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Dueling Oklahoma Legislative Bills Aim to Expand Drilling Laterals

Oklahoma's Senate this month has produced two competing bills aimed at allowing longer horizontal laterals in non-shale formations in the state. The state's two principal industry groups back different measures.

An official with the Oklahoma Oil and Gas Association (OKOGA) told NGI's Shale Dailyon Tuesday that her association and the Oklahoma Independent Petroleum Association (OIPA) will be working with members of the state lower House to strike a compromise that both associations can get behind.

On Thursday, Tim Wigley, OIPA executive vice president in charge of government affairs, said the two associations met last Tuesday and he is optimistic that a compromise will get worked out. "I suspect there will be another meeting next week and hopefully there will be a meeting of the minds pretty quickly so we can take something to the legislature and come up with [a compromise bill]," Wigley said.

In the meantime, the OKOGA-backed measure (SB 284) sped out of the Senate earlier this month on a unanimous vote (43-0), as did a competing proposal (SB 669) backed by OIPA on the same day. SB 284 would broaden the application of laterals to include both shale and non-shale plays.

Officials from both organizations, which represent different constituencies in the industry, have said they will seek to agree on one bill. OKOGA's members are predominantly large, publicly traded companies, and OIPA has a mix of small to large independent producers.

Industry observers in the state note the issue of longer laterals has been around for some time, with small independent producers who drill vertically being concerned that lengthening the lateral limits could jeopardize their vertical projects.

"The issue has been somewhat controversial between the small vertical producers and the large horizontal operators," Wigley said. "Our board cleared language on a very strong vote last week, so now at least we are able to sit down [with OKOGA] as two organizations and talk, and from what I have seen so far, I feel good about our chances of coming up with something so we can do what the legislature asked us to do, which is resolve this in the industry."

Wigley sees an ultimate compromise bill as a "necessary tool in the industry toolbox" for use in expanding development five or 10 years from now, given the strong influx of investment dollars coming into Oklahoma.

As passed out of the Senate, SB 669, which is backed by OIPA, would eliminate a 640-acre cap on oil/gas well spacing as long as units are no more than a mile wide, and add to notification requirements for long-lateral producers entering areas of existing vertical well production. The proposal also would protect the rights of existing wells in zones above those targeted for extended laterals.

OKOGA officials have stressed the need for Oklahoma to update its laws to keep up with the technology advances sweeping the industry, and to be able to open more areas for development that can only be tapped by longer laterals.

OKOGA President Chad Warmington cited a looming state fiscal crisis as further incentive for supporting SB 284, which he said can help eliminate "outdated red tape" in existing law so the oil/gas industry can help resolve the budget problems. "SB 284 and its companion HB 1613, is the simplest and most effective economic development bill legislators will consider all session,” he said.

Another OKOGA official said there is adequate time to work out a compromise because the state lawmakers aren't scheduled to adjourn until the end of May.

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