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Conflict Between Voluntary Pooling Agreements and State Spacing and Pooling Orders

Morris G. Gray, Hugh V. Schaefer, Proceedings of 27th Annual Rocky Mountain Mineral Law Institute (1981)

Elementary to any treatment of this topic is terminology. Frequently, key terms are easily misunderstood because the vernacular usage of a term often conflicts with the statutory or regulatory definition of the same term. A good example occurs with the usage of the terms unitization and pooling. Williams and Meyers observe in their treatise Oil and Gas Law as follows:

Although the terms pooling and unitization are frequently used interchangeably, more properly pooling means the bringing together of small tracts sufficient for the granting of a well permit under applicable spacing rules, whereas unitization, or as it is sometimes described, unit operation, means the joint operation of all or some part of a producing reservoir.1

Besides these terms, other terms are frequently used and require definition at the outset. These include such terms as location rules,spacing orders,drilling unit,production unit, and proration unit. As [1518] pointed out in Justice Clinton's dissent in Farmers Irrigation District v. Schumacher,2 a well location rule merely establishes the location of a drilling site. Such rule does not create any kind of a unit. In many respects, a location rule is very similar to spacing regulations. As Kuntz has pointed out in his treatise on oil and gas law, spacing regulations specify the minimum distances between wells. He further states that each