The Pros & Cons of Shallow Oil Wells

Col. Edwin Drake drilled the world’s first oil well near Titusville, Pennsylvania in 1859. This started a revolution in energy production, providing millions of jobs and billions of dollars to local economies in the subsequent years. Over those years, the industry has evolved and advanced, adopting various technologies and techniques to make the most of our natural gas and oil resources. One of these techniques is the use of shallow oil wells.

Shallow wells provide many benefits to drilling operations. From cost benefits to surprising legal advantages, shallow wells are a reliable source of natural resources for many drilling companies. However, the definition of a shallow well is hardly consistent. From a legal standpoint, differences in definition have led to regulatory and legal battles for the drilling industry. For this reason, it's crucial to be aware of the differences between shallow and deep wells from a legal standpoint and carefully consider which would be most advantageous for your operation.

What Is a Shallow Well?

What constitutes a shallow oil well differs depending on the organization referenced and the purpose of the definition. From a scientific and practical standpoint, a shallow oil well is often defined as any oil well drilled to a depth of 10,000 feet or less. However, this definition does not suit all purposes and regions.

Many states and counties have differing definitions for what constitutes as a shallow well. These different definitions serve to help enforce drilling practices and prevent over-drilling. For example, states and counties located along the Marcellus shale of the Northeastern United States have widely differing definitions and regulations concerning what constitutes a shallow well and how these wells should be drilled. Kentucky law defines a shallow well as any well drilled and completed at a depth of less than 4,000 feet or above the base of the lowest member of the Devonian Brown Shale. Pennsylvania defines shallow wells as any wells that do not penetrate the Onondaga horizon or are otherwise shallower than 3800 feet. A "deep well" for any of these states is any well that does not meet these specifications.

Counties and states will often define shallow wells differently based on local geography and drilling practices. To avoid any issues with regulatory agencies, it is essential to consult with a local expert and a legal team. Doing so will allow your organization to understand the local laws and create a plan that addresses all of them appropriately.

Shallow Well Regulations

While the definitions discussed above may seem superficial, they are essential to understand. The local definition of a shallow oil well is integral to understanding local regulations and provides a guide for how to plan a drilling operation.

Most states regulate shallow wells differently than deep wells. Some states even have different regulatory agencies for each type. Most of these regulations have to do with the legal considerations for the landowner and how closely oil wells can be drilled in proximity to one another. Unfortunately, when drilling companies don't pay attention to these local laws and definitions, they can get into trouble.

As an example, we will look at the definitions, regulatory organizations and regulations of West Virginia and how they affect shallow oil well drilling practices.

  • Shallow Well Definitions: West Virginia law can be particularly confusing for drilling companies due to the fact that the law does not provide a hard number for what constitutes a shallow oil well versus a deep oil well. Instead, the definition is dependent on how deep the drilling company goes into the Onondaga group. Shallow wells can penetrate up to 20 feet into the Onondaga group, but any more than that will cause the well to be defined as a deep well.

  • Regulatory Agencies: In West Virginia, the Oil and Gas Conservation Commission, or OGCC, regulates the drilling of deep wells, while the West Virginia Shallow Gas Well Review Board or SGWRB, regulates and resolves issues with shallow wells. While the SGWRB can establish specific considerations and distances for shallow oil and gas wells on a case-by-case basis, the OGCC enforces strict rules based on the depth and location of the proposed drilling site in relation to established wells.

  • Regulations: The SGWRB generally enforces the rule that shallow wells under 3,000 feet in depth must be 1,000 feet from an existing well, while shallow wells over 3,000 feet in depth must be at least 1,500 feet from the nearest existing well. If the owner of the coal seam contests this, the drill operator must observe a 2,000-foot drilling distance from the nearest well unless they can prove a need for a shorter distance. Deep wells, on the other hand, must be at least 3,000 feet from another permitted well.

These factors came into play in the 2008 case Blue Eagle Land, LLC v. The West Virginia Oil & Gas Conservation Commission, in which a group of coal owners and operators claimed that several wells should have been defined as shallow wells and fallen under the jurisdiction of the SGWRB rather than the OGCC. The crux of their argument focused on the definition of a shallow well versus a deep well — they had drilled over 20 feet into the Onondaga group but finished the wells at shallower depths. The court ruled against the petitioners, stating that the accepted interpretation of the law favored the OGCC and that the petitioners had insufficient evidence that their oil wells fit the accepted definition. As a result, the drilling companies were responsible for fines and legal fees associated with insufficient permissions and litigation.

This is just one example, but these types of problems arise frequently. Between the production delays and the legal and civil fines incurred, it's essential to a company's bottom line to understand the definitions, regulations and regulatory agencies overseeing any particular drill site. When in doubt, it's best to consult with the local Department of Environmental Protection Office of Oil and Gas. They, combined with your legal counsel, can help determine any required permits or adjustments in your drilling plan. This simple step can prevent massive costs from being incurred over a simple misunderstanding.

