Oklahoma royalty owners oppose longer wells

Oklahoma royalty owners said Tuesday they oppose a plan to let producers drill longer horizontal oil and natural gas wells, suggesting it would further complicate royalty payments and make it easier for producers to drain minerals from adjacent lands.

"How do you know you don't have a nozzle under my place? There's no way for me to know," Marceline Piper of the Woods County Mineral Owners Association told producers during a crowded public forum on the so-called unitization plan before the Oklahoma Corporation Commission, the state agency that regulates utilities. "Our oil or gas is ours, not our neighbor's."

At least 200 people packed into the commission's courtroom and an adjacent hallway as producers and mineral owners discussed possible changes in commission guidelines that would address new technology allowing producers to drill horizontal wells up to two miles long. Producers must pay royalties to landowners with mineral rights in order to use the minerals.

Jim Addison of Houston-based Newfield Exploration Co. said authorizing horizontal oil and natural gas wells with longer lateral lengths would make the wells more efficient and economical.

Current regulatory restrictions require producers to drill only within 640-acre units, limiting the lateral lengths of horizontal wells, Addison said. Some of the acreage within the unit is not developed and oil or natural gas reserves are not tapped.

Newfield is the leading producer in the Woodford Shale natural gas project in Oklahoma's Arkoma Basin, where it has invested $1.6 billion since 2006 and will invest $500 million more this year, Addison said. He said there are 22 horizontal wells in the Woodford Shale, 10 of which belong to Newfield.

Currently, Newfield's longest horizontal well in the Woodford Shale is 6,700 feet. The unitization plan would double the size of drilling units to 1,280 acres and allow for wells up to 10,000 long.

"It's good for the operator. It's good for the mineral owners," Addison said.

Other producers expressed support for the idea, saying horizontal drilling is the best way to develop unconventional sources of mineral supplies like shale formations. Tom Luttrell of Enid-based Continental Resources said his company routinely drills horizontal wells up to 9,000 feet long in shale formations in Montana and North Dakota.

Bob Costello of Oklahoma City-based Chesapeake Energy Corp. said regulators in Arkansas, where Chesapeake is heavily invested in the Fayetteville Shale, are considering regulatory changes to accommodate longer horizontal wells.

A bill filed in the Oklahoma House this year to enlarge drilling units for gas wells to 1,280 acres never got a vote. And royalty owners indicated they are not in favor of larger drilling units.

"When you start creating bigger units, it creates problems for surface owners as well as mineral owners," said Terry Stowers of the Coalition of Oklahoma Surface and Mineral Owners.

Some royalty owners expressed distrust of producers and suggested that the longer units might drain oil and gas from adjacent drilling units without the mineral owner ever knowing or being compensated.

"I know you're all reputable, trustworthy oil people," said Piper, drawing laughter from dozens of mineral owners in the audience.

"We've had no bad experiences with royalty companies," she said later. "We get a check every month."