The Applicant’s Plans for Exploration and Development of the Proposed Unit Area. Xxxxxxxx proposed a two-year Initial Unit Plan in the application to form the McCovey Unit. The Initial Unit Plan includes three requirements: Xxxxxxxx must 1) enter into a formal drilling contract for the proposed McCovey #1 Well by April 30, 2001; 2) commence drilling or provide documentation to DNR that the lessees have committed at least $3 million dollars toward drilling the McCovey #1 Well by July 31, 2001; and 3) commence drilling the McCovey #1 Well by April 30, 2002. Completion of these exploration activities as scheduled will satisfy the performance standards and diligence requirements that the state and Xxxxxxxx agreed to as a condition for approval of the Agreement. If Xxxxxxxx fails to perform any of the activities in the Initial Unit Plan as scheduled, the plan will be in default, the Agreement will terminate, and the working interest owners will surrender the acreage in the unit area which is past its primary term. These provisions ensure that the lease extensions resulting from unitization pursuant to 11 AAC 83.336(a)(2) continue only so long as Xxxxxxxx proceeds diligently with exploration and development. Xxxxxxxx must report annually on its progress under the plan, and submit another unit plan, for further exploration or for development, at least sixty days before the Initial Unit Plan expires. 11 AAC 83.341 - 11 AAC 83.343. Unitization provides a comprehensive plan for exploration of the unit area. Xxxxxxxx’ Initial Unit Plan allows for earlier exploration and confirmation of the prospect in the McCovey Unit area than would occur under the individual leases.
