Missouri Revised Statutes

Chapter 259
Oil and Gas Production

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Council established.

259.010. There shall be a "State Oil and Gas Council" composed of the following members in accordance with the provisions of section 259.020:

(1) The state geologist;

(2) One member from the department of economic development;

(3) One member from the Missouri public service commission;

(4) One member from the clean water commission;

(5) One member from the Missouri University of Science and Technology petroleum engineering program;

(6) One member from the Missouri Independent Oil and Gas Association; and

(7) Two members from the public.

(L. 1965 2d Ex. Sess. p. 917 § 1, A.L. 1972 H.B. 1176, A.L. 2012 H.B. 1251 merged with H.B. 1647, A.L. 2015 H.B. 92)

Council membership.

259.020. The member entities in section 259.010 shall be represented on the council by the executive head of each respective entity, except that:

(1) The Missouri University of Science and Technology shall be represented by a professor of petroleum engineering employed at the university;

(2) The Missouri Independent Oil and Gas Association shall be represented by a designated member of the association; and

(3) The public members shall be appointed to the council by the governor, with the advice and consent of the senate. Both public members shall have an interest in and knowledge of the oil and gas industry, and both shall be residents of Missouri.

The executive head of any member state agency, the professor of petroleum engineering at the Missouri University of Science and Technology and the member from the Missouri Independent Oil and Gas Association may from time to time authorize any member of the state agency's staff, another professor of petroleum engineering at the Missouri University of Science and Technology or another member of the Missouri Independent Oil and Gas Association, respectively, to represent it on the council and to fully exercise any of the powers and duties of the member representative.

(L. 1965 2d Ex. Sess. p. 917 § 2, A.L. 1972 H.B. 1176, A.L. 2012 H.B. 1251 merged with H.B. 1647, A.L. 2015 H.B. 92)

Council officers.

259.030. 1. The council shall elect a chairman and vice chairman from the members of the council. A chairman and vice chairman may serve more than a one-year term, if so elected by the members of the council.

2. The state geologist shall act as administrator for the council and shall be responsible for enforcing the provisions of this chapter.

(L. 1965 2d Ex. Sess. p. 917 § 3, A.L. 2012 H.B. 1251 merged with H.B. 1647, A.L. 2015 H.B. 92)

Expenses of members.

259.040. Representatives of the member state agencies shall not receive any additional compensation for their services as representatives on the council and all expenses of the state agency representatives shall be paid by their respective agency. The professor of petroleum engineering, the member from the Missouri Independent Oil and Gas Association and the public members shall not receive any compensation for their services as representatives on the council and all expenses of such representatives shall be paid by their respective entities.

(L. 1965 2d Ex. Sess. p. 917 § 4, A.L. 1972 H.B. 1176, A.L. 2012 H.B. 1251 merged with H.B. 1647)

Definitions.

259.050. Unless the context otherwise requires, the following words mean:

(1) "Certificate of clearance" means a permit prescribed by the council for the transportation or the delivery of oil or gas or product and issued or registered in accordance with the rule, regulation, or order requiring such permit;

(2) "Council", the state oil and gas council established by section 259.010;

(3) "Department", the department of natural resources;

(4) "Field", the general area underlaid by one or more pools;

(5) "Gas", all natural gas and all other fluid hydrocarbons which are produced at the wellhead and not hereinbelow defined as oil;

(6) "Illegal gas" means gas which has been produced from any well within this state in excess of the quantity permitted by any rule, regulation, or order of the council;

(7) "Illegal oil" means oil which has been produced from any well within the state in excess of the quantity permitted by any rule, regulation, or order of the council;

(8) "Illegal product" means any product derived in whole or in part from illegal oil or illegal gas;

(9) "Noncommercial gas well", a gas well drilled for the sole purpose of furnishing gas for private domestic consumption by the owner and not for resale or trade;

(10) "Oil", crude petroleum oil and other hydrocarbons regardless of gravity which are produced at the wellhead in liquid form and the liquid hydrocarbons known as distillate or condensate recovered or extracted from gas, other than gas produced in association with oil and commonly known as casinghead gas. The term shall also include hydrocarbons that do not flow to a wellhead but are produced by other means, including those contained in oil-shale and oil-sand;

(11) "Owner", the person who has the right to drill into and produce from a pool and to appropriate the oil or gas he produced therefrom either for himself or others or for himself and others;

(12) "Pool", an underground reservoir containing a common accumulation of oil or gas or both; each zone of a structure which is completely separated from any other zone in the same structure is a pool, as that term is used in this chapter;

(13) "Product", any commodity made from oil or gas and includes refined crude oil, crude tops, topped crude, processed crude, processed crude petroleum, residue from crude petroleum, cracking stock, uncracked fuel oil, fuel oil, treated crude oil, residuum, gas oil, casinghead gasoline, natural-gas gasoline, kerosene, benzene, wash oil, waste oil, blended gasoline, lubricating oil, blends or mixtures of oil with one or more liquid products or by-products derived from oil or gas, and blends or mixtures of two or more liquid products or by-products derived from oil or gas whether herein enumerated or not;

(14) "Reasonable market demand" means the demand for oil or gas for reasonable current requirements for consumption and use within and without the state, together with such quantities as are reasonably necessary for building up or maintaining reasonable working stocks and reasonable reserves of oil or gas or product;

(15) "Waste" means and includes:

(a) Physical waste, as that term is generally understood in the oil and gas industry, but not including unavoidable or accidental waste;

(b) The inefficient, excessive, or improper use of, or the unnecessary dissipation of, reservoir energy;

(c) The location, spacing, drilling, equipping, operating, or producing of any oil or gas well or wells in a manner which causes, or tends to cause, reduction in the quantity of oil or gas ultimately recoverable from a pool under prudent and proper operations, or which causes or tends to cause unnecessary or excessive surface loss or destruction of oil or gas;

(d) The inefficient storing of oil;

(e) The production of oil or gas in excess of transportation or marketing facilities or in excess of reasonable market demand; and

(f) Through negligence, the unnecessary or excessive surface loss or destruction of oil or gas resulting from evaporation, seepage, leakage or deliberate combustion;

(16) "Well", any hole drilled in the earth for or in connection with the exploration, discovery, or recovery of oil or gas, or for or in connection with the underground storage of gas in natural formation, or for or in connection with the disposal of salt water, nonusable gas or other waste accompanying the production of oil or gas.

