After more than a year of contending with regulators and a small group of landowners to secure more than 3,000 acres for four horizontal drilling units in western Pennsylvania, Hilcorp Energy Co. has dropped its bid for a rare forced pooling order with the state’s Department of Environmental Protection (DEP).
The company said late Friday that it had filed written notice with the DEP, citing a desire to move forward with development and to protect the interest of its lessors across a 3,267 acre tract of land straddling Lawrence and Mercer counties.
The Houston-based company's move brought to an end a highly public battle that began in July 2013 (see Shale Daily, April 2), when the company filed a well-spacing application with the DEP for forced pooling in the area. According to Hilcorp, it had secured 99% of the mineral rights across the area in question, but was forced to file the pooling request after it became clear that a handful of property owners were not willing to sign a lease with the company.
When Hilcorp filed its application, it cited a law passed in 1961 to justify its request to drill more than 7,000 feet underground into a shallow portion of the Utica Shale. The Oil and Gas Conservation Law of 1961, as it's called, applies only to the Utica. Hilcorp would have been the first company in state history to facilitate high volume horizontal fracturing (fracking) under the law.
The application proved problematic from the start, with the DEP initially turning to an oversight panel, the Environmental Hearing Board, to make a ruling on the request. But after four months of deliberations, in November 2013, the board ruled that it did not have jurisdiction in the matter and handed the case back to the DEP, which set the stage for a series of delayed public hearings (see Shale Daily, Nov. 21, 2013).
In a statement issued after its decision to drop the request, Hilcorp said it "remains committed to its legal position" and said it was confident that the company would have ultimately prevailed on the application "as a matter of law."
"In Hilcorp's opinion, this protracted process has created uncertainty for landowners that have leased to Hilcorp and are eager to exercise their right to develop their oil and gas," the company said. "While continuing to pursue legally prescribed integration is the correct legal option, the company decided it was time to move forward with drilling and development plans in order to provide the economic benefits to which the mineral owners in these units are entitled."
Pooling allows an operator to gather landowners into a unit, in which they share royalties and production costs. Dozens of states have similar laws, but in Pennsylvania it applies only to the Utica. The laws were passed at a time when multiple vertical wells were being drilled in high density and were aimed at reducing the number of drilling derricks and surface impacts.
A group of landowners in Lawrence County were not interested in signing leases with the company and three of them filed suit in a Commonwealth Court in May to stop Hilcorp's request (see Shale Daily, May 20). They cited concerns about air and water pollution and the disruptions that could arise from development, such as construction noise and truck traffic.
Hilcorp, one of northwest Pennsylvania's most active operators with 140 horizontal permits in Lawrence and Mercer counties, plans to move forward with development on the leased acreage. The company said it will modify its production units to exclude the unleased tracts of land and added that operations will begin once it receives local and state permits.
The hearings that were scheduled for Hilcorp's pooling request had been postponed four times for various reasons, including the DEP's realization that not enough landowners had been notified of the company's application (see Shale Daily, July 22; March 13).