CHAPTER 10 SECONDARY RECOVERY UNITS, PRESSURE MAINTENANCE, AND RECYCLING

• Jurisdiction: United States

Onshore Pooling and Unitization
(Jan 1997)
CHAPTER 10
SECONDARY RECOVERY UNITS, PRESSURE MAINTENANCE, AND RECYCLING
Craig Newman
Law Office of Craig Newman
Casper, Wyoming

I. Introduction and Terms

In the broadest sense, the terms "secondary recovery," "pressure maintenance," and "recycling" are all forms of enhanced or improved oil or gas recovery. All three of these general methodologies are employed either at or near the end of the recovery provided by or beyond the recovery provided by what are typically considered "primary" production methods. In discussing several of these terms and unitization, one court has observed:

In order to understand the nature of this appeal it is helpful to be cognizant that when oil is initially discovered, it flows or is pumped to surface via wells, assisted by natural pressure existing in the subsurface. This process is termed 'primary' recovery of oil. As the natural pressure dissipates, oil production declines. Production can sometimes be restored by injecting water (termed 'secondary' recovery) or other substances...(termed 'tertiary' or 'enhanced' recovery) through wells to restore or increase pressure. This restoration is expensive and often times can only be made cost effective if various owners of tracts of land consolidate their resources in order to maximize their return of oil. This consolidation occurs via what is termed unitization. ¹

It is this consolidation or aggregation of separately owned tracts into a unit for purposes of engaging in secondary recovery, pressure maintenance or recycling which is the focus of the discussion which follows. Practical and legal considerations, limitations and requirements in the unitization process under several statutory schemes will be discussed. An exhaustive, point-by-point analysis is not intended.² Rather salient features of the several statutory schemes were selected. The

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emphasis in the discussion which follows will be on the common requirements and limitations in the statutory unitization process, with singular or special requirements noted.

The bulk of the discussion which follows applies, unless otherwise noted, whether the unit is formed for secondary recovery, pressure maintenance or recycling purposes. However, some general understanding of the terms "primary recovery", "secondary recovery", "pressure maintenance" and "recycling" is necessary.

"Primary recovery", has been defined by the American Petroleum Institute and quoted by Williams & Meyers as

the oil, gas, or oil and gas recovered by any method (natural flow or artificial lift) that may be employed to produce them through a single well bore; the fluid enters the well bore by the action of native reservoir energy or gravity.³

"Secondary recovery" is defined by Williams & Meyers as follows:

Broadly defined, this term includes all methods of oil extraction in which energy sources extrinsic to the reservoir are utilized in the extraction. One of the early methods was the application of vacuum to the well, thus 'sucking' more oil from the reservoir. The term is usually defined somewhat more narrowly as a method of recovery of hydrocarbons in which part of the energy employed to move the hydrocarbons through the reservoir is applied from extraneous sources by the injection of liquids or gases into the reservoir. Typically, a differentiation is made between secondary recovery and pressure maintenance; the former involves an application of fluid injection when a reservoir has reached the exhaustion of natural energy, while the latter involves an application of fluid injection early in the productive life of a reservoir when there has been little or no loss of natural reservoir energy. ***

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The term 'secondary recovery' has been defined by a subcommittee of the American Petroleum Institute as 'the oil, gas or oil and gas recovered by any method (artificial flowing or pumping) that may be employed to produce them through the joint use of two or more wellbores. Secondary recovery is generally recognized as being that recovery which may be obtained by the injection of liquids or gases into the reservoir for purposes of augmenting reservoir energy; usually, but not necessarily, this is done after the primary-recovery phase has passed.' [citation omitted]⁴

Williams & Meyers have defined "pressure maintenance" as follows:

The injection of gas, water or other fluids into oil or gas reservoirs to maintain pressure or retard pressure decline in the reservoir for the purpose of increasing the recovery of oil or other hydrocarbons therefrom. [citations omitted]⁵

"Recycling" is defined by Williams & Meyers as

[a] continuous reinjection of gas produced from a condensate gas reservoir, after the liquid constituents have been removed. In recycling, the reinjected dry gas mixes with the wet gas so that over the period of the operation progressively less liquids are recovered until finally only dry gas remains in the reservoir.⁶

The quoted Williams & Meyers definition also refers the reader to their definition of "cycling" which, of interest in the context of an institute on unitization and anomalously given their definition of "primary" recovery quoted above, is referred to as a "primary" recovery method by which condensate is recovered from a gas condensate reservoir. Accordingly to Williams & Meyers, engineers distinguish between "cycling" and "recycling" as follows:

in cycling the gas condensate moves as a unit across the reservoir to output wells, the front between the

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wet gas and the reinjected dry gas remaining relatively stable. Thus the operation is a one-cycle process, and when all the wet gas has been removed, the process is finished. In recycling, the wet gas and the reinjected dry gas intermix, so that over the period of the operation, progressively less liquid is recovered from the gas produced.⁷

Based upon these definitions and the author's experience, the only significant difference between the formation of a unit involving "secondary recovery", "pressure maintenance", "cycling" or "recycling" is the stage in the producing life of the hydrocarbon reservoir at which one of these methods of recovery is embarked upon. Noted by Williams & Meyers, most "secondary recovery" projects are commenced nearing the end or at the end of the commercial life of the reservoir under "primary" production techniques. "Pressure maintenance" and "recycling" (or "cycling") projects, on the other hand, may well be implemented fairly early in the producing life of a hydrocarbon reservoir, since continued production without the implementation of such techniques would result in the loss of hydrocarbons which can not otherwise be physically recovered at a later date.

Common to all of these recovery methodologies is the deliberate introduction or reintroduction of substances (water, gas, etc.) into the hydrocarbon reservoir and the movement or potential for movement of hydrocarbons in the reservoir from one place to another. In secondary recovery units involving, for example, waterflooding, this movement of hydrocarbons is intended and the direct result of the project. In pressure maintenance and recycling projects, this movement is conceptually a more indirect, but a nonetheless physically real consequence of the pressure maintenance or recycling activity. It is this movement or potential for movement of hydrocarbons across lease lines through the introduction or reintroduction of some substance into the reservoir, together with the expense and relatively wide areal affect of such production techniques, which promote the fundamental necessity of unitization.⁸

II. Conservation Law Motivation/Goals and Unitization

As is the case with other conservation devices authorized by statute, all oil and gas conservation laws in the Rocky Mountain area authorizing unitization do so, in part, on the basis of the protection

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against "waste", as defined by statute, afforded by unitization.⁹ Nearly all of these statutory authorizations for unitization also adhere in some fashion to the other primary conservation law goal that the unit afford the protection of "correlative rights", as that term is defined by statute.¹⁰ Montana and North Dakota, of the seven states surveyed, are the exceptions.

The only stated purpose for which Montana's conservation agency is authorized to regulate unitization is the prevention of waste.¹¹ The Montana statute, unlike all of the other states surveyed, does not specifically require the protection of "correlative rights" as a defined term in the conservation statute in unitization matters. However, the Montana law does require that the conservation agency find the unitization plan prescribe that each tract in the unit is allocated "its fair share of the oil and gas produced from the unit area...."¹²

Similarly, North Dakota's conservation statute does not contain a specific definition of the term "correlative rights". However, the statement of legislative policy adopted as a part of the North Dakota law states that the correlative rights of all owners are to be protected.¹³ Further, the market demand proration provisions of the North Dakota code contain most of the common elements of the definition given by the five other Rocky Mountain states surveyed to the term "correlative rights:" the opportunity of an owner to produce the owner's just and equitable share of hydrocarbons from the pool without waste.¹⁴

The surveyed conservation laws all contain a multifaceted definition of "waste" the common elements of which generally include "physical waste", the unnecessary dissipation of reservoir energy and drilling and production activities which unreasonably reduce ultimate recovery.¹⁵ The two surveyed jurisdictions which prorate production based on market demand, North Dakota and New Mexico, include in their

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definitions of waste production in excess of market demand.¹⁶...