(L. 1965 2d Ex. Sess. p. 917 § 5, A.L. 1972 H.B. 1176, A.L. 1987 S.B. 353, A.L. 2015 H.B. 92)

Oil and gas resources fund created, use of moneys.

259.052. 1. There is hereby created in the state treasury the "Oil and Gas Resources Fund" which shall consist of all gifts, donations, transfers, moneys appropriated by the general assembly, permit application fees collected under section 259.080, operating fees, closure fees, late fees, severance fees, and bequests to the fund. The fund shall be administered by the department of natural resources.

2. The state treasurer shall be custodian of the fund and may approve disbursements from the fund in accordance with sections 30.170 and 30.180. Notwithstanding the provisions of section 33.080 to the contrary, any moneys remaining in the fund at the end of the biennium shall not revert to the credit of the general revenue fund. The state treasurer shall invest moneys in the fund in the same manner as other funds are invested. Any interest and moneys on such investments shall be credited to the fund.

3. After appropriation by the general assembly, the money in such fund shall be expended by the department to administer the provisions of chapter 259, and to collect, process, manage, interpret, and distribute geologic and hydrologic resource information pertaining to oil and gas potential, and not for any other purpose.

(L. 2015 H.B. 92)

Waste prohibited.

259.060. Waste of oil and gas is prohibited in the interest of conservation of natural resources.

(L. 1965 2d Ex. Sess. p. 917 § 6, A.L. 1972 H.B. 1176)

Powers and duties of council--rulemaking, procedure.

259.070. 1. The council has the duty of administering the provisions of this chapter. The council shall meet at least once each calendar quarter of the year and upon the call of the chairperson.

2. The council shall conduct a review of the statutes and rules and regulations under this chapter on a biennial basis. Based on such review, the council, if necessary, shall recommend changes to the statutes under this chapter and shall amend rules and regulations accordingly.

3. (1) The council shall have the power and duty to form an advisory committee to the council for the purpose of reviewing the statutes and rules and regulations under subsection 2 of this section. The advisory committee shall make recommendations to the council when necessary to amend current statutes and rules and regulations under this chapter and shall review any proposed new or amended statute or regulation before such proposed statute or regulation is considered by the council.

(2) The advisory committee shall be made up of representatives from the department, the oil and gas industry and any council member desiring to be on such advisory committee. The advisory committee shall meet prior to each calendar quarter meeting of the council, if necessary for the purposes set forth under this subsection, and present any recommendations to the council at such calendar quarter meeting. The council shall designate one of its members to serve as the chairperson of the advisory committee.

(3) The advisory committee may make recommendations to the council on appropriate fees or other funding mechanisms to support the oil and gas program efforts of the department.

4. The council, acting through the department, has the duty and authority to make such investigations as it deems proper to determine whether waste exists or is imminent or whether other facts exist which justify action.

5. The council, acting through the department, has the authority:

(1) To require through the issuance of appropriate orders:

(a) Identification of ownership of oil or gas wells, producing leases, tanks, plants, structures, and facilities for the refining or intrastate transportation of oil and gas;

(b) The making and filing of all mechanical well logs and the filing of directional surveys if taken, and the filing of reports on well location, drilling and production, and the filing free of charge of samples and core chips and of complete cores less tested sections, when requested in the office of the state geologist within six months after the completion or abandonment of the well;

(c) The drilling, casing, operation, and plugging of wells in such manner as to prevent the escape of oil or gas out of one stratum into another; the intrusion of water into oil or gas stratum; the pollution of fresh water supplies by oil, gas, or highly mineralized water; to prevent blowouts, cavings, seepages, and fires; and to prevent the escape of oil, gas, or water into workable coal or other mineral deposits;

(d) The furnishing of a reasonable bond with good and sufficient surety, conditioned upon the full compliance with the provisions of this chapter, and the rules and regulations of the council prescribed to govern the production of oil and gas on state and private lands within the state of Missouri; provided that, in lieu of a bond with a surety, an applicant may furnish to the council his own personal bond, on conditions as described in this paragraph, secured by a certificate of deposit or an irrevocable letter of credit in an amount equal to that of the required surety bond or secured by some other financial instrument on conditions as above described or as provided by council regulations;

(e) That the production from wells be separated into gaseous and liquid hydrocarbons, and that each be accurately measured by such means and upon such standards as may be prescribed by the council;

(f) The operation of wells with efficient gas-oil and water-oil ratios, and to fix these ratios;

(g) Certificates of clearance in connection with the transportation or delivery of any native and indigenous Missouri produced crude oil, gas, or any product;

(h) Metering or other measuring of any native and indigenous Missouri-produced crude oil, gas, or product in pipelines, gathering systems, barge terminals, loading racks, refineries, or other places; and

(i) That every person who produces, sells, purchases, acquires, stores, transports, refines, or processes native and indigenous Missouri-produced crude oil or gas in this state shall keep and maintain within this state complete and accurate records of the quantities thereof, which records shall be available for examination by the council or its agents at all reasonable times and that every such person file with the council such reports as it may prescribe with respect to such oil or gas or the products thereof;

(2) To regulate pursuant to rules adopted by the council:

