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Informational Letter IL 97-02

6 October 1997

To: All Oil, Gas, and Oil Sands Operators

WELL SPACING/LEASE BOUNDARY SETBACKS - OIL SANDS AREA DEVELOPMENT

As a result of industry concerns related to well spacing/lease boundary setbacks for specific developments in oil sands areas, the EUB decided to bring oil sands operators together to get their views on this matter. A meeting was convened in late 1996 to review the following matters:

• Lease boundary setbacks under reduced spacing development for primary and thermal projects.
  
  
• Notification requirements for mineral rights holders (P&NG and oil sands).

A summary of the issues and the Board's position on these is provided in the following sections:

1. Lease Boundary Setbacks

The concern expressed by some operators was that the existing 50 metre (m) lease boundary setback, applied to projects under reduced spacing (typically 4 hectare (ha)) development, was creating equity issues due to the potential for cross-boundary drainage of resources. These operators proposed that an offset of at least 75 m and perhaps 100 m would be preferred. Another suggestion was that an offset equal to one-half the interwell distance should be adopted.

The information provided indicated that the industry was clearly split between the 50 m and 100 m offsets. Accordingly, the Board does not believe that it would be appropriate to bring about a change to the existing 50 m setback at this time. Rather, the Board believes that if there are setback issues related to a specific project application it would be more appropriate to consider the issues at a hearing of the application. In addition, the Board is aware that operators are reaching a compromise on the offset distances adjacent to specific land parcels and sees merit in these private arrangements.

For higher pressure thermal projects there was general agreement that a greater setback would be more reasonable to address issues of equity, safety, and environmental protection. Consequently, the Board would expect projects employing high-pressure steam injection (e.g. cyclic steam stimulation) to be designed with a 100 m setback from adjacent lease boundaries. This action would not necessarily apply to other lower-pressure thermal processes such as Steam Assisted Gravity Drainage (SAGD).

2. Mineral Rights Holder (MRH) Notification

There appeared to be two main issues associated with MRH notification. Firstly, there was the need for clarification around the process and expectations of the notification policy. Secondly, there was the need to expand the notification process to affected P&NG leaseholders.

On the matter of the notification process, based on the information received, the Board is prepared to adopt the following procedure for project development.

• All off-set oil sands leaseholders must receive notification from the proponent of the proposed development.
  
  
• A minimum 10-day notice period must be specified in the notice.
  
  
• If no concerns are received within the 10-day notice period, disposition of the application will proceed.

Regarding the need for notification of affected P&NG leaseholders, while it appeared there was general support for this requirement, the Board notes that this issue was also discussed recently as part of the Gas/Bitumen Inquiry and, as additional information will become available as a result of that proceeding, the Board will defer any policy changes pending the outcome of that inquiry.

Inquiries regarding this matter should be directed to Mr. Keith Sadler, Reservoir Applications Group at 297-2886.

[Original signed by]

J. D. Dilay, P.Eng.
Board Member