SPACING AND POOLING ISSUES FOR HORIZONTAL DEVELOPMENT: NORTH DAKOTA

• Jurisdiction: United States

Horizontal Oil & Gas Development
(Nov 2012)
CHAPTER 6B
SPACING AND POOLING ISSUES FOR HORIZONTAL DEVELOPMENT: NORTH DAKOTA
John W. Morrison
Crowley Fleck PLLP
Bismarck, ND

JOHN W. MORRISON is a shareholder with the firm of Fleck, Mather & Strutz, Ltd. in Bismarck, North Dakota. He received a Bachelor of Arts degree from Mary College (now the University of Mary), in Bismarck in 1975 and a Juris Doctor degree from the University of North Dakota in Grand Forks in 1978. After graduation from law school, he was employed by the North Dakota Legislative Council, the North Dakota State Land Department and the North Dakota Attorney General's Office. In 1981, he began his employment with Fleck, Mather & Strutz, Ltd. and since that time has specialized in oil and gas law, including litigation and administrative matters. He has authored papers for special and annual institutes of the Foundation, including "Horizontal Drilling - The Changing Role of Traditional Conservation Principles," Federal Onshore Pooling and Unitization II, Paper 5; "Regulation of Gas Gathering Systems," 39 Rocky Mtn. Min. L. Inst. 18 (1993); and "Doing the Lateral Lambada: Negotiating the Technical and Legal Challenges of Horizontal Drilling," 43 Rocky Mtn. Min. L. Inst. 16 (1997). He is also the North Dakota author of Lobbying, PACs and Campaign Finance and Doing Business in States Other than the State of Incorporation. John is admitted to practice before state and federal courts in North Dakota, the Eighth Circuit Court of Appeals and the United States Supreme Court. He has served as Chairman of the Executive Committee of the North Dakota Petroleum Council, North Dakota Vice-president and President of the Rocky Mountain Oil and Gas Association, a director of the American Petroleum Institute, and a trustee of the Rocky Mountain Mineral Law Foundation. He currently serves as a North Dakota representative to the Interstate Oil and Gas Compact Commission and is the Chairman of the Ethics Committee of the Landman's Association of North Dakota. He has been included in the Best Lawyers in America since 1995 and is also named as one of the Leading Lawyers for Business in Chambers USA.

I. General Spacing and Pooling Principles

A. Temporary and Proper Spacing

1. Spacing is established by "pool" or field

2. §38-08-07(1), N.D.C.C. - when necessary to prevent waste, to avoid the drilling of unnecessary wells, or to protect correlative rights, the commission shall establish spacing units for a pool

a. "Pool" is an underground reservoir containing a common accumulation of oil or gas or both - §38-08-02(11), N.D.C.C.

b. §43-02-03-18(2), N.D.A.C. - within 30 days after discovery of oil or gas in a pool not then covered by spacing order, the commission shall docket a spacing hearing and, after hearing, issue an order prescribing a temporary spacing pattern for the pool

c. "Proper spacing" is reconsidered after a period of "not more than three year."

(1) Changed from 18 months effective 4/1/12

3. §38-08-07(2), N.D.C.C. - Size and shape of spacing units "are to be such as will result in the efficient and economical development of the pool as a whole."

4. Spacing units must be of uniform size and shape but when necessary to prevent waste, avoid the drilling of unnecessary wells or protect correlative rights, may divide any pool into "zones" and establish spacing units for each zone, which units may differ in size from those established in any other zone

5. §38-08-07(3), N.D.C.C. - order must specify size and shape of spacing units and the location of the permitted well

6. "Exception locations" allowed when well at prescribed location would not produce in paying quantities, surface conditions substantially add to burden of well, or drilling well at exception location is otherwise necessary to protect correlative rights, prevent waste, or prevent drilling of unnecessary wells.

a. Exception location requires notice to offset owners - §43-02-03-18.1, N.D.A.C.

7. §38-08-07(4) - order may be modified to increase or decrease the size of spacing units or permit the drilling of additional wells on a reasonably uniform plan in the pool, or any zone thereof, or on any spacing unit

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a. Temporary or proper spacing order may be modified or infills may be allowed

B. Wildcat Wells

1. §43-02-03-18, N.D.A.C. - sets "statewide spacing unit."

a. Vertical wells are either governmental quarter-quarters or governmental quarter sections, depending upon depth (base of Mission Canyon)

(1) 500 foot setback for 40 acres, 660 setback for 160 acres

b. Horizontal wells - either 320 or 640 governmental section for shallow (above base of Mission Canyon) or 640 governmental section for deeper horizontal wells

(1) 500 foot setback

C. Pooling

1. §38-08-08,

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