CHAPTER 6 FORMING THE UNIT—AREA AND DEPTH
| Jurisdiction | United States |
(Jan 1990)
FORMING THE UNIT—AREA AND DEPTH
Bureau of Land Management
Reno, Nevada and Denver, Colorado
Table of Contents
INTRODUCTION
GENERAL BACKGROUND
THE AUTHORITY FOR UNITIZATION
BENEFITS OF UNITIZATION
OBJECTIVES OF UNITIZATION
PURPOSE OF THE AREA AND DEPTH MEETING
WHO IS THE AUTHORIZED OFFICER?
LOGICAL UNIT BOUNDARY
GEOLOGIC BOUNDARIES
ADMINISTRATIVE BOUNDARIES
COMBINATION BOUNDARIES
DEPTH AND LOCATION OF THE OBLIGATION WELL
SIZE OF THE UNIT AREA
OTHER CONSIDERATIONS
MULTIPLE WELL REQUIREMENTS
CONFIDENTIALITY
WHAT TO BRING TO THE AREA AND DEPTH MEETING
GEOLOGIC REPORT
EXHIBITS "A" AND "B"
TOPICS WHICH SHOULD BE DISCUSSED AT THE AREA AND DEPTH MEETING
FORM OF THE UNIT AGREEMENT
FORMATIONS TO BE UNITIZED
LEASE EXPIRATIONS
INCLUSION OF PRE-UNIT WELLS
BONDING
EFFECTIVE CONTROL
DRILLING CONSTRAINTS
METHOD USED TO ESTABLISH PARTICIPATING AREAS
ENVIRONMENTAL CONCERNS
NON-BLM FEDERAL SURFACE MANAGEMENT AGENCIES
DRILLING AND COMPLETION CONSIDERATIONS
THE DESIGNATION LETTER
MULTIPLE DESIGNATIONS
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INTRODUCTION
This paper reviews some of the procedures commonly employed by the oil and gas industry and the Bureau of Land Management (BLM), to form a federal oil and gas exploratory unit. This paper is not intended to present official Bureau policy on federal units nor be a legal analysis. It is, rather, intended to be a guide as to the purpose and intent of each step in the process up to and including designating an area as a logical unit area. Other papers presented in this compendium address additional aspects of unit agreements.
GENERAL BACKGROUND
THE AUTHORITY FOR UNITIZATION
The Mineral Leasing Act of February 25, 1920, 41 Stat. 437, as amended, 30 U.S.C. Sec. 181 et seq., authorizes Federal lessees and their representatives to unit with each other, or jointly or separately with others, in collectively adopting and operating a unit plan of development or operations of any oil and gas pool, field or like area, or any part thereof for the purpose of more properly conserving the natural resources thereof whenever determined and certified by the Secretary of the Interior to be necessary or advisable in the public interest.1
BENEFITS OF UNITIZATION
The Bureau of Land Management's 3180 Manual characterizes the benefits of unitization as:
Unitization provides for the exploration, development, and operation of an entire structure or area by a single
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operator so that drilling and production may proceed in the most efficient and economical manner.2
OBJECTIVES OF UNITIZATION
As extracted from the BLM 3180 Handbook which accompanies the 3180 Manual, the objectives of unitization are:
...to proceed with a program for all lands within the unit that will adequately and timely explore and develop the committed leases within the unit area without regard to the interior boundaries of the leases. Exploratory units normally embrace a prospective area that has been delineated on the basis of geological and/or geophysical inferences. Such agreements usually encompass all oil and gas interests in all formations within the unit area and provide for the allocation of unitized production to the committed lands reasonably proven to be productive of unitized substances in paying quantities on the basis of the surface acreage included within the controlling participating area. The consolidation of separate leasehold interests through unitization eliminates the need to drill protective wells along common boundaries between unitized leases and serves to maximize benefits through a continuing exploration and development program.3
PURPOSE OF THE AREA AND DEPTH MEETING
The unit proponent should plan to meet with the authorized officer to discuss these aspects:
-The geological model or play which will define the logical unit boundary;
-The depth and location of the obligation well(s);
-The type of agreement which is proposed and any modifications or stipulations which are planned to be incorporated into the unit agreement;
-The proposed area of the unit; and
-The unit name which is traditionally, a short local name based upon a natural or topographic feature in the vicinity.
A more detailed explanation of the steps involved in the
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designation of a logical unit area can be found in the BLM Handbook:
To initiate the formation of an exploratory unit, the proponent of the unit files an application formally requesting the Authorized Officer (AO) to (1) designate the proposed area as logically subject to exploration and development under a unit plan of operation; (2) approve the maximum depth and objective formation proposed for the initial test well(s) and or development obligations (if the area contains a discovery but is not fully developed); and (3) approve the text of the proposed form of unit agreement. The request for designation must be accompanied by a map or diagram showing the area sought to be designated and indicating the types of geological and geophysical information. After consideration of the application, the applicant will be advised of the decision with respect to the designation of the area, the specific form of agreement, and the number and depth of the initial well(s) required. Copies of the approved designation letter, signed by the Authorized Officer, are furnished to other appropriate BLM offices and to appropriate State and Federal agencies having jurisdiction over lands in the unit area. The application and all supporting information will be retained by the Authorized Officer.4
WHO IS THE AUTHORIZED OFFICER?
The BLM is an agency of the Department of the Interior and derives the authority to enter into unit agreements from the 1920 Mineral Leasing Act as amended.5 This authority is not held near the top of the organization in the BLM but delegated to the field office level which is closest to the effects of each decision. This decentralization of authority throughout the BLM often puts the authority to approve unit agreements upon a field office level such as a Resource Area Manager. However, differing levels of workload and personnel ceilings often limit the available expertise to centralized locations such as District Offices or State Offices. The authorized officer in any given area may be different than an adjacent State or another District within the same state. Inquire with the local office of the BLM to determine who the authorized officer is for unit agreements in your area of interest.
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LOGICAL UNIT BOUNDARY
Unitization allows a single pool or structure to be defined, tested and developed as if there were no intervening lease boundaries. The unit operator has the expressed authority to locate the wells such that the best target could be drilled and the pool exploited in the most efficient manner. The unit boundary should encompass the entire geological structure or trap to diminish the possibility of adjacent lease owners competing to drain the reservoir. The geologists and geophysicists cannot accurately predict the exact location of the oil or gas pool. However, without some geologic framework upon which to base a logical boundary, conservation of the resources may be unattainable.
GEOLOGIC BOUNDARIES
The geologic model or play used to define a unit proposal may be supported by geologic data such as surface mapping, detailed stratigraphic sections, gravity data, magnetic data, nearby well data, surface sampling for hydrocarbons, regional or local structural analyses, or any number of geophysical or electronic data which come in a myriad of forms, applications and usefulness. These geological data are blended together by the unit...
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