CHAPTER 5 PRACTICAL APPLICATIONS DURING A POOL'S LIFE

• Jurisdiction: United States

Basic Oil and Gas Technology for Lawyers and Landmen
(Apr 1979)
CHAPTER 5
PRACTICAL APPLICATIONS DURING A POOL'S LIFE
R.B. (Bart) Giles
Amoco Production Company
Denver, Colorado

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The illustrations on the following pages have been designed for viewing purposes to be all-inclusive and self-explanatory. Each illustrates a practical application of how basic geological and engineering knowledge may be applied in Oil and Gas Conservation Commission hearings, beginning with the initial discovery of a pool and progressively showing situations that develop in the life of stratigraphic accumulations of hydrocarbons and in the life of pools with structural closure. These different case histories, at least to some degree, could be adaptable to a hearing before a different type of regulatory agency and/or litigation.

The discussion pertaining to each illustration on the following pages will amplify what the illustration shows, cover procedures which have been made known to applicants at hearings by an Oil and Gas Conservation Commission, and basic principles or concepts practiced in the oil and gas industry so as to provide a better understanding of the illustrations.

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Why Have Oil And Gas Regulatory Agencies?

Just as referees and umpires are needed in professional sports, so are regulatory agencies needed to see to it that all oil and gas operators and lessees follow a set of rules and regulations, and rules of practice and procedure. The industry, with its expertise, assists the regulatory agency in the formulation of a workable and practicable set of rules and, when the occasion calls for it, assists the regulatory agency in updating its rules to keep pace with technological advances.

The Oil and Gas Conservation Act in each state requires that the Oil and Gas Conservation Commission promote conservation by preventing waste of the natural resources. "Waste" refers by definition to a lot of situations, but customarily concerns underground waste of oil and/or gas. Securing the greatest ultimate oil and gas recovery is synonymous with prevention of waste. Although subordinate to the prevention of waste, the Commission is also required to protect the correlative rights of all affected parties. "Correlative rights" simply means the opportunity afforded the owner of each property in a pool or reservoir to produce, so far as it is reasonably practicable to do so without waste, his just and equitable share of the oil or gas, or both, in the pool. He does not have to exercise the opportunity given him, if that is his decision. Generally speaking, if waste is prevented, correlative rights are protected. Among many other requirements, the Commission is required to prevent pollution by virtue of oil and gas operations and to establish safe drilling and production practices. Each Commission, some states call their agency a Board, has a bound set of rules and regulations and rules of practice and procedure before the Commission (statewide rules), which oil and gas operators and lessees must abide by.

In sum and substance, the Commission in each state serves an important function. It is incumbent upon them to administer their rules and regulations in a fair manner. Most of their hearings are routine, uncontested cases involving field rules orders. Some are contested hearings. No one applicant can expect to win all of his contested cases, for, were this to happen, that applicant probably has not tried all of the cases he probably should have tried before the Commission.

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[Page 5-3]

ORIENTATION MAP OF WYOMING

Shows the location in Southern Wyoming of four fields that are illustrated and discussed later in this Paper:

1) Hansen Draw Field

2) Yellow Creek Field

3) Echo Springs Field (initially and then 2 1/2 years later)

4) Bruff Field

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[Page 5-5]

STYLE OF A HEARING EXHIBIT TO SUPPORT GAS WELL SPACING

Features that are highlighted on the exhibit are:

a. Ownership of leases within the area to be spaced; most importantly, what leaseholdings (stippled) the applicant owns in the area.

b. The red bordered outline of the proposed 9 section area to be spaced around the discovery well.

c. Log characteristics of the Mesaverde formation to be spaced as a pool. The SP and Dual Induction log was shown for the discovery well. Also shown are where the well was perforated, size of the stimulation treatment, and the total depth of the well. (Other potential gas shows may later be opened in the Mesaverde through performations by the operator of the well.)

d. We show or give testimony on, the cost of the well. The Wyoming Conservation Act, for some 28 years, has ignored mention of economics in its well spacing provision, so the Commission has felt compelled to ignore economics. However, one cannot ignore the fact that the spacing initially must be wide enough to economically justify and foster additional development. Subconsciously, I believe the Commission over the years has accepted this premise and has guided itself accordingly. Just this spring, the Wyoming Legislature enacted a revision to its Conservation Act containing economics — so, from now on, the Wyoming OGCC can logically consider economics in its spacing deliberations.

e. Although not too meaningful in a stratigraphic play, regional contours on top of the formation to be spaced as a pool are shown. This allows the State Geologist, a member of the Commission, to see how this pool fits into his regional concept for the geological province, in this case, the Washakie Basin.

f. In stratigraphic plays for gas development, the Commission wants a specific well location pattern established, so as to protect the correlative rights of all parties and to avoid clustering of wells around a common section corner. In the Hansen Draw Field, the specific pattern requested is the center of the SW/4 of a governmental section, with a 200' tolerance to avoid surface hazards, a pattern reasonably in conformance with the discovery well location.

This is certainly not the only style of hearing exhibit that may be used, but one that gives the Oil and Gas Conservation Commission what it needs to provide them visual evidence after the hearing for their use in making their decision on the case, besides providing visual evidence in support of the witness' testimony in the record of the hearing, i.e., make the record as "complete" as possible, in the event an appeal of the Commission's Order should be necessary.

We show this style of exhibit simply to illustrate the printed material which is useful to the Commission. On later illustrations, you will not see a lot of this printed material because there is no space available to include such information.

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[Page 5-7]

YELLOW CREEK FIELD

Recombination...