Bulletin 2011-29

Bulletin 2011-29: Changes to the Province-Wide Framework for Well Spacing for Conventional and Unconventional Oil and Gas Reservoirs

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Changes to the Province-Wide Framework for Well Spacing for Conventional and Unconventional Oil and Gas Reservoirs

Oct 06, 2011

On November 25, 2010, the Energy Resources Conservation Board (ERCB/Board) issued Bulletin 2010-39: Invitation for Feedback on Province-Wide Framework for Well Spacing for Conventional and Unconventional Oil and Gas Reservoirs. During the feedback period, from November 25, 2010 to January 21, 2011, the ERCB received over 60 submissions from companies, individuals, and associations. A summary of the stakeholder submissions is available on the ERCB website, www.ercb.ca, under Industry Zone: Rules, Regulations, Requirements: Directives: Directive 065.

The ERCB has completed a comprehensive review of the stakeholder submissions and acknowledges that there is public concern about the removal of well density controls, but notes that the concern relates to the impact of surface development rather than the subsurface well spacing. The optimal development of oil and gas reservoirs does not predispose approval by the ERCB of any related applications for surface facilities, such as wells or pipelines. No landowner rights or the public’s opportunity to participate in ERCB processes are affected by these modifications. Public notification is currently and will continue to be a requirement for surface facility applications, and concerns regarding impacts of specific oil and gas developments on the surface will continue to be considered through the facility application process. The EnerFAQs Proposed Oil and Gas Development: A Landowner’s Guide offers information on what a company applying to develop an oil or gas project must provide a landowner whose right may be directly affected.

After reviewing all stakeholder submissions, the ERCB has made the following changes to the four areas outlined in the original framework.

Well Spacing Framework Changes

1) Remove Well Density Controls for Lower Quality Reservoirs
The ERCB has amended Part 4 of the Oil and Gas Conservation Regulations (OGCR) by removing the well density controls for coalbed methane (CBM), including coal seams with other interbedded lithologies, and shale gas reservoirs throughout the province and for all gas zones to the base of the Colorado Group in the area outlined in Schedule 13A of the OGCR. (For the designation of shale gas reservoirs for the purpose of well spacing, refer to Bulletin 2010-28: Zones Eligible for Shale Gas Fluid Codes ). Therefore, well spacing applications are no longer required for the production of CBM (including coal seams with other interbedded lithologies) and shale gas reservoirs throughout the province and for all gas zones to the base of the Colorado Group in the area outlined in Schedule 13A. The exception to this is where there is existing special well spacing, in which case a spacing application is required to rescind the current approved spacing in favour of the new spacing regulations.

Multiple contiguous drilling spacing units (DSUs) of common ownership (defined, with respect to spacing, in Directive 065: Resources Applications for Oil and Gas Reservoirs, Unit 7) may be developed, limited solely by the regulation target area, which applies only to the external boundaries of that block of land. This rule pertains to any oil or gas DSU that is not subject to a holding and where the development does not exceed the baseline well density as defined by the OGCR .

2) Increase Baseline Well Densities Province-Wide for Conventional Gas Reservoirs
The ERCB has amended Part 4 of the OGCR to increase the baseline well densities from one well per pool per standard DSU (one section) to two wells per pool per standard DSU for the production of gas reservoirs from all areas of the province. This amendment does not apply to CBM and shale gas throughout the province and all gas zones to the base of the Colorado Group in the area outlined as Schedule 13A since well density controls have been removed for those reservoirs.

The increased baseline well densities apply only to those lands that are not subject to previous spacing approvals.

It should be noted that no changes have been made to the baseline well densities for gas in the areas and strata outlined in Schedule 13B, where the baseline well densities have previously been increased and remain at four wells per pool per section.

The standard DSU has been retained as one section for gas. Consequently, the provincial Department of Energy rules for royalty calculations and tenure administration have not been affected.

3) Standardize Province-Wide Target Areas for Standard DSUs
The ERCB has amended Part 4 of the OGCR by changing the standard target areas for oil and gas reservoirs in the province.
Standard buffer zones for holdings are also consistent with the standard target area concept for oil and gas reservoirs throughout the province.

