SPACING

Vertical

Horizontal

Eric R. King

Week Three

September 6, 2012

Conservation

• 52 O.S. 87.1

• Common Source of Supply of Oil

• Well Spacing and Drilling Units

Spacing• Actual Notice at least 15 days prior to Hearing to

all parties who have the right to share in production

• File Application

• Notice via regular mail at least 15 days before Hearing

• Publication Notice – At least 15 days prior in County where Land is situated and Oklahoma County before the Hearing

• Hearing

• Issues

OAC 5-7-6

Drilling and spacing unit establishment or

modification

OAC 5-7-6.1

Horizontal well unitization for shale reservoirs

OAC 5-7-6.2

Multiunit horizontal wells in share reservoirs

General Well Spacing

Requirements

OAC 165:10-1-21

Any well drilled for oil or gas to an unspaced common source of

supply the top of which is 2,500 feet or more in depth shall be

located not less than 330 feet from any property line or lease

line, and shall be located not less than 600 feet from any

producible or drilling oil or gas well when drilling to the same

common source of supply; provided and except that in drilling to

an unspaced common source of supply the top of which is less

than 2,500 feet in depth, the well shall be located not less than

165 feet from any property line or lease line and not less than

300 feet from any other producible or drilling oil or gas well in

the same common source of supply; provided however, that the

depth to the top of the common source of supply in the original

or discovery well shall be recognized as the depth to the top of

the common source of supply for the purpose of this section;

provided further, when an exception to this Section is granted,

the Commission may adjust the allowable or take such other

action as it deems necessary for the prevention of waste and

protection of correlative rights.

Drilling and Spacing Units

OAC 165: 10-1-22(a) The Commission may establish drilling and spacing units

in any common source of supply a s provided by law, and the

special orders creating drilling and spacing units shall

supersede the provisions of 165:10-1-21. It shall be

The responsibility of any operator who proposes to drill a

well to ascertain the existence and provisions of special

spacing orders.

(b) The drilling of a well or wells in to a common source of supply

in an area covered by an application pending before the

Commission seeking the establishment of drilling and spacing

units is prohibited except by special order of the Commission.

However, if an Intent to Drill (Form 1000) has been approved by

the Commission and operations commenced prior to the filing of

a spacing application, the operator shall be permitted to drill and

complete the well without a special order of the Commission.

Permitted Well Locations

Within Standard Drilling

and Spacing Units

OAC 165: 10-1-24

• (a) The permitted well location within any standard square

drilling and spacing unit shall be the center of the unit. The

permitted well locations within standard rectangular drilling

and spacing units shall be the centers of alternate square

tracts constituting the units (alternate halves of the units);

provided, however, a well will be deemed drilled at the

permitted location if drilled within the following tolerance

areas:

• (1) Not less than 165 feet from the boundary of any

standard 10-acre drilling and spacing unit or the proper

square 10-acre tract within any standard 20-acre drilling

and spacing unit.

� (2) Not less than 330 feet from the boundary of any

standard 40-acre drilling and spacing unit or the proper

square 40-acre tract within any standard 80-acre

drilling and spacing unit.

� (3) Not less than 660-feet from the boundary of any

standard 160-acre drilling and spacing unit or the

proper square 160-acre tract within any standard 320-

acre drilling and spacing unit.

� (4 ) Not less than 1320 feet from the boundary of any

standard 640-acre drilling and spacing unit.

Drilling and Spacing Units

• A Township - 36 Sections of Land

• Size of Drilling and Spacing Units

– 640 acres (Section)

– 320 acres – stand-up or laydown units

– 160 acres (Quarter Section)

– 80 acres – stand-up or laydown units

– 40 acres (Quarter Quarter Section)

– 20 acres Stand-Up or Lay-Down Units

– 10 acres (Quarter Quarter Quarter Section)

A Township - 36 Sections of Land

36 31 32 33 34 35 36 31

1 6 5 4 3 2 1 6

12 7 8 9 10 11 12 7

13 18 17 16 15 14 13 18

24 19 20 21 22 23 24 19

25 30 29 28 27 26 25 30

36 31 32 33 34 35 36 31

1 6 5 4 3 2 1 6

640 acres (Section)

320 acres (Half Section)

160 acres (Quarter Section)

Proper Well Location Requirements

• 640 acres - No closer than 1320 feet from unit boundaries

• 320 acres - Stand-Up or Lay-Down Units – No closer than 660 feet from proper Quarter Section i.e. on NW-SE proper location within each 320 acre unit (or can be NE-SW)