(a) The release and forfeiture of bonds required under paragraph (d) of subdivision (1) of subsection 5 of this section;

(b) The drilling, producing, and plugging of wells, and all other operations for the production of oil or gas;

(c) The treatment of wells;

(d) The spacing of wells;

(e) Operations to increase ultimate recovery such as cycling of gas, the maintenance of pressure, and the introduction of gas, water, or other substances into producing formations; and

(f) Disposal of highly mineralized water and oil field wastes;

(3) To limit and to allocate the production of oil and gas from any field, pool, or area;

(4) To classify wells as oil or gas wells for purposes material to the interpretation or enforcement of this chapter;

(5) To promulgate and to enforce rules, regulations, and orders to effectuate the purposes and the intent of this chapter;

(6) To make rules, regulations, or orders for the classification of wells as oil wells or dry natural gas wells; or wells drilled, or to be drilled, for geological information; or as wells for secondary recovery projects; or wells for the disposal of highly mineralized water, brine, or other oil field wastes; or wells for the storage of dry natural gas, or casinghead gas; or wells for the development of reservoirs for the storage of liquid petroleum gas;

(7) To detail such personnel and equipment or enter into such contracts as it may deem necessary for carrying out the plugging of or other remedial measures on wells which have been abandoned and not plugged according to the standards for plugging set out in the rules and regulations promulgated by the council pursuant to this chapter. Members of the council, the department, or authorized representatives may, with the consent of the owner or person in possession, enter any property for the purpose of investigating, plugging, or performing remedial measures on any well, or to supervise the investigation, plugging, or performance of remedial measures on any well. A reasonable effort to contact the owner or the person in possession of the property to seek his permission shall be made before members of the council, the department, or authorized representatives enter the property for the purposes described in this paragraph. If the owner or person in possession of the property cannot be found or refuses entry or access to any member of the council, the department, or to any authorized representative presenting appropriate credentials, the council or the department may request the attorney general to initiate in any court of competent jurisdiction an action for injunctive relief to restrain any interference with the exercise of powers and duties described in this subdivision. Any entry authorized under this subdivision shall be construed as an exercise of the police power for the protection of public health, safety and general welfare and shall not be construed as an act of condemnation of property nor of trespass thereon. Members of the council, the department, or authorized representatives shall not be liable for any damages necessarily resulting from the entry upon land for purposes of investigating, plugging, or performing remedial measures or the supervision of such activity. However, if growing crops are present, arrangements for timing of such remedial work may be agreed upon between the state and landowner in order to minimize damages;

(8) To develop such facts and make such investigations or inspections as are consistent with the purposes of this chapter. The department or its authorized representatives may, with the consent of the owner or person in possession, enter upon any property for the purposes of inspecting or investigating any condition which the department shall have probable cause to believe is subject to regulation under this chapter, the rules and regulations promulgated pursuant thereto or any permit issued by the department. If the owner or person in possession of the property refuses entry or access for purposes of the inspections or investigations described, the department or authorized representatives shall make application for a search warrant. Upon a showing of probable cause in writing and under oath, a suitable restricted search warrant shall be issued by any judge having jurisdiction for purposes of enabling inspections authorized under this subdivision. The results of any inspection or investigation pursuant to this subdivision shall be reduced to writing with a copy furnished to the owner, person in possession, or operator;

(9) To cooperate with landowners with respect to the conversion of wells drilled for oil and gas to alternative use as water wells as follows: the state geologist shall determine the feasibility of the conversion of a well drilled under a permit for oil and gas for use as a water well and shall advise the landowner of modifications required for conversion of the well in a manner that is consistent with the requirements of this chapter. If such conversion is carried out, release of the operator from legal liability or other responsibility shall be required and the expense of the conversion shall be borne by the landowner.

6. No rule or portion of a rule promulgated under the authority of this chapter shall become effective unless it has been promulgated pursuant to the provisions of section 536.024.

(L. 1965 2d Ex. Sess. p. 917 § 7, A.L. 1972 H.B. 1176, A.L. 1983 H.B. 37, A.L. 1987 S.B. 353, A.L. 1993 S.B. 52, A.L. 1995 S.B. 3, A.L. 2012 H.B. 1251 merged with H.B. 1647, A.L. 2015 H.B. 92)

Permits--fee structure proposal.

259.080. 1. It shall be unlawful to commence operations for the drilling of a well for oil or gas, or to commence operations to deepen any well to a different geological formation, or to commence injection activities for enhanced recovery of oil or gas or for disposal of fluids, without first giving the state geologist notice of intention to drill or intention to inject and first obtaining a permit from the state geologist under such rules and regulations as may be prescribed by the council.

2. The department of natural resources may conduct a comprehensive review, and propose a new fee structure, or propose changes to the oil and gas fee structure, which may include but need not be limited to permit application fees, operating fees, closure fees, and late fees, and an extraction or severance fee. The comprehensive review shall include stakeholder meetings in order to solicit stakeholder input from each of the following groups: oil and gas industry representatives, the advisory committee, and any other interested parties. Upon completion of the comprehensive review, the department shall submit a proposed fee structure or changes to the oil and gas fee structure with stakeholder agreement to the oil and gas council. The council shall review such recommendations at the forthcoming regular or special meeting, but shall not vote on the fee structure until a subsequent meeting. If the council approves, by vote of two-thirds majority, the fee structure recommendations, the council shall authorize the department to file a notice of proposed rulemaking containing the recommended fee structure, and after considering public comments may authorize the department to file the final order of rulemaking for such rule with the joint committee on administrative rules under sections 536.021 and 536.024 no later than December first of the same year. If such rules are not disapproved by the general assembly in the manner set out in this section, they shall take effect on January first of the following year, at which point the existing fee structure shall expire. Any regulation promulgated under this subsection shall be deemed beyond the scope and authority provided in this subsection, or detrimental to permit applicants, if the general assembly, within the first sixty calendar days of the regular session immediately following the filing of such regulation, disapproves the regulation by concurrent resolution. If the general assembly so disapproved any regulation filed under this subsection, the department and the council shall not implement the proposed fee structure and shall continue to use the previous fee structure. The authority of the council to further revise the fee structure as provided in this subsection shall expire on August 28, 2025.

