EOG Resources has filed an application with the Texas Railroad Commission proposing the adoption of temporary field rules for wells drilled in the Eagle Ford Shale in South Texas that could have a significant impact on thousands of oil and gas leases in the field. The application proposes to consolidate 27 designated fields that produce from the Eagle Ford Shale formation, and the proposed rules will replace any field rules previously adopted for those fields. The consolidated rules would apply to Eagle Ford Shale wells drilled in Railroad Commission of Texas Districts 1, 2 and 4. A copy of the notice of the Railroad Commission hearing for the adoption of the proposed rules may be found here:
eagle ford field rules.pdf. The hearing is scheduled for June 25, 2010, at 9 am in the William B. Travis Sate Office Building, 1701 Congress Avenue, Austin. Persons wishing to participate in the hearing must file a notice of intent to appear at least five working days in advance of the hearing date and serve a copy of the notice on the applicant and any other parties of record. More information can be obtained by calling the Office of General Counsel of the Railroad Commission at 512-463-6848.
Field rules are adopted by the Railroad Commission to govern the spacing of wells in a field. They specify how far wells must be from each other, how far wells must be from the nearest lease line, and how much acreage must be assigned to a well in order to obtain a permit to drill a well. The acreage assigned to a proposed well is known as a “proration unit.” Well spacing and density rules were developed by the Commission after it was given jurisdiction over oil and gas operations in Texas in the early days of the oil industry, principally because of unregulated drilling in the East Texas Field. Because of unregulated drilling in that field, wells were being drilled that were not necessary for the efficient development of the field, and oil prices plummeted. The Commission was also given authority to “prorate” production from a field — that is, to limit production, and to allocate or “prorate” the specified limit of production from a field among the wells in a field. The stated purposes of spacing and density rules are to avoid waste and protect the correlative rights of producers in the field. Theoretically, field rules should designate a size for proration units that approximates the amount of acreage in the field that can be efficiently drained by a single well.
The field rules proposed by EOG would provide: