36.25.412    UNIT OR COOPERATIVE PLANS OF DEVELOPMENT OR OPERATION

(1) For the purpose of more properly conserving the natural RESOURCES of any geothermal pool, field, or like area, lessees under leases issued by the board are authorized, with the written consent of the board, to commit the state lands to unit, cooperative or other plans of development or operation with other state lands, federal lands, privately-owned lands or Indian lands. Applications to unitize shall be filed with the director who shall certify whether such plan is necessary or advisable in the interest of the trust of state lands for the support of common schools. He may require whatever documents or data he deems necessary. To implement such unitization, the board may with the consent of its lessees modify and change any and all terms of leases issued by it which are committed to such unit, cooperative or other plans of development or operations.

(2) The agreement shall describe the separate tracts comprising the unit, disclose the apportionment of production or royalties and costs to the several parties, and the name of the operator, and shall contain adequate provisions for the protection of the interests of all parties, including the state of Montana. The agreement should be signed by or in behalf of all interested necessary parties before being submitted to the director and will be effective only after approval by the board.

(3) The owners of any right, title, or interest in the geothermal resources to be developed or operated under an agreement can be regarded as proper parties to a proposed agreement. All such owners must be invited to join as parties to the agreement. If any owner fails or refuses to join the agreement, the proponent of the agreement should declare this to the director and should submit evidence of efforts made to obtain joinder of such owner and the reasons for non-joinder.

(4) In lieu of separate bonds required for each lease committed to a unit agreement, the unit operator may furnish and maintain a collective corporate surety bond or a personal bond conditioned upon faithful performance of the duties and obligations of the agreement and the terms of the leases subject thereto and these rules. Personal bonds shall be accompanied by a deposit of negotiable federal securities in a sum equal at their par value to the amount of the bond and by a proper conveyance to the department with full authority to sell such securities in case of default in the performance of the obligations assumed. The liability under the bond shall be for such amounts as the board shall determine to be adequate to protect the interests of the state of Montana. Additional bond coverage may be required whenever deemed necessary by the director. In case of changes of unit operator, a new bond must be filed or a consent of surety to the change in principal under the existing bond must be furnished.

(5) Any modification of an approved agreement will require approval of the board under procedures similar to those cited in (1) .

(6) The term of all leases included in any cooperative or unit plan of development or operation shall be extended automatically for the term of such unit or cooperative agreement. Rentals or royalties on leases so extended shall be at the rate specified in the lease.

(7) Any lease which shall be eliminated from any such cooperative or unit plan of development or operation, or any lease which shall be in effect at the termination of any such cooperative or unit plan of development or operation, unless relinquished, shall continue in effect for the term of the lease or for 1 year after its elimination from the plan or agreement or the termination thereof, whichever is longer, and so long thereafter as the lessee engages in diligent and continuous drilling or so long thereafter as geothermal resources are produced in paying quantities, but in no event beyond the time provided in ARM 36.25.304.

(8) Before issuance of a lease for lands within an approved unit agreement, the lease applicant or successful bidder will be required to file evidence that he has entered into an agreement with the unit operator for the development and operation of the lands in the lease if issued to him under and pursuant to the terms and provisions of the approved unit agreement, or a statement giving satisfactory reasons for the failure to enter into such agreement. If such statement is acceptable, he will be permitted to operate independently, but will be required to perform his operations in a manner which the director deems to be consistent with the unit operations.

(9) Nothing in this rule shall excuse the parties to a unit agreement from procuring the approval of the department of natural resources and conservation if approval is required.

(10) Geothermal resources produced from any part of a unit in which state lands are included by virtue of a pooling agreement shall be considered to be produced from the state lands therein.

History: 77-4-103, MCA; IMP, 77-4-124 and 77-4-125, MCA; NEW, Eff. 12/31/72; AMD, Eff. 3/7/75; TRANS, 1996 MAR p. 2384.