An Act
ENROLLED HOUSE
BILL NO. 3039 By: Boles of the House
and
Taylor of the Senate
An Act relating to oil and gas; amending 52 O.S.
2021, Section 87.1, which relates to common source of
supply and well spacing and drilling units; allowing
drilling of wells within location tolerance areas
while spacing applications are pending ; allowing the
Oklahoma Corporation Commission to issue a p ermit to
drill a well prior to issua nce of an order; requiring
final order with respect to drilling activity related
to certain underground st orage facilities; providing
exception; and declaring an emergency.
SUBJECT: Oil and gas
BE IT ENACTED BY THE PEOPLE OF T HE STATE OF OKLAHOMA:
SECTION 1. AMENDATORY 52 O.S. 2021, Se ction 87.1, is
amended to read as follows:
Section 87.1 Whenever the production f rom any common source of
supply of oil or natural gas in this sta te can be obtained only
under conditions constituting was te or drainage not compensated by
counterdrainage, then any person having the right to drill into and
produce from such common source of supply may, except as otherwise
authorized or in this section provided, take therefro m only such
proportion of the oil or natural gas that may be produced therefrom
without waste or without such drainage as the productive capacity of
the well or wells of any such person considered with the acreage
properly assignable to each such well bear s to the total productive ENR. H. B. NO. 3039 Page 2
capacities of the wells in such common source of supply cons idered
with the acreage properly assignable to each well therein.
(a) To prevent or to assist in preventing the various types of
waste of oil or gas prohibited by statut e, or any wastes, or to
protect or assist in protecting the correlative rights of inte rested
parties, the Corporation Commission, upon a proper application and
notice given as hereinafter provided, and after a hearing as
provided in the notice, shall have the power to establish well
spacing and drilling units of specified and approximately uniform
size and shape covering any common source of supply, or prospective
common source of supply, of oil or gas within the State of Oklahoma;
provided, that the Commis sion may authorize the drilling of an
additional well or wells on any spacing and dril ling unit or units
or any portion or portions thereof or may establish, reestablis h, or
reform well spacing and drilling units of different sizes and shapes
when the Commission determines that a common so urce of supply
contains predominantly oil underlying an area or areas and contains
predominantly gas underlying a different area or ar eas; provided
further that the units in the predominantly oil ar ea or areas shall
be of approximately uniform size and sha pe, and the units in the
predominantly gas area or a reas shall be of approximately uniform
size and shape, except that the units in th e gas area or areas may
be of nonuniform size and shape when the y adjoin the units in th e
oil area or areas; provided furt her that the drilling pattern for
such nonuniform units need not be uniform, and provided further that
the Commission shall adjust the allowable production within the
common source of supply, or any part thereof, and take such other
action as may be necess ary to protect the rights of interested
parties. Any order issued pursuant to the provisions hereof may be
entered after a hearing up on the petition of any person owning an
interest in the minerals in lands embraced withi n such common source
of supply, or the right to drill a well for oil or gas on the lan ds
embraced within such common source of supply, or on the petition of
the Conservation Officer of the State of Oklahoma. When such a
petition is filed with the Commissi on, the Commission shall give at
least fifteen (15) days' notice of the hearing to be held upon such
petition by one publication, at least fifteen (15) days prior to th e
hearing, in some newspaper of general circulation published in
Oklahoma County, and by one publication, at least fifteen (15) days
prior to the date of the hearing, in some newspaper published in the
county, or in each county, if there be more than one, in which the
lands embraced within the application are situated. Except as to
the notice of hearing on such a petition, t he procedural ENR. H. B. NO. 3039 Page 3
requirements of Section 86.1 et seq. o f this title shall govern all
proceedings and hearings provided for by this sectio n.
(b) In case of a spacing unit of one hundred sixty (160) ac res
or more, no oil and/o r gas leasehold interest outside t he spacing
unit involved may be held by production f rom the spacing unit more
than ninety (90) days beyond expiration of the primary t erm of the
lease.
(c) In establishing a well spacing or drill ing unit for a
common source of supply thereunder, the acrea ge to be embraced
within each unit may include acrea ge from more than one governmental
section, but shall not exceed six hundred forty (640) acres for a
gas well plus ten percent (10%) tolerance, unless the unit is a
governmental section and the government al section contains more than
six hundred forty (640 ) acres in which case the unit may comprise
the entire section. Provided, however , fractional sections along
the state boundary line and within the townships along the b oundary
where the survey west of t he Indian Meridian meets the survey east
of the Cimarron Meridian may be spaced with adjoining section unit,
and the shape thereof sha ll be determined by the Commission from the
evidence introduced at the hearing, and the following facts, among
other things, shall be material: (1) the lands embraced in the
actual or prospective common source of supply; (2) the plan of well
spacing then being employed or contemplated in the source of supply;
(3) the depth at which productio n from the common source of supply
has been or is expected to be found; (4) the nature and character of
the producing or prospective producing formation or formations; and
(5) any other available geological or scientific data pert aining to
the actual or prospective source of supply which m ay be of probative
value to the Commission in determ ining the proper spacing and well
drilling unit therefor, with due and relative al lowance for the
correlative rights and obligations of the prod ucers and royalty
owners interested therein.
The order establishing such spacing or drilling units shall set
forth: (1) the outside boundaries of the surface area included in
such order; (2) the size, form, and shape of the spacing or drilling
units so established; (3) the drillin g pattern for the area, which
shall be uniform except as hereinbefore provided; and (4 ) the
location of the permitted well on each such spacing or drilling
unit. To such order shall be attached a plat upon which shall be
indicated the foregoing informatio n. Subject to other provisions of
Section 86.1 et seq. of this title, the order estab lishing such
spacing or drilling units shall direct that no more than one well ENR. H. B. NO. 3039 Page 4
shall thereafter be produced from the common source of supply on any
unit so established, a nd that the well permitted on that unit shall
be drilled at the location thereon as pr escribed by the Commission,
with such exception as may be reasonably necessary whe re it is
shown, upon application, notice and hearing in confo rmity with the
procedural requirements of Section 86.1 et seq . of this title, and
the Commission finds that any s uch spacing unit is located on the
edge of a pool and adjacent to a producing unit , or for some other
reason that to require the drilling of a well at the prescribed
location on such spacing unit would be inequitable or unreasonable.
Whenever such an exce ption is granted, the Commission shall adjust
the allowable production for the spa cing unit and take such other
action as may be necessary to p rotect the rights of intere sted
parties.
Except for horizonta l spacing units allowed by subsection (f) of
this section, any well spacing or drilling unit for a common source
of supply thereunder which exceeds six hundred forty (640) acres for
a gas well plus ten percent (10%) tolera nce or exceeds the total
amount of acreage contained in a governmental section, and is not in
production or in the process of drilling development on the
effective date of this act shall be de-spaced. However, fractional
sections along the state boundary line and within the townships
along the boundary where the survey west of the Indian M eridian
meets the survey east of the Cimarron Meridian may be spaced with
adjoining section unit, and the shape thereof shall be determined by
the Commission.