3. Failure to pay the fees, or any portion thereof, established under this section or to submit required reports, forms or information by the due date shall result in the imposition of a late fee established by the council. The department may issue an administrative order requiring payment of unpaid fees or may request that the attorney general bring an action in the appropriate circuit court to collect any unpaid fee, late fee, interest, or attorney's fees and costs incurred directly in fee collection. Such action may be brought in the circuit court of Cole County, or, in the case of well fees, in the circuit court of the county in which the well is located.

(L. 1965 2d Ex. Sess. p. 917 § 8, A.L. 1972 H.B. 1176, A.L. 2015 H.B. 92)

Production--controls and allocations authorized.

259.090. The council shall determine market demand for each marketing district and shall regulate the amount of production as follows:

(1) The council shall limit the production of oil and gas within each marketing district to that amount which can be produced without waste, and which does not exceed the reasonable market demand.

(2) Whenever the council limits the total amount of oil or gas which may be produced in the state or a marketing district, the council shall allocate or distribute the allowable production among the pools therein on a reasonable basis, giving, where reasonable under the circumstances to each pool with small wells of settled production, an allowable production which prevents the general premature abandonment of such wells in the pool.

(3) Whenever the council limits the total amount of oil or gas which may be produced in any pool in this state to an amount less than that amount which the pool could produce if no restriction was imposed, regardless of whether or not the limitation is imposed in relation to the limitation on the total amount of oil or gas produced in the marketing district wherein the pool is located, the council shall allocate or distribute the allowable production among the several wells or producing properties in the pool on a reasonable basis, preventing or minimizing reasonable avoidable drainage, so that each property will have the opportunity to produce or to receive its just and equitable share, subject to the reasonable necessities for the prevention of waste.

(4) In allocating the market demand for gas as between pools within marketing districts, the council shall give due regard to the fact that gas produced from oil pools is to be regulated in a manner as will protect the reasonable use of its energy for oil production.

(5) The council shall not be required to determine the reasonable market demand applicable to any single pool, except in relation to all other pools within the same marketing district, and in relation to the demand applicable to the marketing district. In allocating allowables to pools, the council may consider, but shall not be bound by, nominations of purchasers to purchase from particular fields, pools, or portions thereof. The council shall allocate the total allowable for the state in such manner as prevents undue discrimination between marketing districts, fields, pools, or portions thereof resulting from selective buying or nomination by purchasers.

(L. 1965 2d Ex. Sess. p. 917 § 9)

Spacing of wells, exception, noncommercial gas wells.

259.100. 1. The council shall set spacing units as follows:

(1) When necessary to prevent waste, to avoid the drilling of unnecessary wells, or to protect correlative rights, the council shall establish spacing units for a pool. Spacing units when established shall be of uniform size and shape for the entire pool, except that when found to be necessary for any of the purposes above mentioned, the council is authorized to divide any pool into zones and establish spacing units for each zone, which units may differ in size and shape from those established in any other zone;

(2) The size and shape of spacing units are to be such as will result in the efficient and economical development of the pool as a whole;

(3) An order establishing spacing units for a pool shall specify the size and shape of each unit and the location of the permitted well thereon in accordance with a reasonably uniform spacing plan. Upon application, if the state geologist finds that a well drilled at the prescribed location would not produce in paying quantities, or that surface conditions would substantially add to the burden or hazard of drilling such well, the department is authorized to enter an order permitting the well to be drilled at a location other than that prescribed by such spacing order; however, the state geologist shall include in the order suitable provisions to prevent the production from the spacing unit of more than its just and equitable share of the oil and gas in the pool;

(4) An order establishing spacing units for a pool shall cover all lands determined or believed to be underlaid by such pool, and may be modified by the department from time to time to include additional areas determined to be underlaid by such pool. When found necessary for the prevention of waste, or to avoid the drilling of unnecessary wells or to protect correlative rights, an order establishing spacing units in a pool may be modified by the state geologist to increase the size of spacing units in the pool or any zone thereof, or to permit the drilling of additional wells on a reasonable uniform plan in the pool, or any zone thereof. Orders of the department may be appealed to the council within thirty days.

2. Applicants seeking a permit for a noncommercial gas well shall file a bond under paragraph (d) of subdivision (1) of subsection 5 of section 259.070 and meet the following conditions and procedures: an owner of a noncommercial gas well with drilling rights may apply for the establishment of a drilling unit with a well set back of one hundred sixty-five feet on which a well no deeper than eight hundred feet in depth may be drilled. An owner of a noncommercial gas well may apply to the department for a variance to establish a spacing unit, to set back distances, or both.

(L. 1965 2d Ex. Sess. p. 917 § 10, A.L. 1987 S.B. 353, A.L. 2015 H.B. 92)

Production pooling authorized.

259.110. 1. When two or more separately owned tracts are embraced within a spacing unit, or when there are separately owned interests in all or a part of the spacing unit, then the owners and royalty owners thereof may pool their interests for the development and operation of the spacing unit. In the absence of voluntary pooling the council, upon the application of any interested person, shall enter an order pooling all interests in the spacing unit for the development and operations thereof. Each such pooling order shall be made after notice and hearing, and shall be upon terms and conditions that are just and reasonable, and that afford to the owner of each tract or interest in the spacing unit the opportunity to recover or receive, without unnecessary expense, his just and equitable share. Operations incident to the drilling of a well upon any portion of a spacing unit covered by a pooling order shall be deemed for all purposes the conduct of such operations upon each separately owned tract in the drilling unit by the several owners thereof. That portion of the production allocated to each tract included in a spacing unit covered by a pooling order shall, when produced, be deemed for all purposes to have been produced from such tract by a well drilled thereon.

