Stabilization - Recoverable Oil and Gas Content of Land as Suitable Standard of each

The many complexities arising from our present oil pool proration systems emphasize the need for a suitable standard of property rights. Attempts at conservation and unitization agreements have frequently failed because of the lack of such a standard. The necessity of reducing production to consumption has caused umpires, committees, commissions and other governing bodies to allocate the production of flush fields among the respective owners. The methods of allocation vary widely and conservation of underground reserves is frequently neglected or misused. Critical economic conditions increase, rather than modify, competitive methods. In some fields we have irregular and uneconomically close well spacing. Many operators drill unreasonably large holes, take excessive sand penetrations or leave their wells untubed in order to secure higher potential open-flow tests than their offsets. All of these practices result in economic waste and frequently damage to the pool. Regardless of our agreement with the fundamental principles of proration or unitization, both are actual necessities in many of our present economic situations, and we are in urgent need of a suitable standard of rights to facilitate and simplify their operation. The problems pertinent to unit management are simple and of daily use in many partnership enterprises, but the problems of fair and proper division of production under either proration or unitization are, as yet, subject to controversy. The rights of respective owners must be ascertained and standardized before we can eliminate wasteful practices and still preserve constructive competition in our industry. Valuation of Tracts In a recent unitization conference it was found that each participant had a different basis for calculating the relative values of tracts. Some of these assumptions were as follows: 1. Unrestricted open-flow operation to abandonment. 2. Current proration system to abandonment.