CODE OF VIRGINIA

FIELD RULES AND DRILLING UNITS FOR WELLS; HEARINGS AND ORDERS (§ 45.1-361.20)

A. In order to prevent the waste of gas or oil, the drilling of unnecessary
wells, or to protect correlative rights, the Board on its own motion or upon
application of the gas or oil owner shall have the power to establish or modify
drilling units. Drilling units, to the extent reasonably possible, shall be of
uniform shape and size for an entire pool.  Any gas, oil, or royalty owner may
apply to the Board for the establishment of field rules and the creation of
drilling units for the field. Unless such motion is made or an application is
received at least thirty days prior to the next regularly scheduled monthly
meeting of the Board, it shall not be heard by the Board at such meeting and
shall be heard at the next meeting of the Board thereafter.

B. At any hearing of the Board regarding the establishment or modification of
drilling units, the Board shall make the following determinations:

   1.  Whether the proposed drilling unit is an unreasonable or arbitrary
   exercise of a gas or oil owner’s right to explore for or produce gas or
   oil;

   2.  Whether the proposal would unreasonably interfere with the present or
   future mining of coal or other minerals;

   3.  The acreage to be included in the order;

   4.  The acreage to be embraced within each drilling unit and the shape
   thereof;

   5.  The area within which wells may be drilled on each unit; and

   6.  The allowable production of each well.

C. In establishing or modifying a drilling unit for coalbed methane gas wells,
and in order to accommodate the unique characteristics of coalbed methane
development, the Board shall require that drilling units conform to the mine
development plan, if any, and if requested by the coal operator, well spacing
shall correspond with mine operations, including the drilling of multiple
coalbed methane gas wells on each drilling unit.

D. If an order to establish or modify a drilling unit will allow a well to be
drilled into or through a coal seam, any coal owner within the area to be
covered by the drilling unit may object to the establishment of the drilling
unit.  Upon a coal owner’s objection, and without superseding, impairing,
abridging or affecting any contractual rights or obligations existing between
coal and gas owners, the Board shall make its determination in accordance with
the provisions of §§ 45.1-361.11 and 45.1-361.12.

E. The Board may continue a hearing to its next meeting to allow for further
investigation and the gathering and taking of additional data and evidence.  If
at the time of a hearing there is not sufficient evidence for the Board to
determine field boundaries, drilling unit size or shape, or allowable
production, the Board may enter a temporary order establishing provisional
drilling units, field boundaries, and allowable production for the orderly
development of the pool pending receipt of the information necessary to
determine the ultimate pool boundaries, spacing of wells for the pool, and
allowable production.  Upon additional findings of fact, the boundaries of a
pool, drilling units for the pool, and allowable production may be modified by
the Board.

F. Unless otherwise provided for by the Board, after an application for a
hearing to establish or modify drilling units or pool boundaries has been filed,
no additional wells shall be permitted in the pool until the Board’s order
establishing or modifying the pool or units has been entered.

G. After the Board issues a field or pool spacing order which creates drilling
units or a pattern of drilling units for a pool, should a gas or oil owner apply
for a permit or otherwise indicate his desire to drill a well outside of such
drilling units or pattern of drilling units and thereby potentially extend the
pool, the Board may, on its own motion or the motion of any interested person,
require that the well be located and drilled in compliance with the provisions
of the order affecting the pool.

HISTORY: 1982, c. 347, § 45.1-301; 1987, c. 452; 1989, c. 529; 1990, c. 92.