Sinclair Oil & Gas Company is on the tail end of project completion regarding the last of three well sites inside the city limits of Big Spring. The final well site, located off of Parkway and Hearn, was rig released at the end of April 2020 and the area is in the process of being cleared and crews are working to bring the wells online. Now that the drilling of the wells has been completed, