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Allocation Wells – A Nerve Has Been Struck

For those following the Klotzman protest of EOG’s allocation well permit (our firm represents the protestants), here are the exceptions to the examiners’ proposal for decision filed by EOG and by Intervenors Devon, Pioneer, Laredo Petroleum and BP America:

EOG Exceptions to PFD.pdf

Devon et al Exceptions to PFD.pdf

Here is a link to the proposal for decision:

2013-06-25 PFD EOG Klotzman (2).pdf

EOG has called on other operators and industry organizations to file objections to the PFD, and they have responded. Letters opposing the PFD have been filed by Diamondback Energy, Halcon Resources, EP Energy, Oxy, Crimson, XTO, Burlington, Texas OIl and Gas Association, Texas Independent Producers and Royalty Owners Association, Texas Alliance of Energy Producers, Panhandle Producers and Royalty Owners Association, and Permian Basin Petroleum Association. Clearly, this PFD has hit a nerve. A typical letter, from Marathon, claims that the PFD would “prevent the drilling of countless horizontal wells throughout the State and cause tremendous, otherwise producible, reserves to be wasted and left in the ground.” The sky is falling.

Operators say that more than 100 allocation well permits have been granted to some 17 operators across the State.  According to the PFD, between April 27, 2010 and the date of the Klotzman hearing on December 3, 2012, 55 permits were approved for “allocation” wells.  During that same time period, the Commission granted 18,335 permits for horizontal wells. So for that time period, allocation well permits were three tenths of 1 percent of all permits granted. More than 4,000 permits were issued by the Commission for Eagle Ford wells alone in 2012, and some 2,000 Eagle Ford permits have been issued this year. The Commission issued a total of 22,479 drilling permits in 2012. Based on these figures, it hardly seems possible that the Commission’s decision not to issue allocation well permits would cause “tremendous reserves” to be wasted.

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