• 160 acres –No closer than 660 from unit boundaries

• 80 acres – Stand-Up or Lay-Down Units – No closer than 330 feet from proper Quarter QuarterSection i.e. on NW-SE proper location within each 80 acre unit (or can be NE-SW)

Proper Well Location Requirements

(continued)

• 40 acres No closer than 330 feet from unit boundary

• 20 acres Stand-Up or Lay-Down Units - No closer

than 165 feet from proper Quarter Quarter Section

i.e. on NW-SE proper location within each 20 acre

unit (or can be NE-SW)

• 10 acres – No closer than 165 feet from unit

boundary

Vertical

Drilling and Spacing Causes

Samples applications/notices/orders

• 40-acre units

• 80 acre stand-up units

• 160-acre units

• 320-acre lay-down Units

• 640-acre units

Horizontal Drilling Offshore

Horizontal Drilling Texas

Horizontal Drilling compared to

Slant Hole Drilling

Horizontal Drilling

OAC 165: 10-3-28

(b) Definitions

(c) General horizontal drilling

requirements

(1) Within 30 days after completion of a horizontal well, the

operator shall show that the location of the completion interval

complies with the applicable general rule, location exception

order, or other order of the Commission by submitting the

following to the Technical Services Department:

(A) A directional survey run in the horizontal well.

(B) A plat constructed from the results of the directional

survey showing the completion interval.

(2) The completion interval of a horizontal well shall be located

not closer than the minimum distance as set out below from any

other oil or gas well completed in the same common source of

supply except as authorized by a special order of the

Commission:

(A) Three hundred feet from any other oil or gas well

completed in the same common source of supply, the top of

which is less than 2,500 feet in true vertical depth.

B) Six hundred feet from any other oil or gas well completed

in the same common source of supply, the tope of which is

2,500 feet or more in true vertical depth.

(C) This paragraph does not apply to horizontal wells drilled in

a unit created for secondary or enhanced recovery operations

pursuant to 52 O.S. § 287.1 et seq. or to horizontal wells

drilled in a horizontal well unitization created pursuant to 52

O.S. § 87.6 et seq.

(d) Horizontal well requirements in an

unspaced common source of supply.

In a horizontal well drilled in a common source of supply in

which the Commission has not established any drilling and

spacing units or horizontal well units, the completion interval of

a horizontal well may not be located closer to the boundaries of

the applicable mineral estate, oil and gas leasehold estate, or

voluntary unit than the minimum distance set out below except

as authorized by a special order of the Commission:

(1) Not less than 165 feet when the top of the common source

of supply is less than 2,500 feet in true vertical depth.

(2) Not less than 330 feet when the top of common source of

supply is 2,500 feet or more in true vertical depth.

(e) Drilling and spacing units

(1) A horizontal well may be drilled on any drilling and spacing

unit.

(2) A horizontal well unit may be created in accordance with

165:10-1-22 and 165:5-7-6. Such units shall be created as new

units after notice and hearing as provided for by the Rules of

Practice, OAC 165:5.

(3) The Commission may create a non-standard horizontal well

unit covering contiguous lands in any configuration or shape

deemed by the Commission to be necessary for the

development of a conventional reservoir or an

unconventional reservoir by the drilling of one or more

horizontal wells. A non-standard horizontal well unit may not

exceed 640 acres plus the tolerances and variances allowed

pursuant to 52 O.S. § 87.1.

(f) Horizontal well location

requirements for horizontal well units

and horizontal well unitizations

(1) Conventional reservoirs. In a conventional reservoir, the

completion interval of a horizontal well in a horizontal well unit

shall be located not less than the minimum distance from the

unit boundary as follows:

(A) Not less than 165 feet from the boundary of any 10-, 20-,

or 40-acre horizontal well unit.

(B) Not less than 330 feet from the boundary of any 80- or

160-acre horizontal well unit.

(C) Not less than 660 feet from the boundary of any 320- or

640-acre horizontal well unit.

(2) Unconventional reservoirs. In an unconventional reservoir,

the completion interval of a horizontal well in a horizontal well

unit shall be located not less than the minimum distance from

the unit boundary as follows:

(A) Not less than 165 feet from the boundary of any 10-, 20-,

or 40-acre horizontal well unit.

(B) Not less than 330 feet from the boundary of any 80-, 160-,

320-, or 640-acre horizontal well unit.

(3) Horizontal well unitizations. The completion interval of a

horizontal well in a horizontal well unitization shall not be

located less than 330 feet from the unit boundary.

