Another Battle is Indeed Looming


OIPA calls for Campaign for 2% rate

As posted below, the OIPA has a new call to their membership to fund a campaign to make sure they keep the “special 2% “ rate on new wells. They say they want to raise money to put a new face on the industry!

They’ve put a ” new” face of the industry in Oklahoma alright – one of destruction of property and greed.

It is disheartening to see so much of the work so many of us have done over the last 30 years to improve our relationship with the Oklahoma public goes down the drain so fast.

The OIPA we belonged to put our state’s interest at least on par with our own.

Setting the priority of protecting a 2% tax rate that is so obviously low, especially in light of our states serious budget deficits, simply is an indefensible position – even more so when considering that the historical rate of 7% is lower than in any other horizontal drilling state in the US.

Our industry should lead by example, relinquish the special 2% rate, and ask that other tax give always be abolished as well.

Government should stick to funding it’s core functions. The marketplace should pick winners and losers in business.

Oil and gas industry Leadership should put civic responsibility ahead of our own special interest, especially when we have become a big part of our funding problems by getting the legislature to approve the lowest -in – the-nation- Gross Production tax at the expense of our children, our state’s infrastructure, healthcare, and safety net.

Join with us at the Oklahoma Energy Producers Alliance (

Let’s put on “our Oklahoma hat” and lead by example, return our state to fiscal sanity and start by restoring the Gross Production Tax from 2% on new wells to the historical rate of 7% that 86% of producers and royalty owners already pay. Only then will our states largest industry have the moral standing required of civic leadership.

Read the OIPA Newsletter…




In the past week, I’ve had the privilege to meet with Oklahoma’s legislative leadership to discuss current trends in the state’s oil and natural gas industry as well as the upcoming 2018 legislative session AND the potential special session this fall.

With the Oklahoma Supreme Court rejecting the 2017 tobacco “fee,” it’s becoming clear that there will likely be a special session sometime this fall to deal with the budget shortfall. The court has yet to rule on the excise tax issue, but if they rule it as unconstitutional, the budget hole will be even greater.

What does this mean? Once again there will be cries to raise the gross production tax on oil and natural gas development. Our legislative team fought all session long to protect our drilling tax incentive on new wells which places the incentive rate at 2 percent for three years. After the three years, these wells go to 7 percent. This tax incentive has helped Oklahoma companies stay competitive and attract additional capital investment.

In recent weeks, you should have received your membership renewal invoice for the 2017-18 year. I respectfully request that you consider continuing your generous support of OIPA’s efforts to protect you and your business. I would also like you to consider an additional commitment for a new and aggressive public education campaign that will help put a “face” on our great industry.

Your OIPA team works hard every single day to ensure that the interests of our great industry are protected and promoted among policy makers at both the state and federal level. The more resources we have – the more effective we can be for you!

This past spring, OIPA led the way to pass historic legislation to allow for long lateral drilling. This will lead to incredible investment in Oklahoma production. We also led the way in protecting your gross production tax rate to incentivize new drilling in Oklahoma.

There is no other group in Oklahoma that represents the oil and natural gas industry better than OIPA. We like to call ourselves THE ASSOCIATION!

So please consider completing your membership renewal and send it in so that we can continue to fight for you. If you can add an additional amount to your membership dues, your efforts and commitment will be greatly appreciated.

I deeply appreciate your support of our efforts and we look forward to another great year in your service.

Tim Wigley
President OIPA

Hydraulic Fracturing

Small producer wins verdict against Devon in ‘frack hit’ case

An Oklahoma jury has awarded $220,000 to a company that says hydraulic fracturing of a horizontal oil well damaged its conventional oil well.

Advocates for vertical well owners called the verdict against Devon Energy Corp. a significant victory in the bitter fight between small producers and large independents in the state.

“This might just open the floodgates of justice for producers who have lost wells to horizontal fracking,” said Mike Cantrell, legislative director and board member of the small producers’ group, called the Oklahoma Energy Producers Alliance.

