Repeal of boundary law would boost production and taxes, Harold Hamm says

Continental Resources Inc. CEO Harold Hamm said an old state law that prevents lateral drilling across section lines is reducing production, and therefore state taxes. He’d like to see that changed.
by Adam Wilmoth Modified: May 5, 2014 at 10:00 am •  Published: May 4, 2014

While much of the focus of the oil-and-natural-gas related legislation has been on the state’s gross production tax rate, Continental Resources Inc. CEO Harold Hamm is asking legislators for a change he says could both increase production and reduce costs.

A 40-year-old state law restricts most oil and natural gas wells in Oklahoma to a single 640-acre section. Companies can seek exceptions at the Oklahoma Corporation Commission, but Hamm is asking the Legislature to eliminate the restriction altogether.

“We are putting two 640-acre units together, but that is cumbersome, slow and eats up a lot of manpower, time and expense,” Hamm said. “There are not any short laterals to speak of being drilled in the Bakken (in North Dakota). We’re able to do it here physically, but it’s a regulatory hurdle.”

Most of the expense of drilling a well is from the vertical and early horizontal portion of the process. Extending a horizontal section across a second 640-acre section more than doubles the production while requiring only 30 percent of the cost, Hamm said.

Current rules also require a buffer around the edge of a 640-acre section. If a company were to drill two one-mile horizontal wells across two sections, it would have to avoid the buffer zone, which is generally about 250 feet on either side of the section line.

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by Adam Wilmoth
Energy Editor
Adam Wilmoth returned to The Oklahoman as energy editor in 2012 after working for four years in public relations. He previously spent seven years as a business reporter at The Oklahoman, including five years covering the state's energy sector....
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A 40-year-old state law limits most horizontal well lengths to one 640-acre section. Continental Resources CEO Harold Hamm has asked legislators to allow oil and natural gas producers to more easily drill wells across two sections. Most of the expense of drilling a well is from the vertical and early horizontal portion of the process. Extending a horizontal section across a second 640-acre section more than doubles the production while requiring only 30 percent of the cost, Hamm said. A single, two-mile lateral also would allow the company to produce from the area surrounding the section line, which is usually off limits to oil and natural gas companies.

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