Dentons US LLP : Changes to well spacing requirements in Alberta

April 23, 2021

The Alberta Energy Regulator (AER) recently announced changes to well spacing requirements. These spacing requirements, contained in the Oil and Gas Conservation Rules (OGCR), govern the number of wells permitted to be drilled within a given pool.

The prior rules regarding well spacing in Alberta were developed in an era when wells were drilled vertically and targeted conventional hydrocarbon pools. Increasing utilization of horizontal wells has facilitated access to hydrocarbon pools that vertical wells could not, and has provided access to a larger horizontal portion of a reservoir from a single drilling pad. This has, in turn, allowed for a reduced environmental footprint for oil and gas wells and, with a higher number of wells drilled from a smaller number of surface locations, producers are able to increase production from a reservoir.

The increased use of horizontal drilling effectively made the traditional drilling spacing units (DSU) redundant. Moreover, as applications for special horizontal well spacing became common, oil companies began drilling horizontal wells in close proximity to each other from a single drilling pad. On March 26, 2021, the Government of Alberta made changes to the OGCR well spacing requirements to accommodate the realities of horizontal drilling. This will more efficiently facilitate the use of horizontal wells.

Before these changes, section 4.021 of the OGCR mandated specific standard well spacing based on the production type and area for a DSU. These requirements have been removed from the OGCR, with this section now giving the AER the discretionary power to limit the number of wells that may be produced in a DSU. This change will allow for well spacing across Alberta that is more reflective of the current state of technology. The standard DSU sizes for oil and gas wells remains the same regardless of the well density.

All existing requirements for participant involvement in well license applications remain the same under AER Directive 056: Energy Development Applications and Schedules (Directive 56), and the ability of those directly and adversely affected by an oil company's proposed drilling program of wells and associated facilities to file statements of concern also remains unchanged under Directive 56.

Unit 7 of AER Directive 065: Resources Applications for Oil and Gas Reservoirs (Directive 65), which deals with applications for special well spacing, has been amended to align with the OGCR changes. Special well spacing and holdings previously approved under Directive 65 will remain in effect until rescinded by operators, and applications to modify buffer zones under Directive 65 will also remain in effect.

Lastly, the Oil Sands Orders, which prescribed well spacing for the oil sands areas and formations, have been amended in order to retain the previous well spacing prescriptions, pursuant to section 4.021 of the OGCR.

Authors: Hazel Saffery, Matthew Potts, Elliott Windfeld and Kate Wiltse.