Small companies operating vertical wells have filed numerous lawsuits in Oklahoma against larger independent producers that drill long horizontal wells nearby. The small companies say their wells have been damaged by the high-pressure fracture treatments performed on the horizontal wells. The fight has also spilled into the state Legislature.

Devon, based in Oklahoma City, declined comment on the verdict, first reported by OK Energy Today.

The jury sided with H&S Equipment Inc. of Oklahoma City on private nuisance and “subsurface trespass” claims but with Devon on claims of negligence. H&S had said it suffered $2.5 million in damage for the profits it would have made from the damaged well and the costs of plugging the well and drilling a new one.

H&S had a conventional vertical well in Blaine County, Okla., that had been producing oil since 1981. In August 2015, Felix Energy of Denver fracked a well nearby. Devon bought Felix assets in the area in a deal announced in 2015.

In fracturing, water, sand and chemicals are pumped at high pressure into a well to crack open rock and release oil and gas. H&S alleges the frack fluid shot past the area where Felix was to produce and toward the H&S production area.

The day after, the frack fluid started erupting from the well into the air, H&S alleged, as a result of what’s called a “frack hit.”

The frack hit caused serious damage, H&S claimed in the suit, “ruining the well and rendering it incapable of producing oil and gas.” H&S alleged that Felix had fracked “recklessly.”

Devon attorneys argued that Felix had “fully complied” with the rules of the state oil and gas regulators at the Oklahoma Corporation Commission.

They also argued that Felix had not been reckless.

“If a ‘frack hit’ occurred, it was at most inadvertent, and Felix’s engineers did not consciously disregard the risk,” Devon attorneys wrote in a motion, saying fracking fissures are hard to control.

They cited a previous ruling that the cracks created by fracking are “of immeasurable length and uncontrollable direction.”


Mike Soraghan, E&E News reporter

Published: Thursday, August 17, 2017

Sharing Our Thoughts

This is a message from one of the 3000+ small Oklahoma oil and gas producers that we are trying to protect. He asked to remain anonymous because he doesn’t want to offend the handful of companies doing this work that will even consider negotiations to pay for the damage they have done. Most say “sue us”.


I am a Small oil and gas producer from Kingfisher County. I would like to respond to the recent Journal record article where one of the horizontal fracking associations tried to gloss over the damage they are doing in the stack and scoop plays talking about all their “so-called” community service.

To start this off with I would like to state that I am part of a small family owned oil and gas company in the middle of the stack play. I have no problem with horizontal drilling, in fact, I believe it is a great tool to unlock reserves on the “tight” shale and lime stone zones. I have seen many wells drilled in these “tighter” formation and coexist and just fine with existing vertical wells and be “good neighbors” Where the problem lies is drilling these wells in the very loose, or porous, zones. This is where the good neighbor issue comes to play, in my opinion, with in the oil and gas industry.

I am going to start off with what I am seeing from a community side first then transition to the oil and gas side.

So, from the article, it appears that the major oil companies and the cronies in the OKOGA got together and put on a pig show for kids in Kingfisher. That is 20 miles from me and I heard 0 about this event. Granted, I don’t run in those circles but you would think word would get out about some “huge” pig show 20 miles away.

I want to start this good neighbor debate by comparing the Horizontal industry to the Wind Industry that is also active in my area. The wind company came into our area and rocked all the roads they plan on using to build the farms. They run water trucks up and down the roads all day to cut down on dust. The wind farm company is also very strict on their drivers when it comes to driving the county roads. They don’t tolerate the nonsense that happens on county roads. You get caught messing up, you’re fired. The company that is putting in the wind farm even donated to the town for their fireworks show this year.

Contrast that to the big oil companies drilling around here. They leave these roads in much worse shape than they were before they were drilling. Sure, they might put a little rock down in some spots but the pot holes in those roads are awful. The rock, sand, and water haulers fly up and down these county roads. They are giving any warm body with a CDL a truck to drive and letting them run free. They are constantly running people off the road and tearing up the county roads. Good luck getting them to fix it, too. The only way you get them to fix it is if it is too muddy to get an oil truck in. I know several roads around here that are almost impassable because of the holes beat in them from the truck traffic.

