I need YOUR input!
Ok all you intelligent “shalers” out there, I have a project for you! As many of you remember from my attached article, our state law (Title 30:9) stipulating one-well-in-the-optimum-position-of-each-drilling-unit has been twisted into any-number-of-wells-anywhere-in-any-drilling-unit. This has led to rampant discriminatory practices. For example do you remember the 92 year old, World War II vet from my article? He went to the trouble to travel to Baton Rouge to speak before the Office of Conservation many years ago -- asking for fair treatment of his property in a Cotton Valley unit. Today, 33 years after unitization he still watches helplessly as adjoining units prosper far beyond his unit. What if unfair, unbalanced development like this was to occur with Haynesville Shale units? Doesn't this violate the "equal protection" provisions of our state and federal constitutions? (And this is just one of many types of discriminations possible) I want to correct the injustices and have proposed the solutions below. I would like YOUR input, YOUR opinion and YOUR suggestions. I’m going to leave you folks alone with this and check back in a few days. I’ve seen the intelligence out there and will value any response.
The solution, as I see it, is for Governor Jindal to:
1) Make a formal declaration that the state has made a serious error in allowing the drilling of “alternate wells” within drilling units.
2) Reset the “allowable” for each drilling unit as the production capability of one well.
3) Require in writing immediate plugging and abandonment of alternate wells in drilling units unless they are approved in writing by the affected surface owners and the mineral owners within a particular drilling unit. Mineral leases and surface use agreements would be subject, in some cases, to renegotiation.
4) If no agreement is reached and the above plugging occurs, declare those drilling units invalid at that point in time when the first alternate well was approved.
5) Prosecute/penalize the operating companies who have violated this law on drilling units.
6) Enact a new type of compulsory unit (not a Title 30:9 "drilling unit") specifically for the Haynesville Shale that will:
a) Provide equal protection for all property owners.
b) Provide for 640 acre units corresponding to sections.
c) Require a unit development plan from the operating company assuring that the unit be fully developed within a reasonable time frame with multiple wells (and as market demand allows). Operators would be able to amend the plan in subsequent hearings as additional geologic evidence from well histories, seismic, etc. became available.
d) Set minimum and maximum gas “allowables” for each unit to assure mineral owners fair and balanced production over time amongst the various units. Inept operators would be subject to removal with undeveloped portions of units possibly released to a new operator. (the “developed” portion of a shale unit would be defined as that portion actually being drained by an existing well or wells)
*** the idea behind the above is that when a unit’s production became deficient in relation to surrounding units the operator would be required to drill another well in the undeveloped portion of the unit, or release the undeveloped portion back to the mineral owners of that unit***
e) Encourage drilling of multiple wells from a single surface “pad.”
f) Require written approval from the affected surface owners for the design and location of every specific surface pad serving a compulsory Haynesville Shale unit.
And also request he:
7) Require surface owners affected by well locations to be considered “interested parties” and be notified in writing of applications and hearings for units and wells; and, if not otherwise and specifically contractually agreed to, compensated with fair market value of land taken by oil and gas exploration. Oklahoma has a similar law.
8) Require all tracts “force pooled” into compulsory units, whether leased or not, be automatically subjected to a sub-surface servitude that may be exploited by the operator of the unit with the drilling of directional or horizontal wells to produce the unitized zone.
9) Allow any mineral owner owning the maximum area which may be efficiently and economically drained by one well in a conventional, non-shale field the opportunity to drill this tract under Title 30:9 without threat of unitization with other tracts (that could make it uneconomical for him to develop his tract).
10) Ensure that no drilling unit under Title 30:9 be allowed to produce more than its “just and equitable” share of the pool.
11) Enforce the Office’s statutory obligation to prevent excessive surface loss by setting guidelines which limit well pad densities in unspoiled natural areas and in areas already suffering from high well densities.
The solution, as I see it, is for Governor Jindal to:
1) Make a formal declaration that the state has made a serious error in allowing the drilling of “alternate wells” within drilling units.
2) Reset the “allowable” for each drilling unit as the production capability of one well.
3) Require in writing immediate plugging and abandonment of alternate wells in drilling units unless they are approved in writing by the affected surface owners and the mineral owners within a particular drilling unit. Mineral leases and surface use agreements would be subject, in some cases, to renegotiation.
4) If no agreement is reached and the above plugging occurs, declare those drilling units invalid at that point in time when the first alternate well was approved.
5) Prosecute/penalize the operating companies who have violated this law on drilling units.
6) Enact a new type of compulsory unit (not a Title 30:9 "drilling unit") specifically for the Haynesville Shale that will:
a) Provide equal protection for all property owners.
b) Provide for 640 acre units corresponding to sections.
c) Require a unit development plan from the operating company assuring that the unit be fully developed within a reasonable time frame with multiple wells (and as market demand allows). Operators would be able to amend the plan in subsequent hearings as additional geologic evidence from well histories, seismic, etc. became available.
d) Set minimum and maximum gas “allowables” for each unit to assure mineral owners fair and balanced production over time amongst the various units. Inept operators would be subject to removal with undeveloped portions of units possibly released to a new operator. (the “developed” portion of a shale unit would be defined as that portion actually being drained by an existing well or wells)
*** the idea behind the above is that when a unit’s production became deficient in relation to surrounding units the operator would be required to drill another well in the undeveloped portion of the unit, or release the undeveloped portion back to the mineral owners of that unit***
e) Encourage drilling of multiple wells from a single surface “pad.”
f) Require written approval from the affected surface owners for the design and location of every specific surface pad serving a compulsory Haynesville Shale unit.
