FORMING THE UNIT -- WHY UNITIZE? A BLM PERSPECTIVE
| Jurisdiction | United States |
(Nov 2006)
FORMING THE UNIT -- WHY UNITIZE? A BLM PERSPECTIVE*
Bureau Chief - Fluid Minerals
Bureau of Land Management
Colorado State Office
Lakewood, Colorado
DUANE W. SPENCER
Duane W. Spencer has worked for BLM for 22 years and has been the Branch Chief of Fluid Minerals in the Colorado State Office since August 1999. His position involves providing oversight, budget, policy and management direction for the Colorado BLM oil and gas program. Operationally, the Fluids Branch has responsibility for all oil and gas leasing and lease maintenance activities on Colorado Federal lands as well as statewide reservoir management responsibilities related to spacing, drainage and unitization.
Duane started his career with BLM in Rawlins, Wyoming as a staff Petroleum Engineer on the Branch of Fluid Minerals. His major duties were reservoir related, but he also worked on numerous operational permits such a Applications for Permit to Drill (APDs) and sundry notices. In 1990, he was promoted and transferred to Farmington, New Mexico, as the newly established Branch Chief of Reservoir Management in the District Office. This position involved establishment and organization of the new branch. In 1995, Farmington District was reorganized and Duane became the Team Lead, Petroleum Management. The Petroleum Management Team consisted of the combination of two separate branches and was composed of mainly petroleum engineers and geologists. The team was responsible for processing of all fluid mineral actions related to operations and reservoir management, which in Farmington is an extremely large workload. During his time in Farmington, he worked on a large number of coalbed methane issues related to both reservoir management and operations.
Duane has a Bachelors Degree in Petroleum Engineering from the University of Wyoming.
I. INTRODUCTION
In preparing this paper, I was surprised to find that in spite of Federal oil and gas regulatory agencies administering Federal exploratory unit agreements for over 75 years, material discussing the benefits and advantages of unitization from a Federal regulatory agency perspective was sparse to nonexistent. Why is this so? Perhaps the benefits of unitization are so clearly understood that discussion is unnecessary. In spite of a general understanding among Bureau of Land Management (BLM) personnel, the question "why unitize?" still warrants further analysis.
Taking a step back and looking at "why unitize?" from a BLM perspective, two questions emerge: (1) Are the historical, traditional reasons for which unitization was authorized for Federal minerals, i.e. reservoir management and to promote the exploration and development of the hydrocarbon resource, still valid in providing a benefit to the Federal government? (2) Does unitization provide BLM additional benefits, relative to its broader public land management responsibilities, beyond minerals management? The answer to both questions is a resounding yes!
II. BACKGROUND: THE LAW AND REGULATIONS
The foundation of Federal onshore oil and gas unit agreements is, of course, the Mineral Leasing Act of 1920, as amended (MLA).1
The Federal regulations which govern establishment of onshore Federal exploratory oil and gas units are found in 43 C.F.R. 3180 . These regulations provide procedural requirements as well as a model onshore exploratory Federal unit agreement. The regulations are predicated upon the authority granted to the Secretary of Interior under the Act approved February 25, 1920, 41 Stat. 437, as amended.2 In keeping with the requirements outlined in the MLA, a Federal unit agreement is approved only when BLM can issue a Certification-
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Determination that the unit is necessary and advisable in the public interest for the purpose of more properly conserving the natural resources.
III. BENEFITS OF UNITIZATION: DEVELOPMENT OF FEDERAL OIL & GAS RESOURCES AND RESERVOIR MANAGEMENT
As noted above, a Federal exploratory unit agreement can only be approved when the BLM determines it is in the public interest for the purpose of more properly conserving natural resources. While these terms no doubt have legal meaning, they are rather broad and somewhat ill-defined when trying to describe the benefits of unitization to the BLM. In an attempt to further quantify the benefits of unitization, the BLM unitization manual and handbook recognize that unitization achieves the following benefits:
• facilitates the orderly and timely development of the oil and gas resources within the unit areas
• eliminates the need to drill protective wells along common boundaries between unitized leases
• maximizes benefits through a continuing exploration and development program.
Some of these reservoir management benefits are general in nature and fairly consistent with State oil and gas regulatory commission conservation mandates. This begs the question, so how exactly does BLM benefit from unitization?
As a starting point, the BLM manages over 500 million acres of Federal minerals. Provisions of the MLA generally make these minerals available for oil and gas leasing. In the Rocky Mountains alone, the Department of Interior report titled, "Scientific Inventory...
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