As far as financial help the major oil companies drilling around here have yet, to my knowledge, to donate to the town or school. There is a local Frac company that is donating to the town and school but that is it. The actual companies doing the drilling have not given anything financially to the local community. If you were to get the donor list from the local, school, church, or town event, you not see any major horizontal companies that are drilling in the area but countless local companies, many of them being the mom and pop oil companies that are getting ran out of business because of the number of wells that are being ruined by the horizontal drilling in porous lime stone formations. Because of this, the donor list will soon be shrinking at the local level and people will begin to wonder what happened, by then it will be too late. The majors will have come, filled their pockets, and left; leaving us to once again fend for ourselves and pick up the pieces.

The next part of “being a good neighbor” is not coming into a community and getting family, neighbors, and old friends to sue each other over minerals and stripper wells holding up leases so the majors can get their leases cheaper and easier and not have to worry about protest at the commission from the small producers already here. When I first started out in this industry 10 years I had countless mineral owners thank me for keeping their wells going while all the majors were leaving so they could still have a little “mailbox money”. I have even had a couple older ladies thank me for trying to fix their wells while in tears when I was plugging the wells on their lands because the old well was just too far gone to repair. Fast forward to the last 3 years and those same people are suing the small companies, being pushed to do this by the leasing agents of the majors with the promise of a “large” lease bonus when in reality it is actually less than they would have to pay the small producer that already bought the lease years ago.

Finally, being a “good neighbor” would be to right the wrong and fairly compensate your neighbor when you ruin their property. The small producers have been through the ups and down of the industry and kept that little stripper well going so you can drill the horizontal well, that in most cases the small producers were forced into through force pooling. When the major companies Frac that horizontal well it waters out the stripper well essentially killing it. When this happens, the small producer is left with nothing but a hefty plugging bill. When they approach the larger companies they are basically told, not our problem – sue us. This is very rare and option since the small producers most likely Don’t have the money to spend on 1 attorney, much the less multiple attorneys it would take to take on the big oil companies and their team of lawyers. Occasionally you hear of companies working out these differences but they are settling for pennies on the dollar for the same reason I mentioned above.

All of that being said, once again, I am not slamming horizontal drilling as a whole, I believe it is a great thing when applied in the proper place. I do believe that drilling these wells in depleted zones already being produced by vertical wells for 30-50 years prior is an awful idea and that is where the problems are lying.

Thank you for listening…

See comments in Facebook:


Commentary – Being a good neighbor in STACK, SCOOP

Commentary regarding article in Journal Record – Being a good neighbor in STACK, SCOOP

Article in reference:

If the big oil associations really want to be good neighbors they should stop the destruction of the hundreds of vertical wells with their horizontal frack jobs around those communities. While they are at it they should join us in the call to eliminate the special 2% tax rate we all get for new wells and truly fund the schools in those communities.

Looks like they think if they can write a few “puff pieces” about spreading a little money around in the communities where small producers live that they can get their friends and neighbors to “look the other way”. They have obviously stepped up their PR efforts. The image of the industry is important to us as well, and the damage they are causing is hurting that image a lot more than our comments are hurting them. We hope that they will do the right thing, acknowledge the damage to wells belonging to others, acknowledge the environmental damage caused by their actions, and allow the restoration of the 7% tax rate (which is still lower than in any other major producing state) for every producer. We want to find solutions. We want to develop our state’s resources. But we also are committed to developing those resources in concert with the best interest of our state and our fellow Oklahomans.

Good public relations should start with doing good things, not try to gloss over your problems by spreading a few dollars around communities to fool the public into thinking they really are good corporate citizens.



Public support requires industry transparency and accountability

Whatever differences exist between different interest in the oil and gas industry, the one common goal that we should all have is to be well regarded by the American public.

Two of our board members Mike Cantrell and Pete Brown, who were the agency’s first and second Chairmen, are widely regarded as the co-founders of the Oklahoma Energy Resources Board.

In 1993 along with many other energy leaders like Jim Stafford, the President/Founder of the National Association of Royalty Owners, and Mickey Thompson the President of the Oklahoma Independent Petroleum Association petitioned the Oklahoma legislature to create the OERB.

