1.
UFT Rule ProposalS
Adopting statewide Horizontal rules in texas
R. Mark Henkhaus, pe, regulatory manager, apache corp

2. Horizontal drilling
Horizontal (HZ) drilling is an old method with new technology and much potential
It has enabled complex geometry of well paths
Allows precise placement of entire lateral length
Has dramatically increased drilling in unconventional reservoirs- makes uneconomic plays economic
Has dramatically increased production
Has brought the US and Texas to the forefront of energy technology and production!

3. UFT? What’s a UFT? UFT means Unconventional Fracture Treated
Generally, an unconventional reservoir requiring horizontal drilling and hydraulic fracturing for commercial production
There is no formal designation by the RRC at this time
This effort is a unique, grass-roots driven effort by industry to implement state-wide horizontal rules
Led by multi-trade group including the Alliance, TIPRO, PBPA, and TXOGA

4. Current HZ status iN texas
Horizontal drilling is governed by Statewide Rule 86
SWR 86 was implemented 1990, amended 2000, 2001 and 2004
Rule was developed prior to current technological developments in HZ drilling and multi-stage frac’ing
In 1990 a long lateral was 500 ft… now it is not uncommon to see 10,000+ ft laterals
Clearly, SWR 86 needs modernization

5. current SWR 86 requirements
HZ well must be on lease at all points from formation penetration to terminus
No off-lease formation penetration point permitted
No alternative lease line spacing (“heel” and “toe”)
No “no perf zones”
No “box rule”
No “stacked laterals”
In general, SWR 86 restricts efficient HZ development rather than encouraging it

6. Proposed uft rules-field designation
A formal procedure for the RRC designate certain fields as “UFT” fields within the rule
Permeability < 0.1 md
5 producing wells
80% of wells must have been HZ and frac’ed
Notice to operators
If objections, set for hearing
Approximately 60 fields are under consideration at this time

7. Proposed uft rules-field designation
A formal procedure for operators to nominate fields as “UFT” fields
Formal request
Notice to operators
Applicant must submit technical data, including
Core analysis
Well test
Logs, other data as needed
If no protest, approval is administrative
If protest, hearing is required

8. Proposed uft rules-Acreage
Allows duplicate assignment of acreage between vertical and horizontal wells
Identical to recent Spraberry (Trend Area) field rules
Requires new P-16 to manage acreage accounting
Allows full HZ development on vertically developed tracts without use of Rule 38 (density) exceptions
Example: 640 acre lease with 80 acre density. Proposal would allow 8 vertical wells and 8 horizontal wells in this tract

9. Proposed uft rules-density reduction
Proposal will allow field-wide density reduction to one-half existing density upon good evidence increased density needed for full development
Notice to operators
Administrative approval if no objections

10. Proposed uft rules-SWR 38
Streamlined procedure for Rule 38 density exceptions
Reduced notice requirements- 600 ft radius
No technical information required
21 day waiting period
If no objections, administrative approval
Similar to current Spraberry (Trend Area) procedure

11. Proposed uft rules- double asgmt of Acreage
Allows double assignment of acreage between vertical and horizontal wells
No requirements for Rule 38s in this case
Does not affect field spacing
Encourages HZ development without forcing vertical operators into obligation drilling
Essentially as Spraberry (Trend Area) rules allow now

12. Proposed uft rules-allowables
Establishes a per-acre allocation formula for UFT fields.
Per-acre factors proposed: 100 bbl/acre oil, 600 mcf/acre gas
Overproduction can be cancelled upon request
Allows for typical HZ production curves, with very high rates early, steep decline, and long life

13. Proposed uft rules-spacing
Does not change field rule spacing
Allows off-lease penetration point, with notice
Allows Stacked Laterals
Allows drilling box
Allows NPZs- Non-Perf Zones in a well

14. HZ lease line spacing without special field rules
Illustrated with statewide spacing

15. HZ well-to-well spacing without special field rules
Illustrated with statewide spacing

16. Proposed uft rules-spacing
Does not change field rule spacing
Allows off-lease penetration point, with notice
Allows Stacked Laterals
Allows drilling box
Allows NPZs- Non-Perf Zones in a well

