Some Legal Unitization and Engineering Problems of Oil and Gas Producing Concerning Properties

In the formation of Oil and Gas Producing Units lawyer& and engineers are interdependent members of the same team. Management is, there-fore, entitled to expect no less than a total cooperative effort from the members of these professions. The petroleum and natural gas lawyer must diligently inform himself on the implications of engineering evidence. Otherwise he can be of little assistance to his engineering witness in a thorough, systematic and convincing presentation of his technical evidence. Conversely, the engineer must appreciate the concern of counsel that quasijudical hearings, whether technical or otherwise, be con-ducted in such a manner as to pre-serve some semblance of organized judicial procedures in the adjudication of property rights. The principal problems in unitization are the participation formula and the adjustment of investment in unit facilities. The equating of oil to gas, the effect of unit infill drilling, the relative values of producing zones and well productivity have •been controversial factors in several Saskatchewan units to date. Perhaps the most perplexing of these has been well productivity. While preserving current income, it may also preserve an ability to drain adjacent tracts plus an inequitable sharing of .reserves properly attributable to secondary recovery operations. However, inequity may also result in depriving an operator of the benefits accruing to him under competitive operations by virtue of his favourable reservoir position or his use of advanced production techniques. The Saskatchewan Oil and Gas Conservation Act has been construed by the Department of Mineral Resources as •completely negating any benefits inherent in the rule of capture when determining equities under unit operations. Under adjustment of investment provisions, large cash flows between owners of exploited acreage should be avoided upon the creation of a unit. These provisions should not deprive any company of the benefits it may have obtained under competitive operations in producing its fair share of the reservoir at a lower net cost per barrel than its competitors. Unitization should be concerned with physical conservation rather than in equalizing production costs as between operators.