FORMING A FEDERAL EXPLORATORY UNIT THE AREA AND DEPTH MEETING -- A BLM PERSPECTIVE
| Jurisdiction | United States |
(Nov 2006)
FORMING A FEDERAL EXPLORATORY UNIT THE AREA AND DEPTH MEETING -- A BLM PERSPECTIVE*
Senior Petroleum Geologist
Bureau of Land Management
Wyoming State Office -- Reservoir Management Group
Casper, Wyoming
FREDERICK J. CROCKETT
Fred Crockett is a petroleum geologist with BLM's Wyoming Reservoir Management Group in Casper, Wyoming. He received degrees in Geology from the University of Maine and the University of Utah. Fred spent six years as a geologist with two independent oil and gas companies where he was responsible for drilling and completion operations, acreage evaluation, and prospect generation. He resigned in 1984 to join the BLM. Fred is responsible for review and approval of oil and gas units and participating areas. His duties with the BLM have also included property evaluations, reasonably foreseeable development scenarios (NEPA), and special projects.
He has authored or co-authored several technical papers and reports, and given numerous technical presentations, mostly on coalbed methane in the Powder River Basin.
Fred is a member of four professional societies and is a licensed geologist in Wyoming, Nebraska, and Utah.
CONTENTS
I. INTRODUCTION
II. GENERAL BACKGROUND
A. Definition of a Unit Agreement
B. Authority for Unitization
C. Authorized Officer
III. THE APPLICATION PROCESS -- AREA AND DEPTH MEETING
A. Formal Unit Application
B. Purpose of the Area and Depth Meeting
C. Logical Unit Area
D. Geologic Boundaries
E. Administrative Boundaries
F. Size of the Unit Area
G. Depth and Location of the Obligation Well
H. Multiple Well Requirements
I. Confidentiality
IV. WHAT TO TAKE TO THE AREA AND DEPTH MEETING
A. Geologic Report
B. Exhibits A and B
V. TOPICS WHICH SHOULD BE DISCUSSED AT THE AREA AND DEPTH MEETING
A. Form of the Unit Agreement
B. Formations to be Unitized
C. Lease Expirations
D. Inclusion of Pre-Unit Wells
E. Effective Control
F. Opportunity to Join
G. Bonding
H. Multiple Designations
I. Environmental Concerns
J. Drilling Constraints
K. Methods Used to Establish Participating Areas
L. Non-BLM Managed Federal Surface
VI. FINAL THOUGHTS
Acknowledgements
REFERENCES
Figure 1
Figure 2
I. INTRODUCTION
Although there are several potential benefits to unitization, before initiating the unitization process the proponent should ask "Will unitization help accomplish my goals?" If the answer is "Yes" or "I don't know" then hopefully this paper will be helpful. This paper reviews some of the procedures commonly employed by the Bureau of Land Management (BLM), when forming a Federal Oil and Gas Exploratory Unit. This paper is not intended to present official BLM policy or be a legal analysis. It is intended to help guide the reader through the designation of a logical unit area.
II. GENERAL BACKGROUND
Approval of a Federal exploratory unit is a two step process. The first step is the designation of a logical unit area. This part of the process usually is more time consuming than the second step and includes the Area and Depth meeting. The second step is final unit approval. Final approvals are usually processed relatively quickly once the requisite unit commitment (usually 85 percent on a surface acreage basis) is achieved.
An acceptable nonfederal unit agreement form is often used for units with less than ten percent federal lands on a surface acreage basis. The BLM has no administrative jurisdiction over nonfederal units but simply elects whether or not to commit Federal lands to the nonfederal unit.
A. Definition of a Unit Agreement
A unit agreement is an agreement or plan for the development and operation which provides for the recovery of oil and/or gas from the lands made subject thereto as a single consolidated entity without regard to separate ownerships and for the allocation of costs and benefits on a basis as defined in the agreement or plan (43 CFR 3186.1 .).
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B. Authority for Unitization
Introductory remarks to the model onshore unit agreement for unproven areas states:
"The Mineral Leasing Act of February 25, 1920, as amended and supplemented (30 U.S.C. 181, 189, 226(e) and 226(j)), and Order Number 3087, dated December 3, 1982, as amended on February 7, 1983 (48FR 8983), authorizes federal lessees and their representatives to unite 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. The purpose is to more properly conserve natural resources whenever determined and certified by the Secretary of Interior to be necessary or advisable in the public interest" (see: (43 CFR 3186.1 , p. 452 (10-1-05 edition).
