Drilling Permits Statewide Rule 37 & 38 Exceptions

Drilling Permits Statewide Rule 37 & 38 Exceptions

Drilling Permits Statewide Rule 37 & 38 Exceptions Christopher Houston Lorenzo Garza AUGUST 2017 Railroad Commission of Texas | June 27, 2016 (Change Date In First Master 1

Drilling Permits Statewide Rule 37 & 38 Exceptions Presentation Overview Terminology associated with exception applications Statewide Rule Exception Triggers Notification parameters Plat requirements Different ways to resolve SWR exceptions Railroad Commission of Texas | June 27, 2016 (Change Date In First Master

2 Drilling Permits Statewide Rule 37 & 38 Exceptions Railroad Commission of Texas | June 27, 2016 (Change Date In First Master 3 Drilling Permits Statewide Rule 37 & 38 Exceptions

Railroad Commission of Texas | June 27, 2016 (Change Date In First Master 4 Drilling Permits Statewide Rule 37 & 38 Exceptions SWR 37 & 38 terminology you should know. OFFSET WAIVER1. Basic information required 2. Information on waiver must

match permit application 3. We will not accept waivers older than 6 months Railroad Commission of Texas | June 27, 2016 (Change Date In First Master 5 Drilling Permits Statewide Rule 37 & 38 Exceptions Railroad Commission of Texas | June 27, 2016 (Change Date In First Master

6 Drilling Permits Statewide Rule 37 & 38 Exceptions SWR 37 & 38 terminology you should know SERVICE LIST TOLERANCE ACRES UNAFFECTED 1. Lease spacing

2. Between well 3. Density Railroad Commission of Texas | June 27, 2016 (Change Date In First Master 7 Drilling Permits Statewide Rule 37 & 38 Exceptions SWR 37 LEASE LINE EXCEPTIONS What triggers a SWR 37 lease line exception? Vertical well

Directional well Horizontal well 1. SWR 86 field 2. Field with special horizontal rules Railroad Commission of Texas | June 27, 2016 (Change Date In First Master 8 Drilling Permits Statewide Rule 37 & 38 Exceptions

Vertical Well in Productive Zone Railroad Commission of Texas | June 27, 2016 (Change Date In First Master 9 Drilling Permits Statewide Rule 37 & 38 Exceptions Directional Well in Productive Zone

Railroad Commission of Texas | June 27, 2016 (Change Date In First Master 10 Drilling Permits Statewide Rule 37 & 38 Exception Horizontal Well Productive Zone 13 Railroad Commission of Texas | June 27, 2016 (Change Date In First Master

Drilling Permits Statewide Rule 37 & 38 Exceptions Railroad Commission of Texas | June 27, 2016 (Change Date In First Master 12 Drilling Permits Statewide Rule 37 & 38 Exceptions Railroad Commission of Texas | June 27, 2016 (Change Date In First Master

13 Drilling Permits Statewide Rule 37 & 38 Exceptions Railroad Commission of Texas | June 27, 2016 (Change Date In First Master 14 Drilling Permits Statewide Rule 37 & 38 Exceptions

Plat requirements For Lease Line SWR 37 exception The plat must clearly show all offset interests within whichever is greatest between the lease line spacing or half of the between well spacing for the field in question. Vertical well from location of the well Directional well from the BHL of the well Horizontal well- portion of well within the correlative interval 15

Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Drilling Permits Statewide Rule 37 & 38 Exceptions Plat requirements For Lease Line SWR 37 exception Example: LL = 467 BW= 1200 so half of BW = 600 this value is greater than 467 so offsets within 600 of well location must be shown on plat. All plats used for SWR exceptions must be

certified with a surveyors stamp or signature from operator representative. Railroad Commission of Texas | June 27, 2016 (Change Date In First Master 16 Drilling Permits Statewide Rule 37 & 38 Exceptions Plat requirements For Lease Line SWR 37 exception Special horizontal field rules- dual lease line provisions The plat must clearly show all offset interests within

the prescribed heel and toe distances and within the minimum lease line distance along the well bore path 17 Railroad Commission of Texas | June 27, 2016 (Change Date In First Master Drilling Permits Statewide Rule 37 & 38 Exceptions Railroad Commission of Texas | June 27, 2016 (Change Date In First Master

18 Drilling Permits Statewide Rule 37 & 38 Exceptions RESOLUTIONS TO SWR 37 EXCEPTIONS LEASE LINE: You are your own offset. You have waivers from affected offsets. Provide service list for 21-day notification of affected offsets.

If unable to locate affected parties request to set up for publication of notice for 4 consecutive weeks Railroad Commission of Texas | June 27, 2016 (Change Date In First Master 19 Drilling Permits Statewide Rule 37 & 38 Exceptions SWR 37 SPACING EXCEPTIONS What triggers a SWR 37 Between Well exception?

