How do spacing requirements lead to Communitization Agreements?
If the acreage in your lease is too small to support an independent well according to either BLM or state spacing requirements, BLM may require that the lease join other leases in what is known as a Communitization Agreement. A Communitization Agreement protects the rights of the participating mineral owners by providing for each to share fairly in the production from the well. Each participant’s share is based on the amount of the mineral owner’s acreage that is included in the agreement. For example, if well spacing is 320 acres for a particular reservoir, the operator can drill only one well for each 320 acres. If your lease is 160 acres ( too small to support its own well) it must link up with other neighboring leases to total 320 acres. To protect the rights of each participating mineral owner, a Communitization Agreement is formed. This agreement allows participating leases in the agreement to share in the well’s production and royalties. Each lease shares in the production based
