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Preparing and Finalizing the Unit Agreement: Making Sure Your Exploratory Ducks Are in a Row

Frederick M. MacDonald, Federal Onshore Oil and Gas Pooling and Unitization (2006)

So you have now had a fruitful “area and depth” meeting with the Bureau of Land Management (“BLM”), and presumably met with other relevant governmental agencies (for example, when state leases are involved) and the other working interest owners in your proposed exploratory unit area and (most) everyone is on board. What's next? As unit proponent, you are responsible for drafting and filing the documents which will govern unit development and operation; namely, the unit agreement and unit operating agreement. The latter will be addressed later in a presentation and paper delivered by Steven Richardson. This presentation and paper will address the former.

What is a unit agreement? According to the BLM's manual on unitization:

A unit agreement is an agreement approved by the authorized officer of the BLM, submitted by an operator on behalf of the owners of oil and gas interests over a potential oil or gas reservoir who wish to unite with each other to facilitate the orderly and timely development of the oil and gas resources within the unit area. This consolidation of separate leasehold interests eliminates the need to drill protective wells along common boundaries between unitized leases and serves to maximize benefits through a continuing exploration and development program. The agreement designates one party as the operator to conduct all activities in the uni