The Commission may establish well location requirements

different from those provided in subsection (f) of this Section

when necessary to prevent waste and protect correlative rights.

These requirements may be established in the order creating a

standard or nonstandard horizontal well unit or through a special

rule of the Commission covering a conventional or

unconventional reservoir in a designated geographic area. (see

OAC 165:10, Subchapter 29, Special Area Rules).

(g) Alternative well location

requirements

(1) Horizontal oil well allowables may be established

administratively using the standard allowables provided in

Appendix A (Allocated Well Allowable Table) supplemented by

the additional allowables provided in Appendix C (Table HD) to

this Chapter.

(2) The allowable for a horizontal gas well shall be computed in

the manner prescribed for a non-horizontal gas well in the same

common source of supply.

(h) Allowable

(3) The allowable for a horizontal well unit or horizontal well

unitization with multiple horizontal gas wells shall be the sum of

allowables for the separate horizontal gas wells. From this

summation, the allowable for each horizontal gas well will be

calculated as if it were the only well in the unit.

(4) The allowable for a multi-unit horizontal well shall be

allocated to each affected unit using the allocation factors

determine in accordance with 52 O.S. § 87.8(B)(1).

Horizontal well units, horizontal well unitizations and multi-unit

horizontal wells may be pooled as provided in 52 O.S. § 87.1, 52

O.S. § 87.6 et seq. and Commission Rules of Practice, OAC 165:5.

Pooling

OAC 165: 10-29-2

Alternative location requirements for horizontal

well units

(a) Scope and effect. The well location requirements of this

Section apply to horizontal wells completed in horizontal well

units in designated common sources of supply and

geographic areas as specified in this Section. Horizontal wells

covered by this Section are subject to OAC 165:10-3-28 and

other applicable Commission rules except as provided in this

Section.

(b) Woodford shale.

(1) This subsection applies to horizontal wells completed in

the Woodford shale common source of supply in Atoka,

Blaine, Caddo, Canadian, Coal, Dewey, Grady, Haskell,

Hughes, Kingfisher, LeFlore, Latimer, McIntosh, Pittsburg,

and Sequoyah Counties.

(2) The completion interval of a horizontal well subject to this

subsection shall be located not less than the minimum

distance from the boundary of a standard or non-standard

horizontal well unit as follows:

(A) Not less than 330 feet from an east or west unit

boundary.

(B) Not less than 165 feet from a north or south unit

boundary.

Appendix C: Table HD

Recommended Additional Allowable for Horizontal Oil Wells

based on True Vertical Depth and Completion Interval

Average True Vertical

Depth of Pool in Feet

Additional Allowable

in Barrels per foot of

Completion Interval

To 4,000 .2

4,001 to 8,000 .3

8,001 to 12,000 .4

Greater than 12,000 .5

All oil produced and marketed during the drilling and completion

operations shall be charged against the allowable assigned to the

well upon completion.

Effective date of the allowable shall be the date of first

production.

Horizontal

Drilling and Spacing Causes

Sample application/notice/final order

Sample Survey

Horizontal Spacing

(OCC Rules and Regulations)

OAC: 165:5-7-6(g)

OAC: 165:5-7-6(h)

OAC: 165:5-7-6(i)

OAC: 165:5-7-6.1

OAC: 165:5-7-6.2

OAC: 165:10-1-21

OAC:165:10-1-24

OAC:165:10-1-25

OAC:165:10-3-4(f)

OAC:165:10-3-27(c)(1)

OAC:165:10-3-28

Appendix C (Table HD)

(Case Law)

Samson Resources Company v. Corporation

Commission, 831 P.2d 663, 665 (Okla. App 1992)

Horizontal Pooling

(OCC Rules and Regulations)

OAC:165:5-15-3(g)

OAC:165:5-13-3(h)

Deviation from the Vertical(OCC Rules and Regulations)

OAC:165:10-3-27

Horizontal Allowables

(OCC Rules and Regulations)

OAC:165:10-3-28(C)(2)

OAC:165:10-3-28(f)(1)

OAC:165:10-3-28(f)(2)

OAC:165:10-3-28(h)(2)

OAC:10-3-29(j)(1)

Horizontal Gross Production Tax

(OCC Rules and Regulations)

OAC:165:10-21-65

OAC:165:10-21-66

OAC:165:10-21-67

OAC:165:10-21-68

Eric R. King

One Leadership Square, 15th Floor

211 N. Robinson Ave.

Oklahoma City, OK 73102

(405) 235-5518