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Conventional Plays Target of Oklahoma's Expanded Long-Lateral Drilling Rules

Implementing a law passed earlier this year by the state legislature, the Oklahoma Corporation Commission (OCC) has adopted on an emergency basis long-lateral drilling rules that apply to all oil and natural gas formations in the state, not only unconventional plays.

The rules were set to take effect Friday, assuming approval from Gov. Mary Fallin.

The OCC "doesn't make law, it only sets rules under the law," said spokesperson Matt Skinner. The expanded requirements are categorized as "emergency" rules to permit a quicker approval process, but they are nevertheless permanent requirements, he said.

The new standards allow for long laterals anywhere in Oklahoma, including areas where vertical wells predominate, Skinner said. Although additional rules are likely to be added, he said there is broad stakeholder agreement that the initial ones are a good start at protecting the correlative rights and people already operating in the nonshale formations.

The Oklahoma Oil and Gas Association (OKOGA), the Oklahoma Independent Petroleum Association, and Continental Resources Corp. all support the new rules as an extension of the state legislation (SB 867) that called for them to be put in place.

"SB 867 is the compromise result of years of work and months of negotiation this year alone" among the major oil/gas and royal trade associations, OKOGA said in written comments to the OCC.

OCC drafted the measures in July and adopted them following a public hearing on Tuesday. At the end of May Fallin signed the Oklahoma Energy and Jobs Act, establishing a three-month window for the regulatory commission to establish the new long-lateral rules.

Owner and operators of oil, natural gas, disposal and injection wells, along with royalty owners, would be affected by the rules concerning horizontal well unitizations and multi-unit horizontal wells in targeted reservoirs, whether unconventional or not. They include authorizations for expenditures on pooling order applications, as well as setting requirements for horizontal spacing units.

"It is anticipated that the proposed emergency rules will encourage the drilling of horizontal wells, and will result in cost savings to owners and operators," according to an OCC analysis of the rules' impact. Operators and royalty owners should get increased revenues from their wells and there are no fee changes involved, according to the OCC, which does not expect its regulatory costs to increase.

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