17. Off Lease Penetration Point Off Lease Surface Location
Allows full lateral length on lease
First Take Pt
Surface Loc
Terminus
Penetration
Point

18. Proposed uft rules-spacing
Does not change field rule spacing
Allows off-lease penetration point, with notice
Allows Stacked Laterals
Allows drilling box
Allows NPZs- Non-Perf Zones in a well

19. Stacked lateral wells
Vertical Section View Plat View

20. The “red” wells are stacked laterals
They share acreage and allowable

21. Proposed uft rules-Stacked laterals
Stacked laterals allow the conservation of acreage by allowing “multiple assignment” of acreage in multiple landing zones
Wells must be within a defined distance in distinct landing zones, 660 ft
Allow efficient drilling and development in thick, tight unconventional reservoirs
Enables additional HZ wells to “share” acres and allowable with the parent well
Common in modern HZ fields now

22. Proposed uft rules-spacing
Does not change field rule spacing
Allows off-lease penetration point, with notice
Allows Stacked Laterals
Allows drilling box
Allows NPZs- Non-Perf Zones in a well

23. Box Rule for Drilling
Allows a “legal well” to be within a box 50 ft either side of permitted well path
Provides for drilling efficiency
Common in recent HZ field rules

24. Proposed uft rules-spacing
Does not change field rule spacing
Allows off-lease penetration point, with notice
Allows Stacked Laterals
Allows drilling box
Allows NPZs- Non-Perf Zones in a well

25. NPZ Illustration
Allows penetration closer to lease line than field rules allow
All take points must be within field rules
Notice required to NPZ offsets, opportunity for protest

26. Proposed uft rules-Plats
To address concern about wellbore placement and legal well spacing and take points, survey required
Requires as-drilled, as-completed plats for all HZ wells showing actual well path and first/last take pts
Plats must be certified by RPLS or PE as to the wellbore path and take points.
Continues requirements for directional companies to independently upload and certify directional surveys

27. Proposed uft rules-new fields
An orderly process for requesting new fields to be added to approved UFT list
Requires technical data
Allows other operators to object
Hearing process if objections, otherwise administrative approval

28. Proposed uft rules-Current Status
Alliance, PBPA, TIPRO, TXOGA have been working with RRC staff since early 2014 on this proposal
Those participating have the backing of their companies and their Trades
RRC staff has been very open to suggestions and have been very helpful in cleaning up proposals
Proposal exists in draft form only, has not been released by Trades or RRC

29. Proposed uft rules-Going Forward
UFT group has requested RRC initiate formal rulemaking for SWR 5, 31, 38, 40, 45, 52, and 86
RRC must decide, at conference, to formally publish for rulemaking
Initially was to be at September conference, but we believe that is postponed until October
Upon publishing, public comments will be received

30. Proposed uft rules-going forward
When this proposal is open for rulemaking, please support the Alliance and the other Trades by expressing your support to the Commissioners, and commenting in writing to the RRC Rules Coordinator

31. Benefit of UFT rules
HZ development represents a sea-change in how we do business and how we develop resources
These proposed rules eliminate inconsistencies in existing rules
These proposed rules will eliminate red tape, increase efficiency, while still protecting correlative rights
These proposed rules will enable the technology shift to be utilized fully to the benefit of the operators, owners, and the State of Texas

32. These proposed rules will work
These proposed rules are essentially in place now, in the Spraberry
They work now in the Spraberry (Trend Area) Field

33. Full Development in Action!

35. Proposed uft Rules- in closing
Texas has always been the most important contributor to American energy, but there has never been a time where the work of Texas operators has been so closely tied to international geopolitics, economics and the security of our nation. For the past 50 years we have been in a near-constant price war with OPEC.  This paradigm has shifted... it is now a production war.  As Texans we only know a few ways to deal with our problems:  work harder, get better…. and Win!

37. Thank you! UFT Rule Proposal
UFT Rule Proposal
Adopting statewide Horizontal rules in texas