We have many board members who have also served on the OERB board, with Dewey Bartlett and David House also serving as OERB Board Chairmen.

The OERB’s primary mission was and still is building a solid, open, and positive relationship with the Oklahoma public.

That task has been largely successful. Thru the OERB we have cleaned up over 15,000 historical damage sites. Working arm in arm with the Oklahoma Department of education we created an unbiased,scientifically-based energy curriculum for all students and provided much needed science resources as well.

And since its beginning, the OERB has continuously communicated with the public about important issues affecting all Oklahomans in relation to the oil and natural gas industry.

We at the Oklahoma Energy Producers Alliance are committed to keeping alive the tradition of leaving all industry disagreements completely separate from the discussions and work of the OERB.

It has never and should never be used to promote any segments own political purposes.

There are many current issues, like earthquakes being linked to oil and gas activity,  that We are quite certain the OERB board is doing its very best to continue that tradition by transparently communicating with the Oklahoma public.

We are committed to communicating openly and honestly with the public on issues related to the oil and gas industry in Oklahoma.

We are confident that the OERB Will continue to get better and to lead in its important role as the industry’s liaison with the public.



Guest blog by

Dewey Bartlett Jr. and

Mike Cantrell







Over the past few months, many of us representing the conventional oil and natural gas industry have been reflecting upon our experience at the Oklahoma legislature. Even though our position did not win the day, we are all very proud that we very respectfully conveyed our facts and recommended solutions.


Most of our group has been through this process numerous times and we all subscribe to the approach that a very successful oil and gas lobbyist, Richard Hutton, said years ago. He observed that “we only have two kinds of people in the state legislature; friends and potential friends”.


That viewpoint is as spot on today as it was 20 years ago. Unfortunately, I recently read a piece written by an oil and gas lobbyist where he basically said that their group would punish those that didn’t vote like they wanted on a specific issue and reward the ones that do. To threaten a withdrawal of political and financial support is, in our view, not a way to win friends or much less consider an issue with an open mind.


It is very short sighted to require a litmus test. I am proud that we conventional operators of oil and natural gas wells do not require a litmus test. We just ask to do what is in the best interests of Oklahomans.


To threaten an elected legislator or a legislative candidate that there will be consequences on how he or she votes on one single issue borders on political bullying. What happens if their group is unsuccessful in unseating legislators that vote against their litmus test issue? In my experience in the capital, friends come and go but enemies have long memories.


The Oklahoma Energy Producers Alliance lost a very close and contentious vote at the end of the legislative session. We also took note of how everyone voted. But we did so in order to know the legislators with whom we need to work harder.


The answer is not to declare a political jihad on those that disagreed with us. It is for us to simply get better in communicating our position with all of our legislative friends, both current and future.


We will get better.



Charted Frack Damage from Steve Altman

Attached is a chart showing the now long term effect (20 months) of the damage done by 2 offset horizontal Mississippi wells on 4 Misener-Hunton (AKA Hunton Dolomite) wells.

As you can see, the well’s production levels have improved over the last 18 months, but not without significant expense (well over $100,000), and certainly not back to their pre-damage levels.

At $45/bbl of oil and $3.00/MCFG, the gross revenue has dropped from $26,862 per month to $12,066 per month, a loss of over $175,000 per year in gross revenue.  The expense increase, just due to handling additional water, is from $20/month to $98/month.  Other expenses, especially regarding the well that had pumping equipment installed, have risen more.

As a reminder, I have attached the BH Pressure chart run on the Wakeman #1 during the Wakeman 1706 6-25MH frac, which clearly shows the frack hit at approximately 220 hours (May 18, 2016).