Approval of federal exploratory units, however, is a discretionary act by the Secretary of Interior and is not required, even though requested by lessees and justified on a technical basis.
C. Authorized Officer
The BLM is an agency of the U.S. Department of Interior and derives the authority to enter into unit agreements from the 1920 Mineral Leasing Act as amended. Initially, all units were approved by the Secretary of Interior. Later authority was delegated to minerals management agencies. Numerous titles occur in the body of older unit agreements. These titles include the United States Geological Survey (USGS), USGS, Minerals Management Service (MMS), MMS, Supervisor, Conservation Manager, Deputy Conservation Manager, Minerals Manager, and Deputy Minerals Manager. When used in onshore unit agreements, these titles now refer to the Bureau of Land Management or to the Authorized Officer. The reader is referred to Secretarial Order 3087 for further clarification of these titles.
Authority to approve units has been delegated to BLM state and field offices. The person with authority to approve unit agreements and make subsequent unit decisions is designated the Authorized Officer, usually referred to as the AO. The AO in any given state may be different than in an adjacent state. Anyone interested in obtaining a decision pertaining to Federal units should inquire with the local BLM office to determine who the AO is in a specific area of interest.
Currently, in Alaska, Arizona, California, Colorado, Montana (including North and South Dakota), Nevada, Oregon, and Utah, the AO is a deputy state director. In most other states the AO is a BLM field office manager. In Wyoming (including Nebraska) the authorized officer is the Chief, Wyoming State Office-Reservoir Management Group.
III. THE APPLICATION PROCESS -- AREA AND DEPTH MEETING
Designation of a logical unit area is the first step in the two-step process of forming a federal exploratory unit. Submission of an application letter officially begins the first step.
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The area and depth meeting may occur before submission of a formal unit designation application. Often the application is submitted at the area and depth meeting. If an operator is not familiar with the application process or designation of a logical unit area, a preliminary meeting with the AO is usually useful to cover the basic requirements and obtain guidance for preparing an application.
A. Formal Unit Application
To initiate the approval of an exploratory unit, the proponent of the unit must file an application formally requesting the AO:
(1) designate the proposed area as logically subject to exploration and development under a unit plan of operation;
(2) approve the location, depth, and objective formation proposed for the initial obligation 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 Exhibits "A" and "B". Exhibit "A" is a map of the proposed unit area and Exhibit "B" is a list of tracts within the unit area regardless of commitment status. Each tract in Exhibit "A" should correspond with the information shown in Exhibit "B".
Exhibit "A" should be a plat which shows the proposed unit and tract boundaries. An example of Exhibit "A" is shown in Figure 1. Exhibit "A" should also include the proposed unit title, county, state, and operator. A summary which lists total federal, state, and fee acres with the appropriate percentages should also be included. Within each tract in Exhibit "A" the following should be shown:
1. tract number,
2. working interests (if more than one list the major interest owner and "et al"),
3. federal (or state) lease number,
4. expiration date, and
5. acreage if other than 640 acres.
Exhibit "B" is a list of each lease in numerical order from oldest federal lease to newest federal lease. An example of Exhibit "B" is shown in Figure 2. Each lease is given a tract number beginning with tract #1 (oldest lease). After the federal leases then state leases are listed, and last fee leases are listed. Each tract listed in Exhibit "B" should include the following in the order listed:
1. the legal description,
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2. acreage,
3. lessors,
4. lessees,
5. overriding royalty interests, and
6. working interests.
Subtotals and percent of the unit area should be listed for each lease type (federal, state, and fee) and a total acreage is of the entire unit. Examples of Exhibits "A" and "B" are available in the Code of Federal Regulations (43 CFR 3186.1-1 and 3186.1 -2, pp. 464-465 (10-1-05 edition)).
The formal application may be submitted to the AO before the area and depth meeting. However, if this is done, changes may subsequently be required.
After consideration of the application, the applicant will be notified of the AO's decision with respect to the designation of the area. If the application is approved, the applicant will also be notified of the...
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