Railroad Commission of Texas | June 27, 2016 (Change Date In First Master 20 Drilling Permits Statewide Rule 37 & 38 Exceptions SWR 38 WELL DENSITY EXCEPTIONS What triggers a SWR 38 density exception?

Railroad Commission of Texas | June 27, 2016 (Change Date In First Master 21 Drilling Permits Statewide Rule 37 & 38 Exceptions Plat requirements for SWR 37 BW and 38 exceptions all offset interests must be clearly labeled on plat around the entire lease or pooled unit. Could include

1. Offset operators or 2. Lessee or 3. Unleased mineral owner. Verify that your field does not have special notification requirements Railroad Commission of Texas | June 27, 2016 (Change Date In First Master 22 Drilling Permits Statewide Rule 37 & 38 Exceptions

Railroad Commission of Texas | June 27, 2016 (Change Date In First Master 23 Drilling Permits Statewide Rule 37 & 38 Exceptions Railroad Commission of Texas | June 27, 2016 (Change Date In First Master 24

Drilling Permits Statewide Rule 37 & 38 Exceptions Railroad Commission of Texas | June 27, 2016 (Change Date In First Master 25 Drilling Permits Statewide Rule 37 & 38 Exceptions Railroad Commission of Texas | June 27, 2016 (Change Date In First Master

26 Drilling Permits Statewide Rule 37 & 38 Exceptions RESOLUTIONS TO SWR 37 and 38 EXCEPTIONS BETWEEN WELL: You are your own offset. You have waivers from affected offsets. Provide service list for 21-day notification of affected offsets.

If unable to locate affected parties request to set up for publication of notice for 4 consecutive weeks Railroad Commission of Texas | June 27, 2016 (Change Date In First Master 27 Drilling Permits Statewide Rule 37 & 38 Exceptions RESOLUTIONS TO SWR 37 and 38 EXCEPTIONS BETWEEN WELL: CONTINUED Unaffected status

1. Offset resides in another state or country 2. For larger leases/pooled units that affected offsets are more than 1 mile away from well location. Provide offset plat that shows entire lease Show 1 mile radius around well Letter requesting Unaffected status for those offsets more than 1 mile away including drainage calculations Railroad Commission of Texas | June 27, 2016 (Change Date In First Master 28

Drilling Permits Statewide Rule 37 & 38 Exceptions RESOLUTIONS TO SWR 38 EXCEPTIONS: Continued Once notification has occurred with no protests then processing of application continues. 1. If no data is required then permit is administratively approved. 2. If data is required then RRC technical examiner will review the information you have provided.

Railroad Commission of Texas | June 27, 2016 (Change Date In First Master 29 Drilling Permits Statewide Rule 37 & 38 Exceptions Railroad Commission of Texas | June 27, 2016 (Change Date In First Master 30

Drilling Permits Statewide Rule 37 & 38 Exceptions Railroad Commission of Texas | June 27, 2016 (Change Date In First Master 31 Drilling Permits Statewide Rule 37 & 38 Exceptions Railroad Commission of Texas | June 27, 2016 (Change Date In First Master

39 Drilling Permits Statewide Rule 37 & 38 Exceptions HOW DOES THE W-1A WORK If the date that the tract took its size and shape is prior to the field rules going into effect a permit can be granted on substandard acreage. If this is the last well on the lease and you have the specified tolerance acreage

available and the tract took its size and shape prior to the field rules going into effect then a permit can be granted on substandard acreage. Railroad Commission of Texas | June 27, 2016 (Change Date In First Master 33 Drilling Permits Statewide Rule 37 & 38 Exceptions

Important things to remember: 1. Make sure you file a certified plat that clearly shows the affected offsets. 2. In fields with special horizontal rules make sure that you manually flag your application for a SWR exception. 3. Lastly call us if you have any questions before you file the application. Railroad Commission of Texas | June 27, 2016 (Change Date In First Master

34 Drilling Permits Statewide Rule 37 & 38 Exceptions SWR 37/38 and Partially Leased Interests How a SWR 37 exception is triggered Using NPZs Stopping a SWR 37 from being triggered Controlling who gets noticed

Railroad Commission of Texas | June 27, 2016 (Change Date In First Master 35 Drilling Permits Statewide Rule 37 & 38 Exceptions Railroad Commission of Texas | June 27, 2016 (Change Date In First Master 36

Drilling Permits Statewide Rule 37 & 38 Exceptions Railroad Commission of Texas | June 27, 2016 (Change Date In First Master 37 Drilling Permits Statewide Rule 37 & 38 Exceptions Railroad Commission of Texas | June 27, 2016 (Change Date In First Master

38 Drilling Permits Statewide Rule 37 & 38 Exceptions Railroad Commission of Texas | June 27, 2016 (Change Date In First Master 39

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