Production comparisons after offset fracs   (link to Excel spreadsheet)

Wakeman_1_bottom_052016_Quick-Look   (link to PDF chart)


Guest post by John A. Brock is a Geological Engineer


I was attracted to the recent Tulsa World Readers Forum article, “Geoengineering: Is it the Solution?” by Law Professor Rex Zedalis because I’ve been practicing Geoengineering for 56 years. The article recapped Geoengineering ideas of how to reduce energy from the sun (and thereby reduce global warming) by various schemes of shielding the earth by using mirrors or clouds of small particles in outer space, etc. His intuitive conclusion was correct. DON’T DO IT! Professor Zedalis has lived long enough to suspect an unworkable idea when he sees it. He apparently made his decision based on his experience and his gut feeling about the proposals. It would be wonderful if all laymen would do the same and not be influenced by the current mania. In this case, you can do simple calculations within the capabilities of a high school physics student to understand that the implementation of such schemes would require the entire wealth of the planet even if you are in error by a factor of ten. In addition, the schemes would be temporary since everything we place in orbit eventually returns to earth and most damning, even if it were possible, the unintended consequences could be horrendous.

Is there Global Warming? Yes

The thing that set me off about the article was it started with…..”There is no credible dispute about the fact that the Earth’s mean temperature has been rising over the past decades.” I thought, “here we go again with…humans are responsible because of our industrial activity and carbon dioxide emissions.” His opening statement is unimportant because a few “past decades” is less than a blink of an eye in the scope of climate change.

Anyone who has sat through the first course in Geology knows that our climate has been in constant change for at least one million years and very likely throughout the 5 billion year history of the earth. During the last 200,000 years alone there have been four ice ages. This would imply that the ice age cycle is about 50,000 years. The beginning of the current global warming era started at the apex of the last ice age, some 13,000 years ago, which leads us to believe we are a little more that halfway through the Earth’s current warming cycle (of 25,000 years). We’re not sure when the cycle will end. It could be tomorrow and it could be 12,000 years from now.  13,000 years ago, at the maximum extent of the ice in this ice age, there were some 2,000 feet of ice in northern Kansas. The ice has been mostly retreating ever since and sea levels have risen about 300 feet. Sea levels may continue to rise, but cannot rise much more because most of the ice has already melted. As recently as 5,000 years ago rising sea levels in the Aegean Sea poured over the Bosporus near Istanbul into a much lower fresh water lake and created the Black Sea. The current warming trend has not continued uninterrupted. There have been cooling cycles within the overall warming cycle. For example, the earth was much warmer 1,000 years ago when the Vikings were colonizing Greenland which that time was really green and much warmer. Those colonies lasted some 500 years before climate cooling known as the Little Ice Age literally killed off the Vikings. Since the end of the Little Ice Age, around 1750, global warming has resumed and the ice has again been retreating. Geoscientists know that the reason for the cooling and warming has to do with cycles in the intensity of the sun. Current research is focused on whether cycles in sun spot activity are responsible for the Earth’s changing temperatures. Sun spot activity has been very low during the last ten years, during which time the earth has been cooling, not warming. Irrespective of the specific reasons for the warming cycle, carbon dioxide has very little, if anything, to do with global warming.

Our witch doctors want you to believe that carbon dioxide causes global warming.

The vast majority of carbon dioxide on the planet is contained in the oceans and not in the atmosphere. As the oceans warm (because of energy from the sun), carbon dioxide is expelled into the atmosphere thus contributing to higher carbon dioxide levels. This is because carbon dioxide is less soluble in water as the temperature rises. Coke holds its fizz better when it’s cold. Al Gore is confusing the effect with the cause. The real relationship is global warming causes increases in carbon dioxide. Carbon dioxide doesn’t cause global warming.

Carbon dioxide makes up 3.62% of greenhouse gases. The balance (96.38%) of the greenhouse gasses is nearly all water vapor. Virtually all (96.5%) of the Carbon Dioxide currently generated comes from natural sources (i.e. volcanic activity, sea water warming, etc.) and only 3.5% from human sources (0.42% from automobiles, 0.49% from air and marine travel, 0.88% from power generation and 0.81% from human households).

