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Well Spacing Battle in the Pinedale Anticline Continues

Despite a recent industry victory by another company in Wyoming's rich oil and natural gas region, the Wyoming Oil and Gas Conservation Commission (WOGCC) last week denied Ultra Petroleum Corp.'s application for increased density drilling in the Pinedale Field.

However, in the denial, the commission said it is awaiting "additional data" from pilot wells elsewhere in the field. Ultra had been seeking approval to drill one well for every 10 acres within the 70-square-mile Pinedale Anticline, which the company said would help it recover significantly more natural gas than under the current 40-acre spacing between wells regulation (see NGI, April 25).

"The WOGCC noted no disagreements with our findings and, in fact, was quite complimentary, but prefers to await a more complete data sampling from the other pilot programs" said Michael D. Watford, Ultra's CEO. "This doesn't change the answer from our perspective, but does move the timeline back.

"Ultra's presentation before the WOGCC clearly indicated the benefits of 10-acre spacing with an estimated incremental recovery from the Pinedale Field of 15 Tcf of natural gas. Nothing today impacts our 10-year inventory of undrilled locations and we just enjoyed the largest revenue month in our history in April. Our normal increased summer activity in Wyoming is under way and drilling on the Pinedale deep test starts again shortly."

WOGCC Director Don Likwartz said, "The commission was just not ready to make that big of a step yet. Even though the case was made -- and I think it is valid -- that Pinedale Anticline is going to be very similar to Jonah where we are now at [10 acre spacing], the commission wanted to see a little more data from the pilot programs they have approved." Likwartz noted that to date, the commission has approved about 170 wells on 20-acre spacing for five different operators.

"The commission was searching for a way to keep the docket open for six months, but when we read the rules and regs, our two attorney generals that were there Tuesday weren't comfortable with that," he told NGI.

The director noted that the commission had already made its mind up that it was not going to approve Ultra's application until it heard information on Shell's pilot program. "Shell had two wells that were fairly close together where they were producing one well and recording pressures in the other," he said. "There was some indication that maybe they were seeing fairly good pressure drops 600 feet away when conventional wisdom would say very few of the sands that far apart should be in both wells...hence the reason for 10-acre spacing."

Likwartz noted that Shell did point out that the well that was recording pressure had collapsed casing, so they were not sure what the cement was like behind that casing. As a result, the director said "we took all of [Shell's] information with a grain of salt." He noted that Shell was going to do the 10-acre pilot that the commission approved for it about a year ago and are expected to have information from that pilot around November or December 2005.

"Ultra said they will be back, so I would assume they will be coming in wanting a more extensive area for 20-acre spacing and they could probably get that through the commission," Likwartz said.

Watford has said in the past that with Ultra's 1,160 locations on 10-acre spacing, his company could put 619 wells in the Pinedale. With 20-acre spacing, Ultra could drill 511 wells.

The density requirements in Wyoming have been at 40-acre spacing since 1986, but last month, EnCana Corp., the largest coalbed methane producer in Wyoming, won approval to reduce well spacing in the Jonah field to 10 acres from 40 acres. At that time, the WOGCC also granted approval to add three pilot wells on five-acre spacing (see NGI, April 11). Ultra is the third largest operator there after BP.

In one of the more highlighted approvals of reduced well spacing in the region, the WOGCC in July 2004 approved 20-acre-density drilling of Lance Pool wells on Questar's Pinedale Anticline acreage in southwestern Wyoming (see NGI, July 19, 2004). The decision allowed the company to drill more than 100 additional wells.

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