Replies to This Discussion

Permalink Reply by Andrew Walker on May 3, 2010 at 11:24

Our lawmakers who wrote Title 30 realized that the area one well can drain would not be an exact measurement. Rather than require the unit to be the area one well can drain, they set a unit size as the "maximum area one well can efficiently and economically drain." They erred on the side of conservation as the drilling of more wells than is necessary to drain a reservoir causes "waste."

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Permalink Reply by The_Baron on May 7, 2010 at 4:17

So you believe the intent of the law is to err on the side of larger units, so you would have less wells, and therefore reduce "waste???

Isn't that what we are doing now??

I am so confused, I think I will take off early today and get a cold beer...

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Permalink Reply by Andrew Walker on May 7, 2010 at 5:48

Ugh. No Baron. We are not establishing one well units at all. We are establishing multi-well units. This is not authorized under current law. This is not my opinion, but the opinion of the most respected oil/gas attorneys, authors, and Supreme Court justices throughout the history of this legislation.

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Permalink Reply by The_Baron on May 7, 2010 at 7:17

thats a good point Jay. I think it especially relavant since the bulk of those south LA units tend to be geologic units.

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Permalink Reply by Andrew Walker on May 7, 2010 at 11:10

Both of you are correct, Baron and ShaleGeo, those geologic units in south Louisiana have multiple wells. They are perfectly legal. They are unitized under a different law (Title 30:5). These are not drilling units (Title 30:9)

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Permalink Reply by Bobi Carr ("parker") on May 7, 2010 at 11:15

Andrew,

It is possible that I am missing something, but it appears to me that the suit is challenging the intent of the law by trying to sue based on the letter of the law.

Or should I say, the plantiff's interpretation of the letter of the law.

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Permalink Reply by Andrew Walker on May 7, 2010 at 16:04

Bobi:

I would not describe it as "the plaintiff's interpretation of the letter of the law." This is the interpretation of the most respected authorities of oil/gas law over the years. I am not trying to be disagreeable with what you think is a "fair and equitable" system today. I'm just trying to point out that these drilling units are not legal according to those experts. I have read dozens and dozens of books, articles, Supreme Court statements, Attorney General opinions, etc that are very clear on this. The group of attorneys filing this class action lawsuit is simply correct. Absolutely. Positively. This is the letter of the law and the intent of the law. When the Supreme Court rules that a drilling unit may not exceed the area one well can drain, I don't know how it can get more clear than that. Did you know that Title 30 allows remedies when it is found that one well cannot drain a unit? I believe it is Title 30:10 that addresses this by allowing the revisions of units into larger or smaller ones. It has been my position that we either need to enforce the one-well-per-unit law, or write a new law to legitimize 640 acre Haynesville units. I don't know if you have read my suggestions for the latter, but if you have I would value your opinion. The only opinion I have so far is from the "Baron" who obviously doesn't care for them, but I'm not sure why. Would you support my suggestions that would reasonably balance the production from one unit to the next? Why or why not?

Permalink Reply by The_Baron on May 7, 2010 at 7:16

I've got it,!

Maybe you are sugesting that we start with a large unit, just to be sure that the maximum possible area is included, and then constantly adjust the unit downward as more data is available...wouldn't that be fun!!

I am hearing reports now of wells over 2000' apart that could be showing signs of communication....this would mean that your little 80 acre units would be to small as they could be draining an area from outside the unit!

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Permalink Reply by Andrew Walker on May 7, 2010 at 11:14

I'm sure you are aware, Baron, that over the decades units have been both increased and decreased in size as additional geologic or engineering data became available.

Your second paragraph is correct. If there is significant communication between those wells 2,000 ft apart, then 80 acre spacing would not be appropriate.

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Permalink Reply by Bobi Carr ("parker") on May 7, 2010 at 17:26

Andrew,

I'm sorry, but as I understand it, you wish to balance production from each unit. Wouldn't this basically undermine our entire free market economy. If development companies are required to orderly develop the play as opposed to develop the play in the most economical fashion many would no longer exist.

What would be next, McDonalds and Burger King having to each be sure to be 1/2 mile from each other. And the government could tell them they could buy property but could only build restaurants in an orderly fashion so as to be fair to all of the potential customers.

Companies should be allowed to develop their lease hold in the order that they deem economical. I'm on the edge of the play. My property may not be economically feasible at this time. These companies take on great risk to stay in business. I say don't choke the goose that lays the golden egg EVEN IF HE ISN'T LAYING ANY EGGS IN MY BASKET.

Sue for lack of development. Revise the law retroactively - since it seems to follow the intent of the law, but I can't see a reasonable argument for the suit. There may be a legal one, but most people are tired of legal vs. reasonable. I know at least I am.

If there is more that I am not getting, please continue to try to explain it. This isn't personal in any way. I just can't grasp the idea of fixin' something that ain't broken.

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Permalink Reply by Andrew Walker on May 8, 2010 at 1:09

Bobi: I think you are missing one very important point here. This is not just McDonalds and Burger King competing in a free market economy. There is another ingredient: Mineral owners. These mineral owners are being force-pooled into these units under the police power of the state, whether they like or not. They have no say in this market. No voice to protect their valuable mineral interests. For this reason it was necessary to enact our drilling unit law that creates an even playing field for these force-pooled owners. And remember, our US Constitution requires equal protection under law. It is not right to force everyone into these units and then allow a few units, here and there, more wells and more production that tie up the pipeline capacity and market demand...while other units are left behind. The Office of Conservation took this very seriously for many years as they established statewide policy limiting units to the production capability of one well. I'll send some info on this next week when I get back to the office. These drilling units were termed "competitive units" by the Office of Conservation because they compete for pipeline capacity and market demand. The Jack Caldwell administration in 1998 cracked down on additional (alternate wells) in units and did not allow these wells to give their unit a competitive advantage over other units. Production was limited to the production capability of one well per unit. I disagree with your statement that many companies would cease to exist if they are required to orderly develop this field. Companies played by these rules for decades. They thrived then and they can thrive today.

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Permalink Reply by Bobi Carr ("parker") on May 8, 2010 at 16:26

Andrew,

Under the guidelines that you talk about, wouldn't an operator be foreced to develop a lease hold that has a 25% royalty burden at the same rate that they develop the acreage that they have leased at 1/6th royalty burden? And what about HBP property?

Wouldn't this be unreasonable to put this burden on an operator?

I may be naive, but I believe that the HS has to be a win/win for the development companies, the mineral owners, the surface owners and the community as a whole.

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