Now let us do one of those engineer “smell tests” to see if it’s reasonable to assume that we can do anything about global warming. Let’s suppose that we eliminate all the cars in the world. By the way, you go first. And that we can deduct the entire 0.42% of the carbon dioxide generated by automobiles is eliminated from greenhouse gases (for a lot of reasons it is doubtful there would be any reduction). This means that by eliminating all the cars in the world we would have reduced total greenhouse gases by less than 1 part in 200. Do you really think that would significantly change the amount of heat trapped in the greenhouse? It is not reasonable to think so! Also, you should consider that without the greenhouse gasses the sun would burn the Earth and you to a crisp. It’s the greenhouse that prevents that. If we were able to reduce the greenhouse gases we might be doing the opposite of what we want.  However, it’s pretty apparent from statements and actions from countries like China and India that, at the most, only Europe and North America would participate in trying to reduce carbon dioxide emissions. The other 5/6th of the population of the earth will not risk destroying their economies in such an effort. And even though Europe seems hell bent on reducing carbon dioxide the policies they have adopted have done very little in achieving the objective they committed to12 years ago. So the question is; are we alone going to impoverish our country to do something that won’t work?

The legend is that the origin of the idea that carbon dioxide causes global warming came when British Prime Minister Margaret Thatcher was trying to justify a nuclear power generation plant. She was told that since carbon dioxide was part of the greenhouse gases etc., etc. that nuclear generation would be better because it didn’t produce carbon dioxide. She said, “If you can prove that, it would be worth a lot of money.” Her Government provided funds to study the issue and, like all government programs, it expanded. Not to be left out other European countries and the United States began studies and also built bureaucracies.  Now thousands of jobs are dependent on maintaining the belief that carbon dioxide is dangerous and the people who hold those jobs are very effective advocates.

The United Nations convened a “study group” to discuss the impact of carbon dioxide on global warming. Some 600 “scientists” participated. Many of the participants were from the government bureaucracies mentioned above. The reports that resulted from this and subsequent UN studies claimed near unanimous agreement that carbon dioxide is the basic cause of global warming and that the science is “settled”. Furthermore, it is important that

Some 600 “scientists” participated. Many of the participants were from the government bureaucracies mentioned above. The reports that resulted from this and subsequent UN studies claimed near unanimous agreement that carbon dioxide is the basic cause of global warming and that the science is “settled”. Furthermore, it is important that human caused carbon dioxide emissions should be reduced. These reports are constantly quoted and claim a consensus of all scientists. It has subsequently been revealed the UN reports have not been approved by the 600 scientists. Many of whom have objected and unsuccessfully demanded their names be removed from the reports. An opposition group of scientists started the “Petition Project”(Google it) which states that “…There is no convincing evidence that the human release of carbon dioxide, methane or other greenhouse gases is causing or will in the foreseeable future cause catastrophic heating of the Earth’s atmosphere and disruption of the Earth’s climate………” Currently, 31,478 American scientists of whom 9,029 are PhDs have signed the Petition opposing the UN claim. So much for the “settled” scientific consensus.

Nevertheless, politicians of the current administration and European governments are convinced of human-caused global warming and seem determined to institute laws such as “Cap and Trade” which will radically increase the cost of living and doing business. They do this in the name of saving the climate which they cannot do. These laws will make our industries uncompetitive. They will cause unemployment, depress our economy and impoverish our Nation. The book ”Extraordinary Popular Delusions and the Madness of Crowds” will have a sad new chapter. This carbon dioxide mania is the modern equivalent of witch doctors throwing the beautiful maidens into the volcano to satisfy the gods and prevent eruptions. The problem and frightening thing is – witch doctors are very persuasive.

John A. Brock is a Geological Engineer


Forced Poolings

Guest blog post by David Guest – OEPA Board member. He provides a good history of forced pooling (subsurface eminent domain) in Oklahoma. He also explains why it needs to remain just that – history.


