Do you know what the State might do to your unit?

Problems with Big Drilling Units

The Louisiana Department of Conservation has already approved joining some sections near the Texas line to form drilling units for the Haynesville Shale in excess of 900 acres instead of the normal 640 acre units. I understand also that Louisiana law currently limits the size of drilling units to 640 acres, so I do not understand how this change can be implemented without changing the law. Don't think this could only impact those sections on the Texas border, since once the precedent is set, it could impact unit sizing everywhere. I have several concerns with this proposal from the view of a land owner.

First, having one well hold a very large unit does not seem fair to the landowners. This could tie up acreage for an indefinite period with limited production. Also in this regard, the current rule in place that allows holding a unit for Haynesville Shale production with only drilling a vertical well with no horizontal development is an outdated rule that needs to be revisited. The limited production from a single vertical well in the Haynesville Shale should not be sufficient to hold an entire drilling unit.

Second, larger units give an advantage to large companies due to financial requirements for leasing and drilling, and limit the chances of smaller companies to compete. We have seen what letting one company dominate the situation has gotten us into.

Larger units may make it more difficult to get all the landowners to lease due to the actual number of people involved and could result in it being difficult to produce some areas. This will not benefit the landowner, the State, or the gas companies.

The reason for the large units for deep formations as I understand it was to keep companies from draining resources from a large area and only paying lease money for a small area. This was aimed at gas production in porous formations from which one vertical well could drain large areas, thus the 640 acre units. However, the Haynesville Shale is a very tight formation that requires horizontal drilling and extensive fracturing to get production. Therefore, that rationale for large units does not apply to this formation. In fact, most experts think that the wells can be drilled on 80 acre tracts or smaller. This argues for smaller, not larger units as being viable.

I encourage you to make your feelings known to the Department of Conservation. The only way we can change this or get any concessions is to get a lot of people making comments. Don't wait until the area where you own land is impacted before commenting. As more areas are changed, it may be too late to have any impact.

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Comment by The_Baron on November 13, 2008 at 1:10pm
There is no rule on vert. wells holding production. This would be somthing in each lease. If you feel that a vert. well should not hold your land by production, then put it in your lease!
Comment by H P Bryant on October 23, 2008 at 1:08pm
There's been a lotta thought put into this unitization bit. I personally would prefer they leave it @ 640 acres, however, I can see where I would be agreeable to larger units in some cases. First, I'm not sure that there is a state law concerning unitization size. I think the mineral board can adjust the size anytime as long as there is no viable objections to the o&g proposal.
If I were in such a situation with my land, I would want the O&G company to stipulate that they would drill multiple wells within a time frame to sufficiently drain all the unit. That way, no land owner would get shorted.
The worst case scenario that I see is: they drill a well on 640 ac unit, wait a year or two and then extend the unit size. That has been done and without landowners attending the hearings and objecting, it will probably be done again. Let's stick with the 640 acres if we can--I agree.

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