Respecting Offset Well Clauses and Rule 37: Protecting Operators When Well Locations Change

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It is critical to know the locations of bottom holes, permits, completions and other well location data in order to stay within the bounds of lease agreements and play by commission rules. One transgression across stated boundaries could bring legal action, hefty fines, or the mandatory cessation of operations. These penalties could lead to budgetary disaster. Drillinginfo GIS has created a way to quickly monitor these location changes.

Clauses and regulations

When an operator holds a mineral lease, they must keep a careful watch for drilling activity on surrounding properties. If another well is drilled within a certain distance of a lease, the lessee may be obligated to take action to prevent drainage from the lessor’s property. The Offset Well Clause in a lease could require the operator to develop the lease by drilling their own well, or risk paying damages or forfeiting the lease.

Similarly, Rule 37 of the Texas Administrative Code states:

No well for oil, gas, or geothermal resource shall be drilled nearer than 1,200 feet to any well completed in or drilling to the same horizon on the same tract or farm, and no well shall be drilled nearer than 467 feet to any property line, lease line, or subdivision line.

The Railroad commission may grant exceptions to permit drilling within shorter distances than prescribed in this paragraph when the commission determines that such exceptions are necessary either to prevent waste or to prevent the confiscation of property“(Title 16, Part 1, Chpt. 3, Rule 3.37).

Even the best laid plans can change

Drillinginfo had a client who got burned by the Offset Well Clause when the permitted location for a well changed and went undetected by their internal data research. While it is natural for a company to keep a careful watch over newly permitted wells, how can you quickly and easily keep track of location changes when there are thousands of wells to monitor? Take a look at the change in permitted well location below.

Notice the difference in location on the Plats as filed with the RRC:

Respecting Offset Well Clauses and Rule 37:  Protecting Operators When Well Locations Change

Respecting Offset Well Clauses and Rule 37:  Protecting Operators When Well Locations Change

Leveraging Drillinginfo data to avoid disaster

For our Plus and Pro clients, we can deliver a geodatabase containing the spatial locations and attributes of wells, including permitted locations, completions, production data, and bottom hole locations. This data feed is updated weekly, includes lease outlines, producing unit boundaries, pipelines, and drilling rig locations, and is also available as a WMS/WFS Geodata Service for Plus/Pro All-State clients.

As a custom solution for this client, we created a model to detect changes for each of our well data types. With one click, the latest well locations can be compared to a previous data set to detect a change. The model will output only those wells which have changed location, and will contain new attributes to indicate if latitude, longitude, or both have changed. It also measures how far the well attribute has moved and creates an attribute containing that distance change in feet. The example below illustrates the refiled permitted surface location shown above.

Respecting Offset Well Clauses and Rule 37:  Protecting Operators When Well Locations Change

This method gives our client assurance that no more costly surprises are likely to occur. With our weekly geodatabase exports and model, this invaluable information is delivered effortlessly to the end user. Budgetary disaster avoided.

[This post was co-authored with Elizabeth Lipps]

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Justin Scott Winn

Justin Scott Winn is the Senior GIS Analyst at Drillinginfo. He graduated from Texas A&M University and began his GIS/Cartography career at A&M’s Forest Science department, where he helped develop a GIS for reservoirs under the Fort Worth jurisdiction of the U.S. Army Corps of Engineers. At A&M, he conducted surveys for a flood inundation study for the Lower Colorado River Authority along the Colorado River and surveyed land use and vegetation for the Texas Forest Service’s Houston Green project. As a GIS analyst in Austin, he spent several years in the environmental planning field, producing maps for the public and private sector, collecting data in the field, and analyzing data provided by engineers, ecologists, archeologists and historians to quantify and mitigate potential environmental impacts. At Drillinginfo, he has researched leasing and unitization agreements in courthouses and at the RRC, developed models for in-house and custom client applications, overseen GIS customer service requests, and managed client connections to our geodata services.