Drilling Bill Modernizes State O&G Statutes

Drilling Bill Modernizes State O&G Statutes

Friday, April 15, 2011
Knight Ridder/Tribune Business News
by Robert Barron, Enid News & Eagle, Okla.

Enid Legislation authored by state Rep. Mike Jackson and state Sen. Cliff Branan allowing expansion of horizontal drilling in Oklahoma was signed into law Wednesday by Gov. Mary Fallin.

House Bill 1909 modernizes oil and gas statutes to update them to accommodate technological advances in horizontal drilling in shale reservoirs. Jackson, R-Enid, said originally there was opposition from royalty and mineral owners, but a task force led by Corporation Commissioner Dana Murphy looked at the problem in an interim study.

The legislation allows for production to expand across drilling unit boundaries of 640 acres. To do so, producers would make application to royalty owners. Producers who do not own a royalty lease can go across the lease and make percentage payments for surface damages that have been done. Jackson said that will benefit shale production in northwest Oklahoma. It makes investment costs less, because drilling can be extended, rather than "poking another hole in the ground," he said.

"When you poke a hole in the ground, your upfront costs are more, so if you can extend it ...," Jackson said.

He said he thinks there will be an increase in horizontal drilling in northwest Oklahoma because of the shale play here and because investment costs are less. That will result in an increase in gross production tax receipts, give more people jobs and do a number of things that will benefit the state, Jackson said.

"The more production is pulled out of the ground benefits the mineral owner as well," he said.

Producers must submit a proposal for horizontal drilling to Oklahoma Corporation Commission for approval, and mineral owners will have a say in whether they want it to occur, Jackson said. There is a high threshold, but an overall benefit to everyone will make it work, he said.

Fallin said the act will help Oklahoma compete against other shale plays nationwide and ensure drilling dollars stay in Oklahoma. Murphy praised the signing of the bill Wednesday.

"I am pleased and proud to have been part of this nine-month-long collaborative effort to ensure that Oklahoma's natural resources continue to be developed while protecting all mineral owners' and other stakeholders' rights," Murphy said. "It was an honor to serve as the facilitator and coordinate this effort with industry, mineral owners and others to make this bill a reality."

A statement from Continental Resources said representatives of the company participated in the study sponsored by Murphy. Advances in horizontal drilling techniques for wells drilled and completed in shale reservoirs have advanced beyond the historical statutory spacing scheme, particularly with lateral wells exceeding 5,280 feet in length, the Continental statement said.

Oklahoma Corporation Commission is the agency charged with the protection of rights of those owning oil and gas interests in Oklahoma, prevention of waste and promotion of full development.