American Oil and Gas Reporter - October 2017 - 86

ConventionSection: Permian Basin Petroleum Association

Differing Regulations Bisect
Permian Basin Potential
By Dan Holder
MIDLAND-Operators have an old
saying that the best place to find oil and
gas is where there is oil and gas, and that
never rang so true as it does in the Permian
Basin, relates Clint Walker, chairman of
the Permian Basin Petroleum Association.
As they prepare for their annual convention, to be held Oct. 25-26 in Midland,
PBPA members generally will be optimistic, assesses Walker, general manager
of Cudd Energy Services in Midland.
"There definitely are some concerns because of regulatory uncertainties that may
be on the horizon, but, all in all, I think
we are in a better place now than we
were a year ago," he says.
While there is oil to be found beyond
the Texas border in the Permian Basin,
PBPA Executive Vice President Stephen
Robertson identifies the significant regulatory differences between Texas and
New Mexico as responsible for the Lone
Star State's enormous advantages in
drilling activity.
"It is not because the acreage on the
New Mexico side is not good acreage; it
is. There are great opportunities in New
Mexico," he says. "The regulatory environment is just not as settled for operations
right now such as horizontal well projects,
partially because New Mexico's regulatory
scheme still relies on rules created for
vertical operations."
But he says that could be changing.
PBPA has been working for almost a
year through a committee composed of
trade associations in New Mexico and
state and federal regulators to develop
horizontal field rules for the state, Robertson says. He adds that the group is hopeful
of moving forward with proposed rules
in the next few months.
New Mexico isn't the only state in
the Permian Basin to confront the issues
of evolving operations, Robertson says.
However, the state may or may not benefit
from Texas' experience in drafting rules
for horizontal operations, Robertson
judges, considering two key differences
in unit sizes and state regulators' permitting
86 THE AMERICAN OIL & GAS REPORTER

7:30 a.m. Kickoff Breakfast, Petroleum
Club of Midland
Christi Craddick, Chairman, Railroad
Commission of Texas
Ryan Flynn, Executive Director, New
Mexico Oil & Gas Association
9:15 a.m. Texas Legislative Panel
Speakers: Senator Kel Sliger, R-Amarillo;
Senator Charles Perry, R-Lubbock;
Representative Drew Darby, R-San Angelo; and Representative Brooks Landgraf, R-Odessa
10:15 a.m. Infrastructure Panel
Speakers: James Beauchamp, President,
MOTRAN; Jeremy Goebel, Senior Vice
President of Acquisitions & Strategic
Planning, Plains Marketing LP; Jarl
Pederson, Chief Commercial Officer,
Port of Corpus Christi
11:30 a.m. Luncheon
Keynote Speaker: Jay Ottoson, President
and Chief Executive Officer, SM Energy
1:30 p.m. Issues Affecting Permian Basin
Operators Panel
2:30 a.m. Industry Service Company Panel
3:30 a.m. Industry Chief Executive Panel

mitting. All the acreage units would be
connected to each other, but they will be
box-shaped as opposed to an elliptical
shape. That raises questions about whether
an operator truly is producing from all
the acreage included, or if there is acreage
not included that is being drained," he
says.
Robertson reflects that the issue is not
as significant in New Mexico's southeastern counties, where the oil production
is concentrated, but does play a role in
Northwest New Mexico, where gas production dominates. And, with the regulatory bodies wanting to develop statewide
rules, as opposed to regional ones, he
says it's a topic that has to be part of the
conversation. "Experience shows that an
evolved regulatory environment can positively affect activity levels. Operators
really do respond to the regulatory environment," he offers.
"Even though there are currently 68
drilling rigs in New Mexico, only two
are in the northwest," Robertson says.
"The state wants to set up statewide rules,
as opposed to trying to break off the
northwest. This presents its own set of
challenges, and there definitely are some
hurdles to get over, but PBPA is using its
experiences from working on regulatory
rules for the past 50 years in New Mexico
to reach a positive conclusion."

assumptions. The New Mexico regulatory
system evolved around the public land
survey, which Texas does not have. He
notes that a lease as small as one acre
could be included in a Texas production
unit, while New Mexico sets a 40-acre
minimum, explaining that particular
acreage size worked well when operators
were only drilling vertical wells.
"But, in a horizontal well world, adding
acreage 40 acres at a time might not be
the best way to properly develop the hydrocarbon assets for the operator and the
landowner. Further, if you want to drill a
well that goes diagonally from the northwest corner of a section to the southeast
corner-because that's what the geology
calls for to get the best production-there
isn't a simple way to accomplish the per-

Double Acreage
As Texas companies continue to expand
their use of horizontal well technology,
Robertson says the Texas Railroad Commission also has revised its regulations
to keep pace. In that vein, he notes several
PBPA members lately have asked the
agency to look at its rules for double-assigning acreage for wells, he says.
"As with New Mexico, you are talking
about rules that originally were set up
for a vertical world. Traditionally, when
you drill a vertical well, you would get
acreage assigned as a production unit for
that well, with surface acreage mirroring
acreage at depth," Robertson describes.
"In the horizontal world, you still get the
acreage assigned with surface acreage
mirroring acreage for a producing for-

PBPA Annual Meeting
Midland
Wednesday, Oct. 25
6 p.m. Opening Reception, Petroleum Museum

Thursday, Oct. 26

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