2. Each pooling order shall make provision for the drilling and operation of a well on the spacing unit, and for the payment of the reasonable actual cost thereof by the owners of interests in the spacing unit, plus a reasonable charge for supervision. In the event of any dispute as to such costs the council shall determine the proper costs. If one or more of the owners shall drill and operate, or pay the expenses of drilling and operating the well for the benefit of others, then the owner or owners so drilling or operating shall, upon complying with the terms of section 259.130, have a lien on the share of production from the spacing unit accruing to the interest of each of the other owners for the payment of his proportionate share of such expenses. All the oil and gas subject to the lien shall be marketed and sold and the proceeds applied in payment of the expenses secured by such lien as provided for in section 259.100.

(L. 1965 2d Ex. Sess. p. 917 § 11)

Unit or cooperative development and operation agreements,hearings--petition, contents--findings, effect of--order,contents--unit expenses, how charged--enlarged units, howtreated.

259.120. 1. A voluntary agreement for the unit or cooperative development and operation of a field or pool, in connection with the conduct of repressuring or pressure maintenance operations, cycling or recycling operations, including the extraction and separation of liquid hydrocarbons from natural gas in connection therewith, or any other method of operation, including selective production methods, injection of water or other fluids, and including but not limited to thermal or combustion processes, is authorized and may be performed and shall not be held or construed to violate any of the statutes of this state relating to trusts, monopolies, or contracts and combinations in restraint of trade, if the agreement is approved by the council as being in the public interest, protective of correlative rights, and reasonably necessary to increase ultimate recovery or to prevent waste of oil or gas. Such voluntary agreements bind only the persons who execute them, and their heirs, successors, assigns, and legal representatives.

2. Where a unit or cooperative plan of development and operation has been submitted to the owners of interests in a field or pool and one or more of such owners fails or refuses to execute the applicable unit agreements for such plan, then, upon the filing of a petition as hereinafter provided, the council, after notice, shall hold a public hearing to consider the need for the operation as a unit of an entire pool, or any portion thereof, to prevent waste, to increase ultimate recovery of oil and gas and to protect correlative rights. The petition shall contain the following:

(1) A description of the proposed unit area;

(2) A statement of the nature of the proposed unit operation;

(3) Conformed copies of the applicable unit agreements, which may be composites of executed counterparts. The petition may be filed by any one or more of the owners who have executed the applicable unit agreements.

3. If, after hearing and considering the petition and evidence offered in support thereof, the council finds that:

(1) The proposed unit plan has been agreed to by persons, who, at the time of filing of the petition, owned of record legal title to at least seventy-five percent interest in the right to drill into and produce oil and gas from the total proposed unit area and by persons, who, at that time, owned of record legal title to at least seventy-five percent of production payments, royalty and overriding royalty payable with respect to oil and gas produced from the total proposed unit area, and that

(2) Unit operation of the pool, or any portion thereof, proposed to be unitized, is reasonably necessary to prevent waste, to increase ultimate recovery of oil and gas and to protect correlative rights, and that

(3) The value of the additional oil and gas to be recovered from the proposed unit area as a result of the proposed unit operation will exceed the additional cost incident to conducting such operation, it shall issue an order requiring unit operation in accordance with the terms of the applicable unit operating agreements. Such order and the unit plan shall, thereafter, be effective as to and binding upon each person owning an interest in the unit area, or in oil and gas produced therefrom or the proceeds thereof.

4. The order requiring unit operation shall be fair and reasonable under all circumstances and shall include:

(1) A description of the unit area;

(2) An allocation, upon the basis agreed upon by the provisions of the unit applicable agreements, and found by the council to be fair and equitable to each separately owned tract in the unit area, in that under the allocation each separately owned tract receives its fair share of all of the oil and gas produced from the unit area and not required or consumed in the conduct of the operation of the unit area or unavoidably lost;

(3) A provision for the credits and charges to be made in the adjustment among the owners of the unit area for their respective investments in wells, tanks, pumps, machinery, materials and equipment contributed to the unit operation. The net amount charged against the owner or owners of a separately owned tract shall be considered expenses of unit operation chargeable against such tract;

(4) A provision that a part of the expenses of unit operation, including capital investments, be charged to each separately owned tract in the same proportion that the tract shares in the unit production. The expenses chargeable to a tract shall be paid by the person or persons who, in the absence of unit operation, would be responsible for the expense of developing and operating such tract;

(5) Designation of the unit operator and the time at which the unit operation shall commence; and

(6) Those additional provisions, not in conflict with, or inconsistent with, the applicable unit agreements, which the council determines to be appropriate for the prevention of waste and the protection of all interested parties.

5. The obligation or liability of each owner in the several separately owned tracts for the payment of unit expense shall at all times be several and not joint or collective and in no event shall an owner of the oil and gas rights in the separately owned tract be chargeable with, obligated or liable, directly or indirectly, for, more than the amount apportioned, assessed or otherwise charged to his interest in such separately owned tract pursuant to the plan of unitization.

