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Communitization, Unitization and the Extension of Leases

Robert P. Hill, Federal Onshore Oil and Gas Pooling and Unitization II (1990)

The basic purpose underlying communitization (pooling) and unitization of oil and gas leases is to develop oil and gas resources efficiently by avoiding the drilling of unnecessary wells. Where a separate well might otherwise be required to hold every lease, regardless of tract configuration or resulting well spacing, through communitization and unitization a field may be developed with a small number of properly spaced wells. Furthermore, through unitization, an operator may develop a field through the drilling of wells in an orderly sequence where he might otherwise have been required to drill many wells concurrently to avoid loss of leases. An important benefit of communitization and unitization, therefore, is the extension and development of committed leases beyond their respective primary terms without the need to drill a well on every lease.

Under current federal law and regulations, lease extension is not only a beneficial result of unitization and communitization, it is also a tool, which is used to encourage cooperative development of federally-owned resources. Leases are not only extended through allocation of production in a unit or communitized area, portions of leases may also be extended upon commitment of other portions to a unit, and leases may be extended upon unit contraction or termination.

The purposes of this paper are to consider the diff