The ERCB has amended the regulations as follows:

Oil Wells

The target area for a standard quarter section DSU for the production of oil from all zones from all areas of the province is at least 100 metres (m) from all boundaries of the DSU.

Gas Wells

The target area for a standard one section DSU for gas from all zones in the area of the province outlined in Schedule 13A is at least 150 m from the south and west boundaries of the DSU. In this regard, the ERCB had previously proposed a central gas target area for the entire province. The ERCB received a significant amount of feedback that a change from the current corner target area concept in the Schedule 13A area could have a negative impact on conservation and effective reservoir drainage and therefore decided to maintain the corner target area concept in this area of the province. The ERCB did not receive any negative feedback on using 150 m as a target area for gas and consequently decided to use this distance as the standard for both central and corner target areas.

The target area for a standard one section DSU for the production of gas from all zones in the province outside of the area outlined in Schedule 13A is at least 150 m from all boundaries of the DSU.

4) Amend the Regulations
The ERCB has undertaken the following to decrease the complexity of the current well spacing framework.

  • Amended Sections 4.040(1), 4.040(2), and 4.040(3) of the OGCR that allow the ERCB to grant an application to reduce the size of a DSU. The ERCB no longer accepts applications to reduce the size of a DSU. Well densities greater than the standard may be obtained by means of a successful application for a holding.
  • Amended Sections 4.040(1) and 4.040(2) of the OGCR that allow the ERCB to grant an application to change the target area of a DSU. The ERCB no longer accepts applications to change the target area of a DSU.
  • Amended Section 4.050(1) of the OGCR, which states “that any person proposing to drill a well in a fractional section shall apply to the Board for a special drilling spacing unit if the proposed drilling spacing unit differs in area from a normal drilling spacing unit by more than 5 per cent.” The amendment allows tracts of land that are at least half the size of a normal DSU to be considered a standalone DSU without application to the ERCB. For areas that are less than half the size of a normal DSU and have common mineral ownership with a DSU to the east or west of the tract of land, the tract of land will be joined with the adjacent DSU without application to the ERCB.
  • Enacted regulations to allow applicants to apply to rescind special DSUs that have been approved through the well spacing application process.

The ERCB has also implemented the following Directive 065 amendments with respect to the well spacing application process.Eliminated the approval holder designation on holdings established by well spacing applications.

  • Eliminated mandatory ownership and notification attachments to the well spacing application. Notice letters, the mineral notification list, lessee map, and lessor map are no longer required attachments as part of the application submission. The ERCB will, however, conduct audits of this information. It is the responsibility of the working interest owner filing the well spacing application to keep this information on file and to submit it to the ERCB upon request.
  • Required to be attached to the application a signed declaration that there is common ownership, as described in Directive 065, within the area of each applied-for holding and that notification has been conducted in accordance with the requirements of Directive 065.
    Preapplication notification is still required for well spacing applications and must be conducted using the applicable notification templates found in Directive 065, Appendix J.

Implementation

The changes outlined above are effective October 6, 2011. Wells drilled on target in accordance with the DSU and target area before this date will not be subject to an off-target penalty.

The ERCB believes that the consistent application of standard buffer zones in a region greatly enhances equity, supports orderly and efficient development, and maximizes resource conservation. In this regard, the ERCB has defined standard buffer zones for holdings that are consistent with the newly implemented target area concept. The ERCB encourages standard buffer zones for holdings and will in some cases consider well exemptions from a buffer zone for wells drilled in accordance with a holding if the holding is amended to include a standard buffer zone. To be considered for a well exemption, the well would have to have been drilled in accordance with the holding on or before October 6, 2011. The applicant is responsible to provide supporting documentation for a requested well exemption when filing a well spacing application.

The ERCB will not consider a well exemption for a well being produced from a holding that becomes located within a revised buffer zone due to changes in the area of the holding. In this situation, the well will continue to be subject to enforcement for producing from within the buffer zone. The well licensee is responsible to maintain common ownership within holdings to ensure that no buffer issues occur.

Questions regarding this bulletin should be directed to the Resources Applications Helpline at 403-476-4967 or by e-mail to Resources.Applications@ercb.ca.

<original signed by>

Stephen Smith
Executive Manager
Applications Branch