Unit Size- how units are decided or declared?

Answer: That is a very good question and one we are still waiting from the state to legally define according to PA law.

It depends on how deep the well actually goes. Shallower wells are controlled by one set of state laws and deeper wells by a different set (Conservation Law). Since we don’t actually know how deep the wells will be it is kind of an educated guess as to which set will apply. You can go on the PA web site and read the regulations. I questioned Joe Umholtz, Chief, Bureau of Oil and Gas Management Pa DEP and he was unclear too. Ed called different people in the department and was also unable to get an answer. They just forwarded us the actual law, which we had already read.

In theory the unit is supposed to be the area that the Company will be pulling the gas from. So in "shale" it should be fairly small. Historically shale would be from 30-80 acres. Deeper wells could drain larger areas. They report from 180-600 acres. The state does not determine this, the company does on its permit. There are hearings on each permit at which we could probably testify but I am not sure how much clout you or I would actually be able to carry.

The other thing that is disconcerting to me is the clause in PA law that allows spacing orders to be no larger than 10 square miles. WOW! That’s 6400 acres

But just because we don't have an exact answer in PA law that is clear to us doesn't mean we should take a wait and see out look. We feel that we should limit that size in our leases. We already have limits on size to no more than 640 acres from Whitmar, New Penn, and Apex Oil. Their language is good. Chesapeake has not yet "volunteered" that language restricting the pool or unit size. Unless someone in the loop has gotten that Addenda from Chesapeake. If you have it forward the language to me Please!

So it all boils down to the same thing; if the Township, County can't regulate it which they can't and we are unsure what protections the State offers we better protect our selves in our lease agreement.

Gas well spacing is ideally an economic question. It is a trade off of the increased cost of tighter spacing, more wells per area, and cost of money in the future due to a longer time to drain the gas. In these very tight shales needing huge frack jobs, the extend of the fractures may be even more important to spacing. The rate of flow declines, obviously, over time as the pressure declines. It is an exponential declining value. After a gas well is completed, flow and pressure build-up tests are completed. With very complicated equations and some known factors from past wells in the same formation, the rate of flow and gas volume can be estimated. Even the extent of reasonable drainage area may be calculated. In Texas, all the production rates are public providing significant data to estimate gas production rates for a gas well decline curve. PA's gas well production rates are confidential for 5 years which hinders the ability of the some gas production companies to design for economic and possibly Green well spacing. I have read for a single well the spacing may be 160 acres and for 4 horizontal wells on one location about 400 acres. There is also a reasonable limit to the size of a frack job and thus the drainage area. A certain velocity must be maintained to carry the prop material, sand, ceramic beads, etc. Another factor is that the is a relatively high amount of clay in shales, therefore, the time the formation is exposed to water needs to be minimized.