Extended Horizontal Well Development Act:
The Extended Horizontal Well Development Act provides for horizontal well
unitizations and horizontal wells to be drilled across unit boundaries in two or more
existing units, a “Multiunit Horizontal Well.”
Horizontal well unitizations include two sections but may be expanded up
to four sections if good cause is shown for the prevention of waste and pollution,
and the protection of correlative rights. The interest of each owner in the unit is
defined as the percentage of interest owned in each separate tract by the owner,
multiplied by the proportion that the acreage in each separately owned tract bears
to the acreage of the entire unit. A plat designating the boundaries of the unit, and
the proposed tract allocation factors are included in the Plan of Development that
is submitted with the application for unitization. The order authorizing the unit will
establish the drilling pattern and setbacks for the unit, including permitted well
location tolerances for the permitted wells within the unit.
Once an order of the Commission authorizing the unit is signed, the unit still
cannot become effective until the applicant receives written consent from 63% of
the working interest owners in the unit and 63% of the royalty owners in the unit.
If consent is not obtained within six months of the date of the order creating the
unit, the order shall cease to be of further force and effect and shall be revoked by
the Commission. Unleased interest owners within the unit may be subject to a
pooling order of the Commission.
A multiunit horizontal well is a horizontal well wherein the completion
interval of the well is located in more than one spacing unit formed for the same
reservoir, with the well being completed in and producing from such reservoir in
two or more of such units. In other words, a multiunit horizontal well is one well
that extends through, and produces from, more than one spacing unit.
The allocation factor for each affected unit is determined by dividing the
length of the completion interval located within the affected unit by the entire length
of the completion interval in the subject multiunit horizontal well. The royalty
proceeds for a multiunit horizontal well are allocated to each affected unit by
multiplying the royalty contribution factor of the unit by the wellbore royalty
proceeds, with the resulting production being the royalty proceeds for that unit.
Each royalty interest owner in an affected unit shall be entitled to receive the
owner’s proportionate royalty share of the allocated royalty proceeds for that unit.
The application for a multiunit horizontal well shall include the anticipated
location of the well or wells, a map indicating the location of each currently existing
well in each affected unit which is the subject of the application and the anticipated
location of each multiunit horizontal well currently proposed to be drilled, and any
other horizontal well not included in the current application, but anticipated to be
necessary, based upon the information and knowledge then available to the