(d) The Commission shall have jurisdiction u pon the filing of a
proper application therefor, and upon notice given as provided in
subsection (a) of this section, to decrease the size of the well
spacing units or to permit additional well s to be drilled within the
established units, or to increase th e size or modify the shape of
the well spacing units , upon proper proof at such hearing that such
modification or extension of the ord er establishing drilling or
spacing units will prevent or a ssist in preventing the vario us types
of wastes prohibited by s tatute, or any of the wastes, or will
protect or assist in protecting the correlative rights of persons
interested in the common sourc e of supply, or upon the filing of a
proper application the refor to enlarge the area cov ered by the
spacing order, if such proof discloses that the development or the
trend of development indicates that such common source of supply
underlies an area not co vered by the spacing order and such proof
discloses that the applicant is an owner withi n the area or within a
drilling and spacing unit contiguous to the area covered by the ENR. H. B. NO. 3039 Page 5
application. Except in the instance of reservoir dewatering as
described herein, the Commission shall not establish well spacing
units of more than forty (40) acres in size covering common sources
of supply of oil, the top of which lies less than four th ousand
(4,000) feet below the surface as determined by the original or
discovery well in the common source of supply, and the Commission
shall not establish well spacing units of more than eighty (80)
acres in size covering common sources of supply of oil, the top of
which lies less than nine thousand nine hundred ninety (9,990) feet
and more than four thousand (4,000) feet below the surface as
determined by the original o r discovery well in the common sou rce of
supply. In the instance of reservoir dewater ing to extract oil from
reservoirs having initial water saturations at or above fi fty
percent (50%), the Commission may establish drilling an d spacing
units not to exceed six hundred forty (640) acres in size.
(e) The drilling of any well or wells into an y common source of
supply for the purpose of producing oil or gas therefrom, after a
spacing order has been entered by the Commission coveri ng such
common source of suppl y, at a location other than that f ixed by the
order is hereby prohibited. The drillin g of any well or wells into
a common source of supply, covered by a pending spacin g application,
at a location or within location tolerance areas other than that
approved by a special order of the Commission authorizing the
drilling of such well is hereby prohibited. The operation of any
well drilled in violation of any spacing order so entered is also
hereby prohibited. Notwithstanding any provision of this section to
the contrary, the Commission, in th e exercise of its authority to
prevent waste and pro tect correlative rights, may issue a permit to
drill any well for which notice and hearing have occurred for a
special order or an order on the merits in any type case pr ior to
the issuance of any such or der. Any such permit shall be subject to
and conform with the final provisions of any such order when
entered. A final order from the Commis sion shall be required prior
to drilling for any w ell that falls within one (1) mile of the
certified boundary of an underground storage facility. The
Commission may issue a pe rmit to drill any well prior to the
issuance of any such order in cases where the u nderground storage
operator does not object. When two or more separately owned tracts
of land are embraced within an established spacing unit, or where
there are undivided interests separately owned, or both such
separately owned tracts and undivided interests embraced within such
established spacing uni t, the owners thereof may validly pool their
interests and develop their lands as a unit. Where, however , such
owners have not agreed to pool their interests and where one such ENR. H. B. NO. 3039 Page 6
separate owner has drilled or proposes to drill a well on the unit
to the common source of supply, the Commission, to avoid the
drilling of unnecessary wells, or to protect correlativ e rights,
shall, upon a proper application therefor and a hearing th ereon,
require such owners to pool and develop their lands in the spacing
unit as a unit. The applicant shall give all the owners whose
addresses are known or could be known through the e xercise of due
diligence at least fifteen (15) days' notice by mail, return receipt
requested. The applicant shall also give notice by one publication ,
at least fifteen (15) days prior to the hearing, in some newspaper
of general circulation published in Oklahoma County, and by one
publication, at least fifteen (15) days prior to the date of the
hearing, in some newsp aper published in the county, or in each
county, if there be more than one, in which the lands embraced
within the spacing unit are situated. The applicant shall file
proof of publication and an affidavit of mailing with the Commission
prior to the hearing. All orders requiring such poolin g shall be
