How do Exploratory Unit Agreements affect Indian mineral owners?
Unit agreements are commonly used in the oil and gas business to economically develop potentially large underground petroleum reservoirs, which may include Indian, federal, state, and/or private leases. A unit agreement combines individual leases covering one or more common underground oil and gas reservoirs to make a larger area for development. An Exploratory Unit is generally formed in areas where the potential for oil and gas is suspected but precise location and amounts are unknown. Two or more operators form a Unit Agreement and designate a unit operator to develop the overall unit. These agreements benefit both operators and mineral owners by allowing one operator to explore large areas that otherwise might not be developed. Once an operator drills a producing well within the unit that produces enough oil and gas to make a profit, a participating area is formed around that well. Generally, the geology around the well determines the size of the participating area. Each time a new
