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EXISTING REGULATORY FRAMEWORK FOR FLUID WITHDRAWAL

While the injection of fluid underground is regulated by the EPA, the BLM, and state agencies, the extraction of fluids is normally not regulated or is minimally regulated. The number of events of induced seismicity caused by the withdrawal of fluid is approximately equal to the number of events caused by the underground injection of fluids for both disposal and secondary recovery (see Box 1.1 in Chapter 1), but fluid withdrawal is usually not curtailed due to induced seismicity. This is because the pumping of fluids from underground reservoirs can be divided among many different oil companies, and states only require permits to drill oil and gas wells, not to produce fluid from them. One method of controlling the withdrawal of fluids from an underground reservoir is through “unitization.” Unitization is an order granted by the state oil and gas regulators that designates one oil and gas company to be the “unit operator” of the unitized oil and gas field, and profits and expenses from oil and gas operations are divided among operators as dictated by the unitization agreement (Box 4.5). This

BOX 4.5
Unitization

In 1892 Edward Doheny and Charlie Canfield discovered the Los Angeles City oil field. By 1895 the field had produced 729,000 barrels of oil, nearly 60 percent of California’s production. The discovery was in a townlot area composed of small residential lots. Each townlot lot owner had both surface and mineral rights. California has the “Law of Capture,” which means that a “liquid mineral” can move from one property to another. Because of this each owner had to drill a well or have their oil taken by their neighbor. This resulted in runaway drilling and very inefficient and expensive oil operations. Some producers would overproduce their wells and harm the productivity of their neighbors, resulting in inefficient and expensive development.

Early in the 1900s the State of California formed the Division of Oil and Gas (now called DOGGR). In the period from 1923 to 1926, Union, Shell and Associated Oil Company under a cooperative agreement developed the Dominguez oil field. This unit proved to be an efficient way to manage the field with almost no wastage. The Subsidence Control Act of 1958 encouraged voluntary pooling and unitization and provided for compulsory unitization if needed. The individual operators of an oil field would be combined into a Unit and the oil field would be operated by one party called the Unit Operator. The other participants are called Working Interest Owners. Unit documents would define the unit and the participant’s share of the total, called the Equity Determination.

Unitization has proven to be an effective way to share the wealth and operations of oil fields fairly while protecting the environment and guaranteeing energy conservation. It is also easier to regulate because all parties share the profits and losses but one party, the Unit Operator, is in charge. DOGGR has used unitization to force efficient waterfloods and prevent environmental problems.

SOURCE: Rintoul (1990).



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