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Current Problems in Federal Unitization, With Particular Reference to Unit Operating Agreements

Richard P. Ryan, Proceedings of 2nd Annual Rocky Mountain Mineral Law Institute (1956)

Pooling is the consolidation of oil or gas properties for the creation of a one well drilling or proration unit. Unitization has been defined by another writer as follows:

'Unitization,' or 'unit operation' as distinguished from 'pooling' represents development and operation of an oil pool as a unit. It involves the consolidation or merger of all of the interests in the pool and designation of one or more of the parties as operator....2

This paper will deal entirely with problems connected with unitized operations where Federal or Indian lands predominate.

I. UNITIZATION OF FEDERAL LANDS

A. Statutory Background

When the Mineral Leasing Act of February 25, 1920,3 was passed no reference was made to unitized operations. [158] However, during the 1920's unitization engaged the attention of leaders in the oil industry and governmental authorities. The Mineral Leasing Act was amended by the Act of July 3, 1930,4 to provide that permittees and lessees might unite with others in operating under a cooperative or unit plan of development whenever determined and certified by the Secretary of the Interior to be necessary or advisable in the public interest. Leases subject to such plans would continue in force beyond their fixed term of twenty years until termination of the plan. The Act of July 3, 1930, expired by its terms at midnight, Januar