made after notice and hearing, and shall be upon such terms and
conditions as are just and rea sonable and will afford to the owner
of such tract in the unit the o pportunity to recover or receive
without unnecessary expense the owner 's just and fair share of the
oil and gas. The portion of the production allocated to the owner
of each tract or inte rests included in a well spacing unit formed by
a pooling order shal l, when produced, be considered as if produced
by such owner from the separately ow ned tract or interest by a well
drilled thereon. Such pooling order of the Commission shall make
definite provisions for the payment of cost of the development and
operation, which shall be limited to the actual expendi tures
required for such purpose not in excess of what are reasonable,
including a reasonable charge for supervision. In the event of any
dispute relative to such costs, the Commission shall determine the
proper costs after due notice to interested parties and a hearing
thereon. The operato r of such unit, in addition to any other right
provided by the pooling order or orders of the Commission, shall
have a lien on the mineral leasehold estate or rights owned b y the
other owners therein and upon their share s of the production from
such unit to the extent that costs incurred in the development and
operation upon the unit are a charge against such interest by order
of the Commission or by operation of law. Such l iens shall be
separable as to each separate own er within such unit, and shall
remain liens until the owner or owners drilling or operating the
well have been paid the amount due under the terms of the pooling
order. The Commission is specifically authoriz ed to provide that
the owner or owners drilling , or paying for the drilling, or for the
operation of a well for the benefit of all shall be entitled to ENR. H. B. NO. 3039 Page 7
production from such well which woul d be received by the owner or
owners for whose benefit the well was drilled or operated, after
payment of royalty, until the owner or owners drilling o r operating
the well have been paid the amount due under the terms of the
pooling order or order settling such dispute. No part of the
production or proceeds accruing to an y owner of a separate interest
in such unit shall be applied toward payment of any cost properly
chargeable to any other interest in the unit.
For the purpose of this section, the owner or owners of oil and
gas rights in and under an unleased tract of land shall be regarded
as a lessee to the extent of a seven-eighths (7/8) interest in and
to the rights and a lessor to the extent of the remaining one -eighth
(1/8) interest therein, unless an d until the owner or owners make an
election or are deemed to make a n election not to participate under
a pooling order issued by the Commission, at w hich time each such
owner shall be considered a lessor, subject to the judicially
recognized implied coven ant to market found to exist by the courts
of this state in oil and gas leases covering lands located in this
state, to the extent of the full royalty percentage elected under
the pooling order. Should the owners of separate tracts or
interests embraced w ithin a spacing unit fail to agree upon a
pooling of their interests and the drilling of a well on the unit,
and should it be established by final, un appealable judgment of a
court of competent jurisdiction that the Commission is without
authority to require pooling as provided for herein, then, subject
to all other applicable provisions of this act, the owner of each
tract or interest embraced within a spacing unit may drill on his or
her separately owned tract, and the allowable production therefrom
shall be that portion of the allowable for the full spacing unit as
the area of such separately owned tract bears to the full spacing
unit.
In the event a producing well or wells are completed upon a unit
where there are, or may thereafter be, two or more separ ately owned
tracts, each royalty interest owner shall share in all p roduction
from the well or wells drilled within the unit, or in the gas well
rental provided for in the lease covering such separately owned
tract or interest in lieu of the customary fixe d royalty, to the
extent of such royalty interest owner's interest in the unit. Each
royalty interest owner 's interest in the unit shall be defined as
the percentage of royalty owned in each separate tract by the
royalty owner, multiplied by the proportio n that the acreage in each
separately owned tract or interest bears to the entire acreage of
the unit. ENR. H. B. NO. 3039 Page 8
(f) Notwithstanding any provision of this ti tle to the
contrary, the Corporation Commission shall have jurisdiction upon
the filing of a proper applicat ion therefor, and upon notice given
as provided in subsection (a) of this section, to establish spacing
rules for horizontally drilled oil or gas we lls whereby horizont ally
drilled oil or gas wells may have well spacing units established of
up to one thousand two hundred eighty (1,280) acres plus tolerances
and variances as allowed pursuant to subsection (c) of this se ction.
