Bulletin 2016-29

 

Bulletin 2016-29: Issuance of Subsurface Order No. 5 Regarding the Cardium Formation

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Issuance of Subsurface Order No. 5 Regarding the Cardium Formation

Sep 29, 2016

On February 10, 2015, the Alberta Energy Regulator (AER) released Bulletin 2015-05: Oil and Gas Conservation Rules Change Introducing Subsurface Orders announcing changes to the Oil and Gas Conservation Rules (OGCR) and the creation of the new subsurface orders regulatory instrument. Subsurface orders allow the AER to adapt subsurface regulatory requirements for specific geological zones over specified areas to better suit the resource development practices being used.

The AER has completed an internal review of the Cardium Formation and has issued Subsurface Order No. 5 (order), effective October 7, 2016. The order sets out specific AER subsurface rules and regulatory processes for well spacing, production rate limitation, well testing and deliverability, and drill cutting controls for designated areas of the Cardium Formation (see map below).

Where a conflict arises between the order and a term or condition of an approval or licence, the term or condition of the approval or licence prevails. For example, the order’s spacing provisions will only apply to lands that are not subject to other previously issued special well spacing approvals. Licensees may apply to vary or rescind related approvals if they wish to take advantage of the terms of the order. The applications must be filed in accordance with Directive 065: Resources Applications for Oil and Gas Reservoirs.

Overview of Subsurface Order No. 5
The order establishes the following subsurface rules in the area defined by the order for wells producing from the Cardium Formation:
  • There are no well density restrictions for both oil and gas drilling spacing units (DSUs).
  • The target area for wells drilled within the standard DSU for a gas or oil well must be the central area within the DSU having sides 100 metres (m) from the sides of the DSU and parallel to them. Wells may be drilled across the boundaries of contiguous DSUs of common ownership.
  • Defined pools within the order area will be subject to good production practice as reflected in the AER’s maximum rate limitation (MRL) order, provided that optimal depletion strategies are employed and wasteful operations are avoided.
  • Initial pressure tests in accordance with Directive 040: Pressure and Deliverability Testing Oil and Gas Wells are required to be taken at a minimum of one well per three section by three section area (nine section squared area) measured from the wellhead location.
  • Annual pressure tests in accordance with Directive 040 are not required.
  • Initial deliverability testing in accordance with Directive 040 is not required.
  • When required to take drill cutting samples pursuant to the OGCR, section 11.010, and Directive 056: Energy Development Applications and Schedules within the zone defined in the order, a licensee must take the samples at intervals no greater than 20 m within the zone.

Existing rules and requirements that are not specified in the order remain in effect as prescribed in the OGCR and other AER directives. The above rules apply only when operators avoid wasteful operations as defined in section 1(1)(ddd) of the Oil and Gas Conservation Act.

Licensees subject to this order may be required by the AER at any time to conduct and provide data, reports, tests, interpretations, or other information, including performance reports, to enable sufficient review of the licensee’s activity, resource characterization, and reservoir management pursuant to sections 11.005 and 11.006 of the OGCR.

Scope of Subsurface Orders
The order only addresses regulatory matters that are under the AER’s jurisdiction. The order does not in any way predetermine regulatory approval of wells, pipelines, other production facilities, access roads, and other surface disturbances that may be associated with energy resource development of the zone defined in the order. Surface energy resource activities and related land access are regulated separately under Alberta legislation administered by the AER and other provincial departments and municipal governments and must comply with the Alberta Land Stewardship Act regional plans.

Similarly, the order does not vary or alter mineral rights, tenure rules, or royalty matters under the authority of Alberta Energy.

Assessment of Performance
T
he AER will assess performance and monitor activity within the zone defined in the order. Participating operators may be required to submit resource management performance reports and meet with the AER, which could include providing a presentation on performance.

This assessment is required in order to

  • ensure that the order’s approvals and conditions are still appropriate and are performing adequately,
  • ensure that the specified conditions and limitations are being met by operators,
  • obtain relevant data to measure performance,
  • monitor reservoir information to ensure that resource recovery is being optimized by operators, and
  • ensure an appropriate response to unintended consequences, such as wasteful operations.

The order, as well as additional information, is available on the AER website, www.aer.ca, under Data & Publication > Orders > Subsurface Orders. It is also available on the AER order system at http://mapview.aer.ca/bos.

Questions about this bulletin may be directed to Industry Relations by phone at 403-662-3981 or by email to IndustryRelations@aer.ca.

<original signed by>
Kirk Bailey
Executive Vice President
Operations Division