614d80e05c401e7ded960ae243f2860596f1dd4de50f76d8","source_id":"us-ky","stale":false,"prev":"us-ky/krs-353.650","next":"us-ky/krs-353.652"},"notice":"GroundRules: Original legal text. Not legal advice."}