Suggested TMS Rule #4 and Proposed Response
The draft document called SUGGESTED TMS POLICIES by the Mississippi Oil and Gas Board has 7 proposed policies. I have previously covered the proposed policies 1-3 and my plans are to cover this 4th proposed policy tonight, policies 5 and 6 on Thursday, and # 7 on Sunday evening.
I’m covering these policies in order to better inform you about these proposals, but also in order to get your input into my own public comments on these policy changes.
For those wishing to view the three previous policies I have reviewed, here are the links:
Now, here is policy #4 and my comments relative to it.
In those instances in which competing dockets are filed by different prospective operators involving the same or substantially the same unit acreage, the Mississippi State Oil and Gas Board shall consider all relevant facts and information in determining which of the competing dockets should be approved.
In making this determination, the Board will be guided by its findings as to which of the competing dockets, if approved, will best promote the orderly development of the oil and gas resources of the State of Mississippi, without unnecessary waste, and which of the competing dockets will best safeguard, protect and enforce the co-equal and correlative rights of all owners in the pool.
In addition to considering which of two (2) or more competing dockets was first filed, the Mississippi state Oil a & Gas Board will consider other relevant factors, including but not limited to the following:
What percentage of the leasehold or drilling rights each of the competing petitioners owns or controls in the proposed drilling unit (through leases, farmouts or other agreements);
The technical and financial ability of each of the competing petitioners to timely drill, complete and operate the well;
The past experience of the competing petitioners in drilling, completing and operating similar wells;
The total number of wells in the area actually drilled, completed and operated by each of the competing petitioners;
The respective records of each of the competing petitioners in complying with the regulatory requirements of the Mississippi state Oil & Gas Board;
The commitment (financial and otherwise) of each of the competing petitioners to commence the timely drilling and completion of the proposed unit well during the term of the drilling permit;
How many, if any, drilling permits have previously been issued by the Mississippi State Oil &Gas Board to each of the respective petitioners under which wells (although permitted) were not drilled;
How many, if any, drilling permits each of the respective petitioners currently hold from the Mississippi State Oil & Gas Board under which the drilling of the wells has not commenced.
I am in agreement with what I believe is the intent of this policy, which is not to approve a large number of permits to a company who has neither the ability nor the intent to drill the permitted wells.
That said, with the general exception of Goodrich (though there are some very old permits for Goodrich, also), none of the five companies operating in the play have demonstrated the ability or intent to drill the permitted wells they already possess.
Further, issuing additional unit 3 section and 2,000 acre unit permits to companies demonstrating the intention to only drill 1 well per unit should be ceased. These companies should be requested to either demonstrate a willingness to drill at least 2 wells per unit or to only submit section and a half unit sizes for approval.
I object to the Mississippi Oil and Gas Board continuing to approve of units for companies without either the ability or the financial wherewithal coupled with a demonstrated plan of action to drill at least 1 well per 1,000 acres.
I believe by continuing to do so, you are in violation of your stated intent, as hereby referenced:
§ 53-1-1. DECLARATION OF POLICY.
It is hereby declared to be in the public interests to foster, encourage, and promote the development, production, and utilization of the natural resources of oil and gas in the State of Mississippi; and to protect the public and private interests against the evils of waste in the production and utilization of oil and gas by prohibiting waste as herein defined; to safeguard, protect and enforce the co equal and correlative rights of owners in a common source or pool of oil and gas to the end that each such owner in a common pool or source of supply of oil and gas may obtain his just and equitable share of production therefrom; and to obtain, as soon as practicable, consistent with the prohibition of waste, the full development by progressive drilling of other wells in all producing pools of oil and gas or of all pools which may hereafter be brought into production of such, within the state, until such pool is fully defined.
It is not the intent nor the purpose of this law to require or permit the proration or distribution of the production of oil and gas among the fields and pools of Mississippi on the basis of market demand. It is the intent and purpose of this law to permit each and every oil and gas pool in Mississippi to be produced up to its maximum efficient rate of production, subject to the prohibition of waste as herein defined, and subject further to the enforcement and protection of the coequal and correlative rights of the owners of a common source of oil and gas, so that each common owner may obtain his just and equitable share of production therefrom.