62 TEXAS JOURNAL OF OIL , GAS , AND ENERGY LAW [ Vol . 16:1
Another issue that EOR operators should be mindful of when evaluating an EOR project is the need for unitization of the project area ( including the execution of a unit agreement and unit operating agreement ). EOR projects are generally conducted across an entire source of supply ( e . g ., a field or reservoir ). Accordingly , unitization of all ( or a majority ) of the interests in the tracts covering such area is necessary to account for the rights belonging to other working and royalty interest owners across the project area . 85 Since operations will occur across the common source of supply underlying such a large area , the operator should control such operations to limit liability exposure and maximize recovery from operations . 86 Once the project area has been unitized , the unit agreement will provide for the commitment of the real property interests of the parties in the project area for development . The working interest owners will also enter into a unit operating agreement to govern operations within the unit . The rights and obligations granted in these agreements deliver a number of economical and operational benefits to the owners of interests in these projects .
Unitization limits free-riding and ensures that responsibility for capital and operating expenses as well as entitlement to resulting revenues from operations are properly allocated amongst the working interest owners . 87 Unitization also allows for the implementation of a unified development scheme across the common source of supply that maximizes the effectiveness of operations . Additional advantages of unitization include the following : ( 1 ) the ability for unit operations to maintain all leasehold interests covering the project area , ( 2 ) the avoidance of duplicative infrastructure costs for surface facilities , roads , and other infrastructure , and ( 3 ) the increased certainty for potential investors / project participants regarding cost allocation and lease maintenance .
Unitization may be effectuated through either voluntary agreement or , in many jurisdictions , compulsory unitization statutes . 88 The state ’ s regulatory body is ultimately responsible for the permitting and governance of unitization operations under either approach . Authorization to unitize the leased premises may be provided under the express terms of the applicable oil and gas lease . In the absence of such provision , a separate agreement is required between the operator and the applicable interest owner to effectuate unitization , unless the applicable state has a compulsory unitization statute . States with such statutes may compel the joinder of holdout mineral or leasehold interests to maximize production and minimize waste . 89 These statutes may also require certain consent thresholds from working and royalty interest owners in the proposed unit
85 . For more insights on unitization , see Austin T . Lee , Pooling and Unitization , BRACEWELL , 10
( Apr . 26 , 2017 ), https :// bracewell . com / news / pooling-and-unitization . 86 . Id . at 11 . 87 . Id . 88 . Id . 89 . Id . at 10 .