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Removing the word “shale” from the state’s existing Shale Reservoir Development Act

A 2016 State Chamber study demonstrated 3 key facts about Oklahomas oil and natural gas industry:

•The oil and natural gas industry is far and away Oklahoma’s largest creator of economic activity.
•The oil and natural gas industry is far and away Oklahoma’s largest taxpayer.
•The oil and natural gas industry employs directly or indirectly almost 1 in 5 wage and salary workers and self-employed proprietors in Oklahoma.

The state has been fortunate over the last century to be the home of some of the most significant oil and gas resource plays in the country. In the lower 48 states, only Texas can claim to have been home to a broader and more diverse set of resource plays over time than Oklahoma.

Chad Warmington, president of Oklahoma Oil and Gas Association, said the South Central Oklahoma Oil Province (SCOOP) and Sooner Trend Anadarko Basin Canadian and Kingfisher Counties (STACK) plays are keeping the state’s rig numbers up, as reported in an article published in the Enid News & Eagle newspaper.

“It is the bright, shining light that’s keeping Oklahoma afloat,” he said. “With the development potential going on — about 106 rigs in the state right now — if it wasn’t for the SCOOP and STACK, we wouldn’t be anywhere near that number. When you have a commodity price environment that is half of what it was, it is a good thing to have the SCOOP and STACK and be able to increase production.”

“When oil and gas is active, the whole state benefits,” he said.

“We know from a quick review from our top five or six companies (who are members of Oklahoma Oil and Gas Association), there’s been pledged over $5.5 billion capital expenditures in the SCOOP and STACK in 2017,” he said.

Warmington said legislation currently being heard at the state Capitol could mean more drilling in the SCOOP and STACK. This legislation is Senate Bill 284 and House Bill 1613, together known as the Oklahoma Energy Jobs Act. The bills would allow companies to drill up to two-mile laterals in all producing rock layers, expanding a process already allowed in shale rock layers.

SB 284 and HB 1613 would strike the word “shale” from the state’s existing Shale Reservoir Development Act. The bills are authored by Senate President Pro Tempore Mike Schulz, R-Altus, and Rep. Weldon Watson, R-Tulsa, chairman of the House Energy and Natural Resources Committee.

“It will allow those companies up there to exploit all these formations in the SCOOP and STACK area that are not shale,” Warmington said. “You add that with what already is going on and the impact is exponential. It would easily generate hundreds of millions in new revenue by getting rid of the outdated red tape. It could be better with simple modifications of state law, and that’s what we’ve been working on.”

Adam Wilmoth reported back on March 8 in his article in The Oklahoman “Oil CEOs lobby for longer laterals” that the 2012 Shale Reservoir Development Act allowed companies to drill two-mile laterals in shale rock layers, but most other layers are still restricted to one mile. Longer wells save producers money by allowing them to recover in one well as much oil and natural gas from two, eliminating the cost and time of drilling the second vertical portion.

The process also allows more of the lease to be produced, opening up the portion of the acreage that would be lost to drilling the second vertical and angled well portions.

Under current law, companies may have access to many producing rock layers from one well pad, but may only be able to drill long laterals on a few of those layers.

FourPoint Energy LLC CEO George Solich said the legislation could boost economic activity in Oklahoma

“The passing of this bill could revitalize the western Anadarko Basin as a competitive and economic basin to put capital development dollars to work,” he said. “As of today, innovations in technology have continued to catapult us forward as an industry, but the long-lateral regulatory hurdles we are currently facing continue to discourage investment in the state of Oklahoma.”

FourPoint is the fifth largest leaseholder in Oklahoma with more than 525,000 acres, mostly in western Oklahoma. The company also has more than 200,000 acres in the same rock formation in the Texas Panhandle, where the company can drill two-mile laterals on all rock layers. Other oil and natural gas-producing states do not have the length limitations that are included in Oklahoma law.

“It doesn’t make sense to allow long laterals in one formation, but not in the others,” Devon Energy Corp. CEO Dave Hager said. “Geology doesn’t recognize state lines. In Texas and other states where we’re active, we are not subject to the same restrictions as in Oklahoma. That puts Oklahoma at a competitive disadvantage in a highly competitive industry, and that’s not necessary.”

Sources:
Emily Summars | Enid News & Eagle |SCOOP and STACK oil and gas driving industry for Oklahoma | March 25, 2017

Adam Wilmoth | The Oklahoman | Oil CEOs lobby for longer laterals | March 8, 2017

 

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Compiled and Published by GIB KNIGHT

Gib Knight is a private oil and gas investor and consultant, providing clients advanced analytics and building innovative visual business intelligence solutions to visualize the results, across a broad spectrum of regulatory filings and production data in Oklahoma and Texas. He is the founder of OklahomaMinerals.com, an online resource designed for mineral owners in Oklahoma.

 

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