OIL AND GAS AGREEMENTS

• Jurisdiction: United States

Horizontal Oil & Gas Development
(Nov 2012)
CHAPTER 10A
OIL AND GAS AGREEMENTS
J. David Chase
Bureau of Land Management, Reservoir Management Group
Casper, WY

DAVID CHASE is the chief of the Reservoir Management Group (RMG) for the Department of the Interior Bureau of Land Management (BLM) in Casper, Wyoming. He is responsible for the following BLM programs in Wyoming: unitization and communitization, drainage, gas storage, Indian diligence and reasonable foreseeable development scenarios for NEPA documents. After receiving a B.S. degree in petroleum engineering from the University of Wyoming in December 1983, he started his BLM career in Lander in February 1984 as a drilling and production engineer. He transferred to Rock Springs in June 1987 to work with the BLM as a reservoir engineer. In August 1993, when the RMG was formed, Dave moved to Casper to work as a reservoir engineer before becoming the chief in July 2008. Dave has a wide range of knowledge working with all aspects of unitization agreements, including lease suspensions and unavoidable delay requests, paying well determinations and establishment and revision of participating areas.

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Introduction

• Exploratory Unit Agreements (Continuous Accumulations/Horizontal Wells)

1. RMG Policy

2. Unit Agreement Language Modifications

3. Initial Participating Areas

4. Non-Paying Unit Wells

Conventional Plays

• Horizontal wells are drilled to maximize contact with the productive horizon or fracture system or to follow geologic structures (e.g., anticlinal axis)

Unconventional Plays

• Many horizontal wells are drilled in unconventional plays known as resource plays

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• "Resourceplay" is an industry term, and the definition varies from company to company, professional to professional.

• The U.S. Geological Survey uses the term "Continuous Accumulation."

— Specific geologic and production characteristics [see Schmoker (2003)]

— The RMG has likewise adopted the term "continuous accumulation"

— Includes coalbed natural gas as well as fractured shale plays

RMG Policy

Exploratory units for continuous accumulation (resource plays) will not be larger than 25,000 acres

• For horizontal wells, all whole sections will be included in the proposed unit area. This allows an exploratory unit to be greater than 25,000 acres, but less than 25,640 acres. A typical section is 640 acres.

• Coalbed natural gas units - limited to 25,000 acres

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Unit boundaries may be based on acreage position if the proposed wells will test formations that fit the definition of a continuous accumulation play

• Also true for coalbed natural gas continuous accumulation plays

The initial unit obligation well for a horizontal well in an exploratory unit shall be located based on the following:

• At least one mile away from any penetration(s) of the formation in which the initial unit obligation well is proposed to test

• If any portion of the horizontal wellbore within the target formation lies a mile away, then the distance requirement for the initial unit obligation well will have been met

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• At least one mile away from the unit boundary; however, if any portion of the horizontal wellbore within the target formation lies a mile away, then the distance requirement for the initial unit obligation well will have been met.

• Subsequent unit wells do not have a similar requirement.

• Sometimes the distance requirement allows for...