The first modern test case of a controversial section of Pennsylvania’s dusty Oil and Gas Conservation Law ended with a fizzle in 2014 when the drilling company that sought to use it withdrew its application.
Hilcorp Energy Co. wanted to use the “forced pooling” provisions of the law to drill and hydraulically fracture the Utica Shale beneath property in northwestern Pennsylvania where a fraction of the property owners had refused to lease their drilling rights.
Observers had hoped the case would clear up critical questions about how the 53-year-old law applies to gas production from the Utica Shale, but the application didn’t get far enough to answer many of them.
The 1961 law is designed to limit excessive drilling and stranded gas by divvying up the land into orderly blocks based on how much area can be drained by a well. It applies only to wells drilled through the Onondaga Horizon, a geologic layer sandwiched between the Marcellus and Utica shales, so it doesn’t factor in Marcellus operations.
Under the Conservation Law, a company must take several steps if it wants to extract gas from properties that have been leased to another operator or not leased at all. The first step — the one Hilcorp took — is to apply to the Department of Environmental Protection for a well spacing order that will define the discrete pool of gas and the fewest number of wells needed to drain it most efficiently.
This first issue is more geological than political. Hilcorp’s spacing order hearing would have featured geologists, petroleum engineers and an energy economist, among other experts, to determine the extractable limits of 3,267 acres of gas-bound Utica Shale in Lawrence and Mercer counties known as the Pulaski Accumulation.
Only after the spacing units are set can a company or mineral owner within the unit apply for an integration order — a separate step, with a separate hearing, that allows for incorporating unwilling landowners into the unit and setting the terms for compensating them.
Hilcorp had not reached that controversial stage when it withdrew its application, but the company made no secret that it was heading in that direction and dread of forced pooling drove much of the public backlash against the proposal.