Spacing orders limit initial development to one well per unit. Sometimes after production history is established it is determined that one well will not effectively develop the reserves underlying the unit. Therefore, the law provides that operators may seek to increase the well density in a unit for a particular formation.
In order to obtain this authority an operator or owner of the right to drill in the unit can file an application and give proper notice for this request. Notice is required to be given to all parties in the unit entitled to share in any type of production from the spaced formation and to any operator of a well producing from that formation in any of the adjacent offsets. If the operator in the unit is the operator of an offset producing well, all the working interest owners in such well must also receive mailed notice. All this notice, including the necessary publication notice in a newspaper in the county where the unit is located and in Oklahoma County, is to ensure that any party whose interest might be impacted is aware of the request.
At the hearing the applicant must present evidence through competent expert witnesses that the existing well or wells in the unit will not be able to produce the available recoverable unit reserves. If any party objects to the density relief, they will be able to present their case at the hearing and a report will issue recommending the case be granted or denied. That report can be appealed to the Referee who will issue a report recommending the report be approved or overturned or modified. This can also be appealed to the Commission en banc who will then grant or deny the case. Upon issuance of an order, the order can be appealed to the Oklahoma Supreme Court.
Any increased density order will set forth the allowable for oil production or for gas production and how that is to be shared among the wells. The order will also indicate the designated operator or will indicate any owner of the right to drill in the unit can commence the well. The order will also indicate anyone intending to proceed under the order must do so within one year of the date of the order.
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