Hello, all. I'm a student working on a paper on oil and gas law on large (1280+ acre) spacing units and mandatory/forced/statutory pooling, primarily in North Dakota.
Large involuntary pooling units obviously dilute payments while making it straightforward for operators to tie up the large tracts, and I'm wondering, Are there other issues occasioned by the large involuntary pooling units? (I know one of these times I'm going to type "pooing unit" by mistake.) Does anyone know of any techniques for protecting mineral interest owners and reducing surprises, particularly relating to changes in unit sizes with technological advances?
That might be an overly-specific question, I guess. To put it more simply, are these big spacing (and therefore pooling) units causing problems for mineral interest owners? Are there effective protections under current statutory or common law?
I appreciate any help from the forum, and I'd be happy to pass along a copy of the paper to anyone who wants it when I'm done. Hopefully I can find some meaty topic to chew on and maybe produce something that could be useful.
The 1280 in the tight shale is just a land grab. Some of the people receiving royalty are not being drained. I am on both sides of the equation. The operator is allowed to hold acres by production by picking some of the mineral owners pocket to pay royalty to mineral owners who are not drained.
Some people call this the smaller piece of a bigger pie concept, which I consider total nonsense. One well is not going to drain the spacing, if it was they probably wouldn't stick most of them in one corner. The operator is deliberately leaving room for more wells later on. A wellspacing should be just that, the space that one well can drain, period. If the operator wants to drill another well they should drill it on acres they have already leased or lease more acres to drill on, they should not be allowed to hold by production acres with a well that can't drain them, diluting the mineral owners who actually are being drained royalty. Smaller piece of a bigger pie may sound good but it breaks down in reality because there is no guarantee that more wells will ever be drilled. I personally have parcels in 5 1280 spacings that have only one well and in 5 years not one single infil well have been drilled in my 5 differnt wellspacings, half of the wells are still naturally flowing, it's a very good area but no new wells. One of my wells had the highest IP to date when it started producing in 2008. Where are those infil wells I hear so much about? Where is that bigger pie? All I see is someone else cutting themselves off a slice of my small piece of pie.
I am not very fond of the 2 mile lateral well either. The 2 mile laterals do well until the natural pressure declines and after that produce poorly on a per foot basis. I have seen estimates that over 70% of oil produced comes from the first 3/4 mile of the lateral. There are many horizontal wells in Tx with 3/4 mile laterals. Are the operators in TX not bright enough to see that they are doing it wrong? Wouldn't they all be drilling two mile laterals if it were actually better? I would guess that this is the reason that in Oklahoma there can be a differential on the royalty paid for each section of a well with bore in two sections. If the second half of that 2 mile lateral isn't going to do much after the natural pressure is gone, the operator sure didn't get much use out of what they spent to frack the second half. It is simple enough to understand that if you put a pump on, every drop of production from near the pump is going to reduce the pull exerted at the end of 2 miles. You might pick up a bowling ball with a vacuum cleaner but try drilling a few holes in the hose close to the vacuum cleaner and try it again. You don't have to have an engineering degree to see that the pull at the end of the line is much diminished. There is one thing that the 2 mile lateral does that the one mile lateral can't touch, the 2 mile lateral holds acreage by production at 200% the rate of a one mile lateral. I have already heard the rumbling of shorter more efficient wells in ND and I look forward to them. I would have been in favor of the 1920 spacings to the extent that 1-1/2 mile lateral wells drilled from the center of 3 sections and going both direction would have been alot more efficient , in my opinion, than 2 mile lateral wells.
Most of this you probably already know, if you feel like it give me a footnote, lol. Good luck with your research.