For purposes of this subs ection a "horizontally drilled oil or gas
well" shall mean an oil or gas well drilled, completed or
recompleted in a manner in which the horizontal component of the
completion interval in the geological formation exceeds th e vertical
component thereof and which horizontal com ponent extends a minimum
of one hundred fifty (150) feet in the formation. The Corporat ion
Commission shall promulgate rul es necessary for the proper
administration of this subsection. For the creation and
continuation of any horizont al spacing unit purs uant to this
subsection that exceeds six hundred forty (640) acres plus
tolerances and variances as allowed pursuant to sub section (c) of
this section:
(1) absent a showing of reasonable cause, the unit shall
include all lands within each governmental sec tion to be included in
the horizontal spacing unit;
(2) the applicant or applicants req uesting the Commission to
form the horizontal spacing unit must be t he owner of an interest in
the oil, gas and oth er minerals in each of the gove rnmental sections
to be included in the horizontal spacing unit;
(3) the applicant or applicants requesting t he Commission to
form a horizontal spacing unit must include in the application the
basis for requesting a spacing unit size greater than six hun dred
forty (640) acres plus tolerances and variances as allowed pursuant
to subsection (c) of this section. Ab sent a showing of reasonable
cause, the contemplated horizontal late ral length for the initial
unit well in the hor izontal spacing unit shall be at least seven
thousand five hundred (7,500) feet. If the lateral length of the
initial horizontal well does n ot actually measure a minimum of se ven
thousand five hundred (7,500) feet, the Commission shall require the
applicant to show cause as to why suc h spacing order should not be
modified, superseded or vacated under the circumstances; and
ENR. H. B. NO. 3039 Page 9
(4) absent a showin g of reasonable cause, the drilling of a
multiunit horizontal well p ursuant to Section 87.8 of this title
shall not be available as the initial unit well for a horizont al
spacing unit unless the contemplated completed portion of the
lateral for said well i s to exceed ten thousand five hundr ed sixty
(10,560) feet.
(g) A horizontal spacing unit may be established for a common
source of supply for which there are already e stablished non-
horizontal nonhorizontal drilling and spacing units. A horizontal
spacing unit formed under subsection (f) of this sectio n may exist
concurrently with any previously formed nonhorizontal drilling and
spacing unit, or any portion thereof, such that each c oncurrently
existing unit may be separately developed with a well drilled into,
completed in and hydrocarbons produced from the same common source
of supply in each such concurrently existing unit, with production
from each such well to be governed by and allocated pursuant to the
applicable unit. Subject to all of the provisio ns of this section,
a pooling order for a horizon tal spacing unit which overlies a n
existing, producing nonhorizontal drilling an d spacing unit, shall
provide that, if a working inte rest owner in such producing
nonhorizontal drilling and spacing unit does not agree to develop
the horizontal spacing unit, the owner shall relinquish its
nonparticipating working interest in the horizon tal spacing unit
while retaining all other rights, in cluding the right to
concurrently develop the producing nonhorizontal unit .
(h) Notwithstanding anything in this title or a pooling order
to the contrary, each party owning a right to participate in
development of a horizontal well described in this subse ction with a
vested interest as to which there is production in the geogra phical
area of the spacing unit or spacing units for a proposed horizontal
well which is drilled after the effective date of this act pursuant
to a pooling order, whether the pooling order was issued before or
after the effective date of this act, shall be afforded separate
elections as set forth below, subject to the following, provide d;
however, a geographic area in which there is no existing producing
unit as of the date of the fil ing of the application for the
governing pooling order and which is initia lly developed pursuant to
a multiunit horizontal well authorized under Section 87. 8 of this
title, or a horizontal spacing unit w hich contains more than six
hundred forty (640) acres plus tolerances and variances as allowed
for pursuant to subsection (c) o f this section shall not be
considered to contain existing production for purposes of this
subsection, unless the geographical ar ea of any spacing unit covered ENR. H. B. NO. 3039 Page 10
by the governing pooli ng order: is overlain by a horizontal spacing
unit greater than six hundre d forty (640) acres plus tolerances and
variances as allowed for pursuant to subse ction (c) of this section
which is not subject to said pooling order; has a multiunit well
drilled pursuant to Section 87.8 of this title which includes a