And also request he:
7) Require surface owners affected by well locations to be considered “interested parties” and be notified in writing of applications and hearings for units and wells; and, if not otherwise and specifically contractually agreed to, compensated with fair market value of land taken by oil and gas exploration. Oklahoma has a similar law.
8) Require all tracts “force pooled” into compulsory units, whether leased or not, be automatically subjected to a sub-surface servitude that may be exploited by the operator of the unit with the drilling of directional or horizontal wells to produce the unitized zone.
9) Allow any mineral owner owning the maximum area which may be efficiently and economically drained by one well in a conventional, non-shale field the opportunity to drill this tract under Title 30:9 without threat of unitization with other tracts (that could make it uneconomical for him to develop his tract).
10) Ensure that no drilling unit under Title 30:9 be allowed to produce more than its “just and equitable” share of the pool.
11) Enforce the Office’s statutory obligation to prevent excessive surface loss by setting guidelines which limit well pad densities in unspoiled natural areas and in areas already suffering from high well densities.
Views: 96
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Replies to This Discussion
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Permalink Reply by The_Baron on
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I am not going to argue with that. You could say that communism just doesn't work in practice because of the inherant greed of man.
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Permalink Reply by Andrew Walker on
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Yes Haynesville wells have a limited drainage area and underdeveloped units would not be losing gas...but there is such potential for discrimination. Take the WWII vet. He has waited 33 years and his Cotton Valley unit is still underdeveloped. It has minimal production while an adjoing unit has a whopping 21 wells approved. This is "why on earth I'm so dang interested in trying to equalize the rate of production across units." I don't want to wait 33+ years for my Haynesville tracts to be developed. How much longer, Mark, would you say is a reasonable time for this 92 year old to wait?
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Permalink Reply by Randy on
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Are you suggesting that they are discriminating against the individual person in their placement of wells? That's ridiculous.
If you said, well he's harder to work with than this other landowner, so they didn't put any wells on his property. That would be different, but still that companies prerogative, in my opinion. We don't tell Dollar Tree what markets it's going to expand into, or on what street corner it's going to put it's stores.
If I already have a rig on one location, it's easier to build that pad a little bit larger, than drill consecutively on that pad. I don't have to pay for time to tear the rig down and move it, I save a bunch of money. I may have a better deal worked out with one landowner which saves me money. The geologist may tell me that one tract is better. Or one may be covered in steep cliffs and valleys and marshy areas that makes it very difficult to locate a pad site in. There are hundreds of reasons to drill one section over another, and very few of them have anything to do with illegitimate discrimination.
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Permalink Reply by Randy on
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I (and I know my perspective is different, so bear with that) think that, regardless, they have a paid a certain amount of money to hold those minerals. I suppose if there was some regulation allowing another company to buy it if it was undeveloped for 'x' amount of time for some type of fair market value determination.
These companies borrow against those reserves in the ground, this Haynesville stuff was financed through reserves in the ground in other places. I wouldn't want to undermine that ability. of course just my 2 cents, which is worth, of course, less than nothing.
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Permalink Reply by Grillin' - MmmMmm on
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But they are still abiding by the terms of the lease/contract. Unless it can be shown that they aren't abiding by the letter of the contract, then you can't force them to give it up. Nor should you.
Interesting use of the WWII veteran in the example. When will you include the disabled, the children and the discriminated against poor?
The decision to develop a unit has many facets and the pace of development is driven by many things. As long as the resources are being conserved, I don't see the Conservation Office being concerned with how fast the wells are being drilled. Just my opinion and pulling in heart-wrenching examples won't change that. I think one would do better approaching the operator and trying to get them to go faster, but that's not a likely scenario either. People have hearts, corporations do not!
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Permalink Reply by Andrew Walker on
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I am suggesting that they are discriminating against EVERYONE in that unit. Not just that one landowner. If a company wants to develop an area on a lease basis or voluntary unit basis and drill as they please...then that is one thing...but at that point when the Commissioner of Conservation sticks his nose into the deal and when he force-pools your acreage into a unit then there is an obligation for the operator to fairly develop that unit with respect to surrounding ones.
By the way, in the example I gave there are no topographical restrictions and experts have testified that the geological characteristics of the two units are identical.
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Permalink Reply by Randy on
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Is their financial interest in each unit the same? I would think not?
So they are motivated to develop one unit over another because one grants larger profits. Which sounds rather capitalistic. Not necessarily fair I agree, but that's one downfall of going UMI?
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Permalink Reply by Andrew Walker on
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While the discussion has led to interesting comments on fairness, communism, and the greed of man, let's assume a hypothetical situation. Say the Office of Conservation is crafting a new unitization law to govern the Haynesville. What provisions would you like to see? If you disagree with my ideas, what would you suggest? For instance, would you like "allowables" set to balance production among units...like the old days...or would you like companies to be able to drill any number of wells in any unit? How would you define the "developed area" of a unit? How would you define "affected surface owner?" At present an operator has no right to drill a horizontal well under an unleased tract. He can't produce that gas and this is a tremendous burden for them. I think that companies should be allowed to produce ALL gas from a compulsory unit...so I suggest they should have an automatic sub-surface servitude on force-pooled tracts. What do you you guys think?
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Permalink Reply by Andrew Walker on
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Big News...and this is rather coincidental...I've just received word that the Commissioner of Conservation is in fact reviewing unitization of the Haynesville Shale and will probably be proposing changes. If this happens, public hearings will have to be conducted. I hope all of you will attend!
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Permalink Reply by Andrew Walker on
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sure thing
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Permalink Reply by Randy on
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I thought the same thing KB, but I couldn't prove it so I didn't mention it. As long as your bore is in the unit you can go underneath that tract. I believe.
Boring from a surface location in one unit and penetrating your producing zone in another unit, that is another story.
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