6. The council, upon the filing of a petition in a form complying with the requirements of subsection 2 of this section, may, after notice and hearing, require unit operation of a pool, or portion thereof, when the unit area newly established embraces a unit area within the same pool established by a previous order of the council. In each such case the petition shall be accompanied by a copy of the proposed unit agreements with respect to the operation of the unit as so enlarged, in the form meeting the requirements of subdivision (3) of subsection 2 of this section. In each such instance the proposed unit agreements shall be executed by persons owning interests in oil and gas in the entire unitized area so enlarged in sufficient numbers to comply with the requirements of subdivision (1) of subsection 3 of this section; provided that, if the unit agreements then in effect with respect to the unit area to which an additional portion of a pool is to be added contain provisions, under the terms of which additions to the unit area may be made, the application for such enlargement of the unitized area need only be accompanied by an agreement, executed by persons owning interests in oil and gas under the area to be added to the unit area in numbers sufficient to comply with the requirements of subdivision (1) of subsection 3 of this section, for the inclusion, in accordance with the plan provided in the unit agreements involved, of the additional area to the unit area then existing. In either such case, such new order, in providing for allocation of unit production from the enlarged unit area, shall first treat the unit area previously established as a single tract, and the portion of unit production so allocated thereto shall then be allocated among the separately owned tracts included in such previously established unit area in the same proportion as those specified therefor in the previous order. In no event shall said new order alter the relative values of tract factors of the previously established unit area, except by consent of all parties owning interests in the tract affected.

7. An order of the council entered under subsection 6 shall be effective as to the enlarged unit area and to all persons owning interests in oil and gas therein to the same extent as an order entered under subsection 3, shall contain provisions with respect to the enlarged unit area to meet the requirements of subsection 4, and the provisions of subsections 5 and 6 shall be applicable to obligations incurred in the operation of the enlarged unit area.

8. The portion of oil and gas produced from the unit area and allocated to a separately owned tract shall be deemed, for all purposes, to have been actually produced from such tract, and operations for the production of oil and gas from any part of the unit area, conducted pursuant to the order of the council, shall be deemed, for all purposes, to be operations for the production of oil and gas from each separately owned tract in the unit area.

9. The formation of such a unit as provided for in subsections 2 through 9 of this section and the operation of the unit under order of the council shall not be a violation of any statute of this state relating to trusts, monopolies, contracts or combinations in restraint of trade.

(L. 1965 2d Ex. Sess. p. 917 § 12, A.L. 1972 S.B. 431, H.B. 1176)

Lien for drilling expenses.

259.130. A person to whom another is indebted for expenses incurred in drilling and operating a well on a drilling unit required to be formed as provided for in section 259.110, may, in order to secure payment of the amount due, fix a lien upon the interest of the debtor in the production from the drilling unit or the unit area, as the case may be, by filing for record, with the recorder of deeds of the county where the property involved, or any part thereof, is located, an affidavit setting forth the amount due and the interest of the debtor in such production. The person to whom the amount is payable may, at the expense of the debtor, store all or any part of the production upon which the lien exists until the total amount due, including reasonable storage charges, is paid or the commodity is sold at foreclosure sale and delivery is made to the purchaser. The lien may be foreclosed as provided for with respect to foreclosure of a lien on chattels.

(L. 1965 2d Ex. Sess. p. 917 § 13)

Council hearings--notice--procedure.

259.140. 1. The council shall prescribe rules and regulations governing the practice and procedure before it.

2. No order, or amendment thereof, except in an emergency, shall be made by the council without a public hearing upon at least ten days' notice. The public hearing shall be held at such time and place as may be prescribed by the council, and any interested person shall be entitled to be heard.

3. When an emergency requiring immediate action is found to exist the council is authorized to issue an emergency order without notice of hearing, which shall be effective upon promulgation. No emergency order shall remain effective for more than fifteen days.

4. Any notice required by this chapter shall be given at the election of the council either by personal service or by letter to the last recorded address of the person to whom the order is directed and one publication in a newspaper of general circulation in the county where the land affected, or some part thereof, is situated. If the notice is applicable throughout the state, then it shall be published in a newspaper of general circulation which is published in Jefferson City. The notice shall issue in the name of the state, shall be signed by the state geologist, shall specify the style and number of the proceeding, the time and place of the hearing, and shall briefly state the purpose of the proceeding. Should the council elect to give notice by personal service, such service may be made by any officer authorized to serve process, or by any agent of the council, in the same manner as is provided by law for the service of original notices in civil actions in the circuit courts of the state. Proof of the service by such agent shall be by the affidavit of the person making personal service.

5. All orders issued by the council shall be in writing, shall be entered in full and indexed in books to be kept by the state geologist for that purpose, and shall be public records open for inspection at all times during reasonable office hours. A copy of any rule, regulation, or order certified by the state geologist or any officer of the council shall be received in evidence in all courts of this state with the same effect as the original.

6. The council may act upon its own motion, or upon the petition of any interested person. On the filing of a petition concerning any matter within the jurisdiction of the council, the council shall promptly fix a date for a hearing thereon, and shall cause notice of the hearing to be given. The hearing shall be held without undue delay after the filing of the petition. The council shall enter its order within thirty days after the hearing. In the event that the matter is submitted on a question or questions of fact, the council shall enter its order within thirty days after the finding of facts is submitted to the council.

(L. 1965 2d Ex. Sess. p. 917 § 14)

Questions of fact submitted to public service commission--costs.

259.150. 1. Whenever either party to a contested matter avers that there is a question or questions of fact involved, the matter shall be submitted to the public service commission for hearing on the question or questions of fact.

2. The rules and regulations governing practice before the public service commission shall be in effect on such hearing to determine a question or questions of fact.

3. Costs in said action may be set and taxed by the commission as it may see fit.

(L. 1965 2d Ex. Sess. p. 917 § 15)

Rehearing.

259.160. Any person adversely affected by any order of the council may within thirty days after its effective date apply to the council in writing for a rehearing. The application for rehearing shall be acted upon within fifteen days after its filing, and if granted, the rehearing shall be held without undue delay.

(L. 1965 2d Ex. Sess. p. 917 § 16)

Appeal to circuit court--time for filing--procedure.

