SPACING Vertical Horizontal. Oil and Gas Practice OU Law School September 19, 2013 Eric R. King

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1 SPACING Vertical Horizontal Oil and Gas Practice OU Law School September 19, 2013 Eric R. King

2 Oklahoma Crude

3 Conservation 52 O.S Common Source of Supply of Oil Well Spacing and Drilling Units

4 Spacing Actual Notice at least 15 days prior to Hearing to all parties who have the right to share in production File Application Notice via regular mail at least 15 days before Hearing Publication Notice At least 15 days prior in County where Land is situated and Oklahoma County before the Hearing Hearing Issues

5 OAC Drilling and spacing unit establishment or modification

6 OAC Horizontal well unitization for shale reservoirs

7 OAC Multiunit horizontal wells in shale reservoirs

8 General Well Spacing Requirements OAC 165:

9 Drilling and Spacing Units OAC165:

10 Permitted Well Locations Within Standard Drilling and Spacing Units OAC 165:

11 Drilling and Spacing Units A Township - 36 Sections of Land Size of Drilling and Spacing Units 640 acres (Section) 320 acres stand-up or laydown units 160 acres (Quarter Section) 80 acres stand-up or laydown units 40 acres (Quarter Quarter Section) 20 acres Stand-Up or Lay-Down Units 10 acres (Quarter Quarter Quarter Section)

12 A Township - 36 Sections of Land

13 640 acres (Section)

14 320 acres (Half Section)

15 160 acres (Quarter Section)

16 Proper Well Location Requirements 640 acres -No closer than 1320 feet from unit boundaries 320 acres -Stand-Up or Lay-Down Units No closer than 660 feet from proper Quarter Section i.e. on NW-SE proper location within each 320 acre unit (or can be NE-SW) 160 acres No closer than 660 from unit boundaries 80 acres Stand-Up or Lay-Down Units No closer than 330 feet from proper Quarter Quarter Section i.e. on NW-SE proper location within each 80 acre unit (or can be NE-SW)

17 Proper Well Location Requirements (continued) 40 acres -No closer than 330 feet from unit boundary 20 acres Stand-Up or Lay-Down Units -No closer than 165 feet from proper Quarter Quarter Section i.e. on NW-SE proper location within each 20 acre unit (or can be NE-SW) 10 acres No closer than 165 feet from unit boundary

18 Vertical Drilling and Spacing Causes Samples applications/notices/orders 40-acre units 80 acre stand-up units 160-acre units 320-acre lay-down Units 640-acre units

19 Horizontal Drilling Offshore

20 Horizontal Drilling Texas

21 Horizontal Drilling compared to Slant Hole Drilling

22

23 Horizontal Drilling OAC 165:

24 (b) Definitions

25 (c) General horizontal drilling requirements

26 (d) Horizontal well requirements in an unspaced common source of supply.

27 (e) Drilling and spacing units

28 (f) Horizontal well location requirements for horizontal well units and horizontal well unitizations

29 (1) Conventional reservoirs. In a conventional reservoir, the completion interval of a horizontal well in a horizontal well unit shall be located not less than the minimum distance from the unit boundary as follows: (A) Not less than 165 feet from the boundary of any 10-, 20-, or 40-acre horizontal well unit. (B) Not less than 330 feet from the boundary of any 80-or 160-acre horizontal well unit. (C) Not less than 660 feet from the boundary of any 320-or 640-acre horizontal well unit.

30 (2) Unconventional reservoirs. In an unconventional reservoir, the completion interval of a horizontal well in a horizontal well unit shall be located not less than the minimum distance from the unit boundary as follows: (A) Not less than 165 feet from the boundary of any 10-, 20-, or 40-acre horizontal well unit. (B) Not less than 330 feet from the boundary of any 80-, 160-, 320-, or 640-acre horizontal well unit. (3) Horizontal well unitizations. The completion interval of a horizontal well in a horizontal well unitization shall not be located less than 330 feet from the unit boundary.

31 (g) Alternative well location requirements

32 (h) Allowable (1) Horizontal oil well allowablesmay be established administratively using the standard allowablesprovided in Appendix A (Allocated Well Allowable Table) supplemented by the additional allowablesprovided in Appendix C (Table HD) to this Chapter. (2) The allowable for a horizontal gas well shall be computed in the manner prescribed for a non-horizontal gas well in the same common source of supply.

33 (3) The allowable for a horizontal well unit or horizontal well unitization with multiple horizontal gas wells shall be the sum of allowablesfor the separate horizontal gas wells. From this summation, the allowable for each horizontal gas well will be calculated as if it were the only well in the unit. (4) The allowable for a multi-unit horizontal well shall be allocated to each affected unit using the allocation factors determine in accordance with 52 O.S. 87.8(B)(1).

34 Pooling Horizontal well units, horizontal well unitizations and multi-unit horizontal wells may be pooled as provided in 52 O.S. 87.1, 52 O.S et seq. and Commission Rules of Practice, OAC 165:5.

35 OAC 165: Alternative location requirements for horizontal well units

36 (a) Scope and effect. The well location requirements of this Section apply to horizontal wells completed in horizontal well units in designated common sources of supply and geographic areas as specified in this Section. Horizontal wells covered by this Section are subject to OAC 165: and other applicable Commission rules except as provided in this Section. (b) Woodford shale. (1) This subsection applies to horizontal wells completed in the Woodford shale common source of supply in Atoka, Blaine, Caddo, Canadian, Coal, Dewey, Grady, Haskell, Hughes, Kingfisher, LeFlore, Latimer, McIntosh, Pittsburg, and Sequoyah Counties.

37 (2) The completion interval of a horizontal well subject to this subsection shall be located not less than the minimum distance from the boundary of a standard or non-standard horizontal well unit as follows: (A) Not less than 330 feet from an east or west unit boundary. (B) Not less than 165 feet from a north or south unit boundary.

38 Appendix C: Table HD Recommended Additional Allowable for Horizontal Oil Wells based on True Vertical Depth and Completion Interval Average True Vertical Additional Allowable Depth of Pool in Feet in Barrels per foot of Completion Interval To 4, ,001 to 8, ,001 to 12,000.4 Greater than 12,000.5

39 All oil produced and marketed during the drilling and completion operations shall be charged against the allowable assigned to the well upon completion. Effective date of the allowable shall be the date of first production.

40 Horizontal Drilling and Spacing Causes Sample application/notice/final order

41 Sample Survey

42 Horizontal Spacing (OCC Rules and Regulations) OAC: 165:5-7-6(g) OAC: 165:5-7-6(h) OAC: 165:5-7-6(i) OAC: 165: OAC: 165: OAC: 165: OAC:165: OAC:165:

43 OAC:165:10-3-4(f) OAC:165: (c)(1) OAC:165: Appendix C (Table HD) (Case Law) Samson Resources Company v. Corporation Commission, 831 P.2d 663, 665 (Okla. App 1992)

44 Horizontal Pooling (OCC Rules and Regulations) OAC:165:5-15-3(g) OAC:165:5-13-3(h) OAC:165: Deviation from the Vertical (OCC Rules and Regulations)

45 Horizontal Allowables (OCC Rules and Regulations) OAC:165: (C)(2) OAC:165: (f)(1) OAC:165: (f)(2) OAC:165: (h)(2) OAC: (j)(1)

46 Horizontal Gross Production Tax (OCC Rules and Regulations) OAC:165: OAC:165: OAC:165: OAC:165:

47 Eric R. King One Leadership Square, 15 th Floor 211 N. Robinson Ave. Oklahoma City, OK (405)