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MARCELLUS SHALE: Staying Upright in a World of Horizontal Drilling Pooling and the Development of Horizontal Wells

Today's Presenter: Ryan J. Morgan. Steptoe

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MARCELLUS SHALE: Staying Upright in a World of Horizontal Drilling Pooling and the Development of Horizontal Wells

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    1. MARCELLUS SHALE: Staying Upright in a World of Horizontal Drilling Pooling and the Development of Horizontal Wells

    4. What We’re Not Going to Cover 4

    5. What We Are Going to Cover 5

    6. A Quick Review - Pooling

    7. Reason for Pooling Rule of Capture No liability for drainage Public interest benefit Correlative Rights Owner’s right to fair chance to produce Wasteful production techniques limited Negligent damage to formation prohibited

    8. Reason for Pooling One well in each drains efficiently Without pooling & unitization A & B can each drill close to the lease line Rule of capture allows Rule of correlative rights allows

    9. Reason for Pooling Prevents physical and economical waste Rational development Maximize recovery for public Owner gets fair share Spacing and lease line requirements Production requirements

    10. Reason for Pooling Pooling – joining of tracts or fractional mineral interests

    11. The Current Law: Statutes & Regulations

    12. Pooling in Pennsylvania 12

    13. Pooling in West Virginia 13

    14. The Current Law: Case Law

    15. Cases in Pennsylvania 15

    16. Cases in West Virginia 16

    17. Future Cases

    18. Possible Changes to the Law: Proposed Legislation

    19. Proposed Legislation - PA 19

    20. Proposed Legislation - WV 20

    21. Issues with Development of Horizontal Wells

    22. Unleased and Partially Leased Tracts 22

    23. Involuntary Pooling Issues Lease Language differs from Order language: - Royalties larger than 1/8 - Overriding royalties - Calculation methods of royalties

    24. Unleased Premises Issue Can regulatory commission permit unit well to be located on unleased premises over objection of owner?

    25. Unleased Premises Issues Some courts permit involuntarily pooled owner to maintain action for surface damages against unit operator (see Cormack v. WIL-MC Corp., 661 P.2d 525 (Okla. 1983))

    26. Allocation – Basis May be based on surface acreage May be based on formula (e.g. acre feet, net reservoir pay, material balance, determination of remaining reserves, present production, cumulative production, surface acres underlined by productive reservoir, number of usable wells bores)

    27. Conflicting Duties to Lessors 27

    28. The meeting host will now open phone and chat lines for questions To pose a question to the presenter, type your question into the chat box on the lower right-hand portion of the screen and submit to the host

    29. Material Disclaimer

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