The Pros of Shallow Wells

What makes shallow wells so advantageous as to risk litigation over them? There are several reasons that companies may seek to drill a shallow well over a deep well, including the following:

  • Pooling: In the oil and gas industry, pooling refers to the combining of small tracts of land to obtain sufficient acreage to get a well-drilling permit. Pooling is a legal way to get around state spacing laws while also enabling interest owners to share production profits. The pooling process usually starts by defining the drilling area, then determining who the interest owners are. The company then reaches out to the owners, gets permission to drill and, when drilling is complete, provides a proportionate share of the profits from the well. This allows every shareholder to get a fair share of the profits while allowing the drilling company to access valuable resources. In some cases, one of the landowners may not consent to any drilling on their land. While many states provide legal ways to get around this lack of consent, some, like West Virginia, prohibit drilling if even one shareholder withholds consent. Generally speaking, however, it is much easier to pool for a smaller well because fewer shareholders are involved, making it less likely that someone will refuse to give consent.

  • Availability: Despite rumors, evidence suggests that there's still plenty of undiscovered shallow oil left on earth. The Yates oil field of western Texas, for example, currently features wells at depths ranging from 900 feet to 10,000-14,000 feet. In fact, the Energy Information Administration ranked Yates field 43rd in the U.S. in proved reserves as of 2009. In the opinion of many professionals in the oil industry, Yates is just one of many resources with plenty left to give. According to some, most of the undiscovered oil is 1,500 and 3,200 feet below the surface.

  • Productivity: While most expect shallow wells to dry up sooner than deeper ones, this isn't always the case. Some shallow wells last 50 years or more, though most of this functional life is spent as a stripper well. This does not mean shallow wells are any less important to the overall economy, however. Stripper wells accounted for 10% of overall U.S. oil production in 2015.

  • Cost Efficient: In terms of overall cost, shallow oil wells are less expensive to drill, maintain and produce from. They also tend to come with fewer complications at every stage — pooling is easier and less costly, permits are cheaper and easier to get and equipment is easier to maintain and replace. In total, the oil well drilling cost breakdown comes out in favor of shallow wells. One drilling specialist estimated that the average cost for a shallow well was around $200,000, while a deep well's cost totaled in the millions. This is especially true when comparing shallow oil wells to offshore platforms, which require even more money annually to maintain. The key to keeping costs low, however, is ensuring that the shallow well meets local regulations in order to avoid fines and litigation costs.

These advantages make shallow wells a worthwhile investment, especially for smaller oil companies looking to maximize their profits without much input.

The Cons of Shallow Wells

While shallow wells are very advantageous for drilling companies in terms of productivity and cost, there are several drawbacks to these types of wells. These disadvantages include the following:

  • Concentration on Deep Drilling: The widespread perception, both inside and outside the industry, is that shallow reservoirs are no longer a viable source of production, and that deep wells are where the focus should be. Over the last six decades, average well depths have steadily increased, starting at an average of 3635 feet in 1949 and jumping to 6064 feet in 2007. Some of this can be attributed to improved drilling technology and depleted resources in some areas, but negative perceptions of shallow wells also play a role.

  • Well Spacing: Part of the challenge facing shallow oil well producers is that deep and shallow reservoirs are often in the same place under the same surface. This combined with the industry-wide preference for deep drilling means that shallow reservoirs are often drilled through to reach the deeper ones. This makes shallow reservoirs significantly more difficult to produce later on. Companies often can't sublease shallow formations, either, due to both practical problems and local drilling regulations.

  • Delay Expenses: One of the most significant factors influencing oil producers' decisions is how heavily their expenses depend on production. Any delays in production and delivery can significantly affect a producer's bottom line. For example, extended equipment rentals, increased employee overtime costs and negatively affected client relationships have both short and long term implications for an oil company's profits. For this reason, many oil companies choose to drill deep to get larger reserves and ideally get more stable production numbers.

  • Legal Considerations: This brings us back to the issue of local regulations. While all oil production companies must consider local laws when setting up a drill site, sifting through the local laws is enough of a challenge without getting into whether a project is a deep well or a shallow well. Even operators pursuing shallow oil well projects have run into complications — more than one operator has erroneously pursued a permit for a shallow well when, legally, they were drilling a deep well. The subsequent civil penalties and litigation costs incurred can discourage producers from pursuing shallow oil well drilling entirely, despite the many benefits of the practice.

Because of the in-depth planning and other challenges involved in shallow oil well drilling, many companies choose not to pursue it. However, this prevents them from taking advantage of a valuable resource. Just because a company primarily works in deep drilling doesn't mean that they can't do some shallow oil well drilling as well.

High-Quality Rubber Products From Global Elastomeric Products

Despite the drawbacks of shallow oil wells in the current economy, it's important to remember that shallow oil well drilling costs are exceptionally low compared to the industry standard and especially low compared to offshore drilling. Combined with the availability and productivity benefits, this makes shallow wells a viable source of income for drilling companies of all sizes.

To make it work, however, you need parts that are reliable and replaceable from a high-quality supplier. Global Elastomeric Products can help.

Global Elastomeric Products has been producing reliable rubber products for the oil and gas industry since 1963. We offer a wide range of high-quality elastomeric products including valve seals, packer cups and shear out joints, all produced to last. We even produce custom rubber molded products for specialized applications, so you can trust Global Elastomeric Products for even your most unique design needs.

Contact Global Elastomeric Products today for more information about how our equipment can supply your next shallow oil well project, boosting your revenue and improving your delivery processes.

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