§5.2. Coal seam natural gas producing areas order; application; procedure; allocation of costs; rules and regulations

A. In order to prevent waste and to avoid the drilling of unnecessary wells and to encourage the development of coal seam natural gas producing areas in Louisiana, the commissioner of conservation is authorized, as provided in this Section, to establish a single unit to be served by one or more wells for a coal seam natural gas producing area.

B. Without in any way modifying the authority granted to the commissioner in R.S. 30:9(B) to establish a drilling unit or units for a pool and in addition to the authority conferred in R.S. 30:5, the commissioner, upon the application of any interested party, may enter an order requiring the unit operation of any coal seam natural gas producing area when such unit operation will promote the development of such coal seam natural gas producing area, prevent waste, and avoid the drilling of unnecessary wells.

C. In connection with such order, the commissioner shall have the right to establish a unit for a coal seam natural gas producing area and to unitize, force pool, and consolidate all separately owned tracts and other property ownerships within such unit. Any order creating a unit for a coal seam natural gas producing area shall be issued only after notice and a public hearing and shall be based on findings that:

(1) The order is reasonably necessary to promote the development of a coal seam natural gas producing area and for the prevention of waste and the drilling of unnecessary wells.

(2) The proposed unit operation is economically feasible.

(3) Sufficient evidence exists to reasonably establish the limits of the coal seam natural gas producing area.

D. The order shall provide for the initial allocation of unit production on a surface acreage basis to each separately owned tract within the unit.

E. No order shall be issued by the commissioner unless interested parties have been provided a reasonable opportunity to review and evaluate all data submitted by the applicant to the commissioner to establish the limits of the coal seam natural gas producing area.

F. The order creating the unit shall designate a unit operator and shall also make provision for the proportionate allocation to the owners (lessees or owners of unleased interests) of the costs and expenses of the unit operation, which allocation shall be in the same proportion that the separately owned tracts share in unit production. The cost of capital investment in wells and physical equipment and intangible drilling costs, in the absence of voluntary agreement among the owners to the contrary, shall be shared in like proportion. However, no such owner who has not consented to the unitization shall be required to contribute to the costs or expenses of the unit operation or to the cost of capital investment in wells and physical equipment and intangible drilling costs except out of the proceeds of production accruing to the interest of such owner out of production from such unit operation. In the event of a dispute relative to the calculation of unit well costs or depreciated unit well costs, the commissioner shall determine the proper costs after notice to all interested owners and a public hearing thereon.

G. Upon application and after notice and a public hearing and consideration of all new available geological and engineering evidence, the commissioner, to the extent required by such evidence, may create, revise, or dissolve any unit provided for under this Section or modify any provision of any order issued pursuant to this Section. Any such order shall provide for the allocation of unit production on a just and equitable basis to each separately owned tract within the unit.

H. The commissioner shall prescribe, issue, amend, and rescind such orders, rules, and regulations as he may find necessary or appropriate to carry out the provisions of the Section.

Acts 2004, No. 892, §1.