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Crossing the Line--Horizontal Drilling in Areas Held by Existing Production

Christopher D. Friez, Proceedings of 60th Annual Rocky Mountain Mineral Law Institute (2014)

The current boom in horizontal drilling on large spacing units creates a number of interesting issues for oil and gas developers, often relating to the fact that some of these large spacing units include smaller spacing units that may contain oil and gas wells that have been producing for decades. Issues that may arise when a proposed horizontal well is to be drilled in an area with one or more existing vertical wells include the existence of old joint operating agreements (JOA) or farmout agreements and their applicability to the new operations; spacing and pooling issues and the incorporation of the existing production into the new production; potential damage to existing vertical wellbores from hydraulic fracturing and other operations; and the protection of correlative rights with respect to the existing production. The existing production also may create issues with new pooling declarations and orders on top of old pooling declarations and orders, which likely included a much smaller spacing unit. This chapter will examine these issues and identify methods to deal with them. In addition, the chapter will provide hypotheticals for a practical look at situations that can arise, the issues created by those situations, and their potential outcomes.
§ 29.02 Leases Held by Production
One of the first issues an operator may face when drilling a horizontal well with one or