Oklahoma Well Spacing Legislation

Anybody heard about legislation in Oklahoma that will allow oil companies to expand the 640-acre spacing?

The bill is attached. How will it affect mineral owners?


2986-HB1909ENGR.doc (98 KB)

Here is an article that might interest you:

http://enidnews.com/agandoil/x1687706740/-Premiere-oil-play-in-America

I perused the bill you attached. It will have a huge impact on mineral owners, but in some respects offers a little more protection to them than what we currently have in ND.

Thanks for your reply. So, in your opinion will the legislation, if passed in Oklahoma, have a negative or a positive impact on Oklahoma mineral owners? I assume North Dakota allows longer laterals and 1280 acre spacing.

Also, thanks for the article. I lived in Enid for about 30 years and am familiar with Continental Resources; I lived next door to the VP of exploration.

Hi Gary:

I believe the proposed legislation will negatively affect minerals owners. The significant point is that horizontal wells are targeting unconventional reservoirs (rock formations) and using fracturing technology to free the oil which is otherwise trapped in the rock so it will flow to the well bore. Continental's most recent investor presentation discloses that use of fracturing technology results in a 500 foot drainage radius. In other words, you need to locate the wells close together to effectively recover oil from rock formations. Even though you may need a unit 2 miles long to accommodate the long lateral, you don't need a unit that is a mile wide. That's why I directed you to the article about Continental and Harold Hamm's statements to the press:

Hamm hopes to use a lesson learned in the Bakken to help increase profitability of drilling for oil in Oklahoma. In North Dakota, Continental employs 1,280-acre spacing for its drilling operations, with as many as four wells, while Oklahoma allows only 640-acre spacing.

It will take four wells or more in a 1280 acre spacing unit to effectively drain the targeted rock formation. Yet, the operating companies are only drilling one well and holding the remaining unproductive acres in the spacing unit "by production" without any requirement that they actually develop the unproductive acres on a timely basis or at all. The establishment of over-sized spacing units that cannot possibly be drained by a single well fails to protect correlative rights of mineral owners, deprives mineral owners of equal protection of the law, and constitutes a regulatory taking. While the proposed legislation grants mineral owners some rights to approve unitization plans, it is foreseeable that the statutory scheme will be abused by operators once they have "de-risked" their mineral leaseholds.


Gary said:


Thanks for your reply. So, in your opinion will the legislation, if passed in Oklahoma, have a negative or a positive impact on Oklahoma mineral owners? I assume North Dakota allows longer laterals and 1280 acre spacing.

Also, thanks for the article. I lived in Enid for about 30 years and am familiar with Continental Resources; I lived next door to the VP of exploration.

Oklahoma's Gov. Mary Fallin signs energy reform bill

Gov. Mary Fallin signed a new law that modernized Oklahoma's oil and natural gas regulations to reflect technological advances in the industry.

BY JAY F. MARKS jmarks@opubco.com Oklahoman
Published: April 14, 2011

Gov. Mary Fallin on Wednesday signed into law an energy reform measure that changes the state's oil and natural gas laws to account for technological advances in the industry.


Oklahoma's Gov. Mary Fallin signs energy reform bill

The law, known as the 2011 Shale Reservoir Development Act, modernizes Oklahoma statutes involved with regulating horizontal drilling in shale reservoirs.

“This legislation is an important step in bringing state oil and gas laws up to date with innovations needed to keep Oklahoma's oil and gas industry competitive.” Fallin said. “House Bill 1909 will help Oklahoma to more effectively compete against other shale plays around the country and help ensure that drilling dollars stay home in Oklahoma.

“Through the use of these technologies, our oil and gas producers can reach and produce even more of Oklahoma's vast oil and natural gas resources in ways that are efficient, safe and environmentally compatible.”

Money for state

The bill was created by a stakeholder committee led by Oklahoma Corporation Commission Chairwoman Dana Murphy that spent nine months working on language for the proposal.

“This isn't ‘just' an oil and gas matter,” Murphy said. “Keeping Oklahoma's oil and gas industry competitive with other states and protecting stakeholders means millions of dollars for Oklahoma schools, roads, and many other things as production of our shale gas resources grows.”

Law receives praise

Oklahoma Energy Secretary Mike Ming said the new law is an important one for the state.

“Reconciling transformative technology in horizontal drilling, much of which was developed right here in Oklahoma, with over 100 years of vertical well case law and rule makings, was no small task,” Ming said. “But recognizing the importance of the issue to protect the rights of all affected parties, these groups rolled up their sleeves and got the job done.”

The bill was sponsored by Rep. Mike Jackson, of Enid, and Sen. Cliff Branan, of Oklahoma City, who are both Republicans.



Read more: http://newsok.com/oklahomas-gov.-mary-fallin-signs-energy-reform-bill/article/3558347#ixzz1JXdiKPTR

The goal of “protecting stakeholders” cannot justify legislation which, in practice, will allow private corporations to hold thousands of mineral acres in their asset inventories without any corresponding duty to fully develop those acres.