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Steptoe & Johnson PLLC: Regulatory Lead Time an Important Consideration in Development of Ohio Drilling Units

By Kathy Milenkovski and Neal Pierce

During the past year, the Ohio Department of Natural Resources has conducted hearings on three applications for unitized operation under Ohio Revised Code 1509.28. Additional hearings are on the schedule for January 2013. This statutory provision, part of the oil and gas regulatory program of Ohio law, permits the formation of multiple well units as part of the state's oil and gas conservation regime. Included in the statute are provisions permitting the mandatory inclusion of unleased tracts as well as leased tracts, whether leased to an applicant or another party. The multiple well aspect of this regulatory provision can be a very useful development tool for companies seeking to conduct horizontal drilling operations where a number of wells are planned to be drilled from a single, centrally located drill site. However, the application process under 1509.28 is more extensive that the process for obtaining a drilling permit and involves a regulatory hearing conducted by ODNR staff, at which an applicant is expected to provide detailed information about the proposed unit, including information on leasing, geology, operations, expected production and costs of development.

In addition, companies considering the use of 1509.28 applications as part of the process of putting together development units should be aware that, although the Division of Oil and Gas is receptive to such applications, it is taking four months or more to complete the process from date of filing, through the hearing process, to issuance of an order. We anticipate that if the number of applications increases in 2013, the regulatory lead time will almost certainly increase. As a result, we encourage interested parties to carefully consider their development plans in light of potential regulatory lag times and identify affected units carefully and with plans in mind to file applications as early as possible consistent with planned rig schedules.

To find out more about this issue or discuss particular plans or needs related to unit development under the Ohio statute, please contact us.

Kathy Milenkovski’s legal practice focuses on energy and environmental law, with an emphasis on air quality issues. Neal Pierce brings more than 30 years oil and gas industry experience to the Steptoe & Johnson Energy Team. He focuses on energy law, Utica and Marcellus shale gas law, as well as conventional oil and gas law.

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