11 AAC 83.336. Effective date and term of unit agreement

(a) A unit agreement becomes effective upon approval by the commissioner and automatically terminates five years from the effective date unless

(1) a unit well in the unit area has been certified as capable of producing hydrocarbons in paying quantities, in which case the unit agreement will remain in effect for so long as hydrocarbons are produced in paying quantities from the unit area, or for so long as hydrocarbons can be produced in paying quantities and unit operations are being conducted in accordance with an approved unit plan of exploration or development, or, should production cease, for so long after that as diligent operations are in progress to restore production and then so long after that as unitized substances are produced in paying quantities; or

(2) exploration operations have been conducted in accordance with an approved unit plan of exploration, and the commissioner, after issuing written notice under 11 AAC 83.311, issues a written decision extending the unit term in which he states the basis for his decision, considering the provisions of 11 AAC 83.303; no single extension will exceed five years.

(b) If a suspension of unit operations or production on all or part of the unit area has been ordered or approved under federal, state, or local law, or, if the commissioner determines that the unit operator has been prevented, despite good-faith efforts, from complying with any express or implied promise, term, condition, or covenant of the unit agreement, or from conducting exploration, development, production, transportation, or marketing operations on or from the unitized area by reason of force majeure, the unit operator's obligation to comply with the provision will be held in abeyance, but not voided, and the commissioner will extend the term of the unit agreement for a period of time equal to the time lost under the unit term due to the suspension or prevention by force majeure. If unit operations or production are suspended or prevented under this subsection and the continuation of those operations or production without suspension or prevention would have had the effect of extending the unit agreement, the unit agreement does not terminate during the period in which operations or production are suspended or prevented plus a reasonable time after that, which will not be less than six months, for the unit operator to resume operations or production. Nothing in this subsection holds in abeyance the obligation to pay rentals, royalties, or other production or profit-based payments to the State of Alaska from operations or production in the unitized area which are not suspended or prevented, or from operations or production which are unrelated to any suspension or prevention. For the purposes of this subsection, any seasonal restriction on operations or production or other conditions specifically required or imposed as a term of sale of an original lease, or as a condition required for unit agreement approval, will not be considered a suspension of operations or production ordered under law, or prevention due to force majeure. However, upon application to the commissioner, seasonal restrictions on operations or production imposed subsequent to approval of a unit agreement will be considered a suspension of operations or production ordered under law.

(d) Upon termination of a unit, each lease or portion of a lease committed to the unit may be continued in effect only in accordance with the terms and conditions of the lease, statutes and regulations, or as provided in the unit agreement.

History: Eff. 6/28/81, Register 78; am 8/15/82, Register 83; am 3/18/83, Register 85

Authority: AS 38.05.020

AS 38.05.145

AS 38.05.180

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