horizontal spacing unit which contains more than six hundred forty
(640) acres plus tolerances and va riances as allowed for pursuant to
subsection (c) of this section which is subject to said pooling
order; or has a multiunit well drilled pursuant to Section 87.8 of
this title for a combination of units different than dril led by the
initial multiunit well pursuant to said pooling order:
(1) as to a multiunit horizontal well authorized under Section
87.8 of this title, each party owning a right to participate in
development of the proposed multiunit horizontal well with a v ested
interest as to which there is existing production in the
geographical area of the spacing unit for the proposed multiunit
well shall be allowed, and as to the extent of their development
rights as to which there is existing production, an election as to
the targeted reservoir or tar geted reservoirs covered by each
pooling order for such proposed multiunit horizontal well described
above, unless otherwise agreed to or waived in writing after the
effective date of this act. If said multiunit well is dr illed in
accordance with the pool ing order, the relinquished rights of an
owner who elects or is deemed to have elected not to partic ipate
with all or any part of that owner 's interest in the multiunit
horizontal well shall be limited to only the owner 's
nonparticipating working interest in the common source or common
sources of supply within the targeted reservoir or targeted
reservoirs covered by said election which are actually horizontally
drilled and completed by said well. The owner shall retain all
other rights, including all right s in any existing wellbores in
which the owner has participated;
(2) as to a horizontal well authorized by the Commission for a
horizontal spacing unit created under subsect ion (f) of this
section, if the horizontal spacin g unit contains more than six
hundred forty (640) acres plus tolerances and vari ances as allowed
for pursuant to subsection (c) of th is section, or is comprised of
more than one governmental section, each pa rty owning a right to
participate in development of the proposed horizontal well w ith a
vested interest as to which there is exis ting production in the
geographical area of the spaci ng unit for the proposed horizontal
well shall be allowed, and as to the e xtent of their development
rights as to which the re is existing production, a sepa rate election ENR. H. B. NO. 3039 Page 11
as to each common source of suppl y or common sources of supply
covered by the pooling order for a proposed horizontal well
described above, unless otherwise agr eed to or waived in writing
after the effective d ate of this act. If said horizon tal well is
drilled in accordance with the pool ing order, the relinquished
rights of an owner who elects or is deemed to have elected not to
participate with all or any part of that owner's interest in the
horizontal well shall be limited to only the owner 's
nonparticipating working interest in the common source or common
sources of supply covered by sai d election which are actually
horizontally drilled and completed by said w ell. The owner shall
retain all other rights, in cluding any rights in all existin g
wellbores in which the owner has participated ;
(3) as to any well which is subject to a pooling o rder which
was entered prior to the effective date of this act, in order t o be
entitled to the rights and benefits of this subsection, the owner
must have been vested with the right to participate in the subject
well as of the effective date of this act;
(4) any relinquishment of rights under this subsection shall be
pursuant to the governing pooling order and at such fair va lue as
determined by the Commissi on; and
(5) the provisions of subsections (g) and (h) of this section
shall supplement each affecte d pooling order as to development of
the affected spacing unit by use of h orizontal wells from and after
the effective date of this act.
SECTION 2. It being immediately necessary for the preservation
of the public peace, health or safety, an emergency is hereby
declared to exist, by reason whereof this act shall take effect and
be in full force from and after its passage and approval.
ENR. H. B. NO. 3039 Page 12
Passed the House of Representatives the 16th day of May, 2022.
Presiding Officer of the House
of Representatives
Passed the Senate the 20th day of April, 2022.
Presiding Officer of the Senate
OFFICE OF THE GOVERNOR
Received by the Office of the Governor this ____________________
day of ___________________, 20_______, at _______ o'clock _______ M.
By: _________________________________
Approved by the Governor of the State of Oklahoma this _____ ____
day of ___________________, 20_______, at _______ o'clock _______ M.
____________________________ _____
Governor of the State of Oklahoma
OFFICE OF THE SECRETARY OF STATE
Received by the Office of the Secretary of State this __________
day of ___________________, 20_______, at _______ o'clock _______ M.
By: _________________________________