259.170. 1. Any person adversely affected by an order entered by the council may appeal from such order to the circuit court of Cole County or to the circuit court of any county in which the property affected or some portion thereof is located. Notice of appeal must be filed with the council within thirty days after the entry of the order complained of, or within thirty days after the entry of the order overruling a motion for rehearing, or within thirty days after sustaining the original order in the event a rehearing has been held. The notice of appeal must identify the order complained of and the grounds for appeal. The appellant shall file a copy of the transcript of the hearing or rehearing before the council as hereinafter provided, and the appellant shall provide the transcript at his expense. The transcript shall be delivered to the appellant, or his designated attorney, within sixty days after the filing of the notice of appeal.

2. Within ninety days after the filing of the notice of appeal, the appellant must file in the circuit court the transcript of the proceedings before the council, together with a petition for review which states briefly the grounds for the appeal. An appeal shall be perfected by filing the notice of appeal within the specified thirty day period. The appeal may be dismissed by the circuit court for failure of the appellant to file the transcript and petition for review within the time specified, unless for good cause shown the time is extended by order of the circuit court.

3. At the time of filing of the notice of appeal, if an application for the suspension of the order is filed, the council shall enter an order fixing the amount of the supersedeas bond. Within ten days after the entry of an order by the council which fixes the amount of the bond, the appellant must file with the council a supersedeas bond in the required amount and with proper surety; upon approval of the bond, the council shall suspend the order complained of until its final disposition upon appeal. The bond shall run in favor of the state for the use and benefit of any person who may suffer damage by reason of the suspension of the order in the event the same is affirmed by the circuit court. If the order of the council is not superseded, it shall continue in force and effect as if no appeal was pending.

4. The circuit court shall, insofar as is practicable, give precedence to appeals from orders of the council. Upon the appeal of such an order the circuit court shall review the proceedings before the council as disclosed by the transcript upon appeal, and thereafter enter its judgment affirming or reversing the order appealed. Orders of the council shall be sustained if the council has regularly pursued its authority and its findings and conclusions are sustained by the law and by substantial and credible evidence.

(L. 1965 2d Ex. Sess. p. 917 § 17)

Prohibited acts--knowledge--certificate of clearance.

259.180. The sale, purchase, acquisition, transportation, refining, processing, or handling of illegal oil, illegal gas, or illegal product is hereby prohibited. However, no penalty by way of fine shall be imposed upon a person who sells, purchases, acquires, transports, refines, processes, or handles illegal oil, illegal gas, or illegal product unless:

(1) Such person knows, or is put on notice, of facts indicating that illegal oil, illegal gas, or illegal product is involved; or

(2) Such person fails to obtain a certificate of clearance with respect to such oil, gas, or product where prescribed by order of the council, or fails to follow any other method prescribed by an order of the council for the identification of such oil, gas or product.

(L. 1965 2d Ex. Sess. p. 917 § 18)

Contraband, seizure and sale--proceeds and bond forfeitures paid intooil and gas remedial fund, purpose.

259.190. 1. Illegal oil, illegal gas, and illegal product are declared to be contraband and are subject to seizure and sale as herein provided; seizure and sale to be in addition to any and all other remedies and penalties provided in this chapter for violations relating to illegal oil, illegal gas, or illegal product. Whenever the council believes that any oil, gas or product is illegal, the council, acting by the attorney general, shall bring a civil action in rem in the circuit court of the county where such oil, gas, or product is found, to seize and sell the same, or the council may include such an action in rem for the seizure and sale of illegal oil, illegal gas, or illegal product in any suit brought for an injunction or penalty involving illegal oil, illegal gas, or illegal product. Any person claiming an interest in oil, gas, or product affected by any such action shall have the right to intervene as an interested party in such action.

2. Actions for the seizure and sale of illegal oil, illegal gas, or illegal product shall be strictly in rem, and shall proceed in the name of the state as plaintiff against the illegal oil, illegal gas, or illegal products as defendant. No bond or similar undertaking shall be required of the plaintiff. Upon the filing of the petition for seizure and sale, the attorney general shall issue a notice, with a copy of the complaint attached thereto, which shall be served in the manner provided for service of original notices in civil actions, upon any and all persons having or claiming any interest in the illegal oil, illegal gas, or illegal products described in the petition. Service shall be completed by the filing of an affidavit by the person making the service, stating the time and manner of making such service. Any person who fails to appear and answer within the period of thirty days shall be forever barred by the judgment based on such service. If the court, on a properly verified petition, or affidavits, or oral testimony, finds that grounds for seizure and for sale exist, the court shall issue an immediate order of seizure, describing the oil, gas, or product to be seized and directing the sheriff of the county to take such oil, gas, or product into his custody, actual or constructive, and to hold the same subject to the further order of the court. The court, in such order of seizure, may direct the sheriff to deliver the oil, gas, or product seized by him under the order to an agent appointed by the court as the agent of the court; such agent to give bond in an amount and with such surety as the court may direct, conditioned upon his compliance with the orders of the court concerning the custody and disposition of such oil, gas, or product.

3. Any person having an interest in oil, gas, or product described in an order of seizure and contesting the right of the state to the seizure and sale thereof may, prior to the sale thereof as herein provided, obtain the release thereof, upon furnishing bond to the sheriff, approved by the court, in an amount equal to one hundred fifty percent of the market value of the oil, gas, or product to be released, and conditioned as the court may direct upon redelivery to the sheriff of such product released or upon payment to the sheriff of the market value thereof as the court may direct, if and when ordered by the court, and upon full compliance with the further orders of the court.