When someone says “virtually all” that is an extremely large sample size. In fact, I operate vertical oil wells that were drilled over 65 years ago, and own royalty under vertical wells drilled over 80 years ago. These properties were spaced at the OCC but not force pooled. Force pooling was introduced by the municipality of OKC in 1929 as “block pooling”. In 1945 the Oklahoma state legislature created force pooling by statute. Most force poolings in the ’50’s, 60’s and 70’s were for only ONE targeted formation. So, there are thousands of producing wells which have never been force pooled. But in the late 70’s and into the 80’s, landmen and exploration companies began to utilize force pooling as a “land and title” tool rather than an exploration tool, as pooling was first intended. Oklahoma is the ONLY state with force pooling, which is private party eminent domain, covering mineral rights. Mineral owners are being short-changed on per acre bonus dollars by force pooling as pooling does not encourage free market conditions for leasing activities. The abolition of force pooling would not deny minerals owners their right to develop their asset… they can negotiate a lease with the exploration company(s). If no agreement can be reached, the exploration company can still drill the tract, the unleased mineral owner is just that… unleased, and has the redress of subsurface trespass. So, unit development is not impeded. Let us ponder this question: Why are per acre cash bonus prices paid in Texas so much higher than the bonus prices paid in Oklahoma?? Although the rock, multi-zone potential formations, are similar between the states?? Because Texas has no force pooling, which mandates exploration companies to be more aggressive in the prices paid for OGL’s. Oklahoma mineral owners should not be continuously cheated by the use of mineral eminent domain.

Horizontal Forced Pooling in the Vertical Universe

Guest Blog Post by Joe Warren – OEPA’s legislative Chairman, a Petroleum Landman, an attorney and a producer.


Forced Pooling procedures developed in Oklahoma over decades, when the oil and gas industry existed in a vertical world. Companies were drilling geological ideas that were almost always relatively small, with the first well being a true exploratory well, and much riskier than today’s horizontal wells. Forced Pooling actually worked pretty well then. Rules of evidence limited testimony as to values to the small area covering the prospect. It resulted in unleased mineral owners and small producers invariably receiving the highest and best compensation paid to anyone within the area of the geological idea. Back then, spacing units were limited in size to an area that could be expected to be drained by one well. Furthermore, I learned early on that Forced Pooling was there primarily to encourage the drilling of that initial exploratory well. It was never intended as a means to take “protection” acreage or development acreage, prior to the exploratory well being drilled.

Today, everything has changed. The horizontal drilling world has been set on top of our vertical regulatory system, with disastrous results. Consider: while a spacing unit used to be of the size that could be drained by one well, somehow, with no change in the law or Corporation Commission rules, companies have been allowed to now space (and pool) units that contain dozens of drill sites. Devon has reported that they expect to drill 220-30, or more, wells per spacing unit. So instead of making elections on a well- by- well basis, as it was done in the past, royalty owners and small producers have to elect-in-or out on dozens of wells at a time, costing tens of millions of dollars to drill, with no control over the timing of those expenditures, and without the benefit of seeing the results of the first well, which would reveal whether the future potential of their investment would be worth tens of millions of dollars, or in some cases hundreds of millions of dollars.

The old vertical Forced Poolings dealt with one high risk well, on a small geological prospect, with royalty owners and producers receiving the highest and best price paid within that prospect. Today’s horizontal plays cover multiple counties. The Horizontal Drillers trade large blocks of acreage across these plays at prices up to and exceeding $20,000 to $40,000 per acre. Evidence of these large trades is not even allowed to be introduced to show value in today’s Forced Pooling hearings. In fact, evidence is limited to trades in only a 9 section area, and a narrow window of time. Many horizontal drillers have agreed amongst themselves to not reveal the terms of their trades, further limiting the ability of the Commission to come up with fair market value.

The end result is that the average value determined by the Commission for the last year or so in the Stack and Scoop plays, has been about $1,000 per acre, give or take. By historic standards, this sounds like a lot of money to royalty owners, so they think they are getting a great deal. In fact, these values represent a 90-95% , or more, discount to the value being put on this acreage by the companies themselves. If you look at Texas, leases in the hot areas in the Permian Basin START at $30,000 + per acre which is closer to a 25%-30% discount to what the Big Guys pay each other. Standard royalty there is 25% , while in Oklahoma it is 18.75% -20%.

The net result of all of this is that literally Billions of dollars are being transferred from the pockets of Oklahoma Royalty Owners and small producers into the coffers of the large Horizontal Drillers and their out of state owners and investors.

This is a travesty. Oklahoma’s current Forced Pooling laws must be changed.