4. If the court, after a hearing upon a petition for the seizure and sale of oil, gas, or product, finds that such oil, gas, or product is contraband, the court shall order the sale thereof by the sheriff in the same manner and upon the same notice of sale as provided by law for the sale of personal property on execution of judgment entered in a civil action except that the court may order that the illegal oil, illegal gas, or illegal product be sold in specified lots or portions and at specified intervals. Upon such sale, title to the oil, gas, or product sold shall vest in the purchaser free of the claims of any and all persons having any title thereto or interest therein at or prior to the seizure thereof, and the same shall be legal oil, legal gas, or legal product, as the case may be, in the hands of the purchaser.

5. All proceeds derived from the sale of illegal oil, illegal gas, or illegal product, as above provided, after payment of costs of suit and expenses incident to the sale, and all amounts obtained by the council from the forfeiture of bonds required under paragraph (d) of subdivision (1) of subsection 5 of section 259.070, shall be paid to the state treasurer and credited to the "Oil and Gas Remedial Fund", which is hereby created. The money in the oil and gas remedial fund may be used by the department to pay for the plugging of, or other remedial measures on, wells. The state treasurer shall be custodian of the fund and may approve disbursements from the fund in accordance with sections 30.170 and 30.180. Notwithstanding the provisions of section 33.080, to the contrary, any moneys remaining in the fund at the end of the biennium shall not revert to the credit of the general revenue fund. The state treasurer shall invest moneys in the fund in the same manner as other funds are invested. Any interest and moneys earned on such investments shall be credited to the fund.

(L. 1965 2d Ex. Sess. p. 917 § 19, A.L. 1983 H.B. 37, A.L. 2015 H.B. 92)

Penalties.

259.200. 1. Any person who violates any provision of this chapter, or any rule, regulation, or order of the council shall be subject to a penalty of not more than one thousand dollars for each act of violation and for each day that such violation continues, unless the penalty for such violation is otherwise specifically provided for and made exclusive in this chapter.

2. If any person, for the purpose of evading this chapter, or any rule, regulation, or order of the council, shall make or cause to be made any false entry or statement in a report required by this chapter or by any such rule, regulation, or order, or shall make or cause to be made any false entry in any record, account, or memorandum required by this chapter, or by any such rule, regulation, or order, or shall omit, or cause to be omitted, from any such record, account, or memorandum, full, true, and correct entries as required by this chapter, or by any such rule, regulation, or order, or shall remove from this state or destroy, mutilate, alter or falsify any such record, account, or memorandum, such person shall be guilty of a misdemeanor and upon conviction shall be punished as provided by law.

3. Any person knowingly aiding or abetting any other person in the violation of any provision of this chapter, or any rule, regulation, or order of the council shall be subject to the same penalty as that prescribed by this chapter for the violation by such other person.

4. The penalties provided in this section shall be recoverable by suit filed by the attorney general in the name and on behalf of the council, in the circuit court of the county in which the defendant resides, or in which any defendant resides, if there be more than one defendant, or in the circuit court of any county in which the violation occurred. The payment of any such penalty shall not operate to legalize any illegal oil, illegal gas, or illegal product involved in the violation for which the penalty is imposed, or to relieve a person on whom the penalty is imposed from liability to any other person for damages arising out of such violation.

(L. 1965 2d Ex. Sess. p. 917 § 20)

Threatened violations--injunction.

259.210. 1. Whenever it appears that any person is violating or threatening to violate any provision of this chapter, or any rule, regulation, or order of the council, the council or the department may request that the attorney general bring suit against such person in the circuit court of any county where the violation occurs or is threatened, to restrain such person from continuing the violation or from carrying out the threat of violation. In any such suit, the court shall have jurisdiction to grant to the council, without bond or other undertaking, such prohibitory and mandatory injunctions as the facts may warrant, including temporary restraining orders, preliminary injunctions, temporary, preliminary, or final orders restraining the movement or disposition of any illegal oil, illegal gas, or illegal product, any of which the court may order to be impounded or placed in the custody of an agent appointed by the court.

2. If the council shall fail to bring suit to enjoin a violation or a threatened violation of any provision of this chapter, or any rule, regulation, or order of the council, within ten days after receipt of written request to do so by any person who is or will be adversely affected by such violation, the person making such request may bring suit in his own behalf to restrain such violation or threatened violation in any court in which the council might have brought suit. The council shall be made a party defendant in such suit in addition to the person violating or threatening to violate a provision of this chapter, or a rule, regulation, or order of the council, and the action shall proceed and injunctive relief may be granted to the council or the petitioner without bond in the same manner as if suit had been brought by the council.

(L. 1965 2d Ex. Sess. p. 917 § 21, A.L. 2015 H.B. 92)

Taxation of mineral rights.

259.220. All rights and interests in or to oil, gas or other minerals underlying land, whether created by or arising under deed, lease, reservation of rights, or otherwise, which rights or interests are owned by any person other than the owner of the land, shall be assessed and taxed separately to the owner of such rights or interests in the same manner as other real estate. The taxes on such rights or interests which are not owned by the owner of the land shall not be a lien on the land.

(L. 1965 2d Ex. Sess. p. 917 § 22)

Political subdivisions authorized to execute oil and gas leases onpublic lands--proceeds to general revenue.

259.230. The state, counties, cities and towns and other political subdivisions are hereby authorized to lease publicly owned lands under their respective jurisdictions for the purpose of oil or gas exploration and production. No such lease shall be entered into until it has been approved by the general assembly on behalf of the state; on behalf of counties by the county commission; on behalf of cities and towns by the council thereof and on behalf of other political subdivisions by the governing body thereof. Such leases shall be upon such terms and conditions as may be agreed upon. All revenue derived from the leasing of state owned lands shall be paid into the general fund of the state. All revenue derived from the leasing of other public lands shall be paid into the general fund of the respective lessor political subdivision.

(L. 1965 2d Ex. Sess. p. 917 § 23)


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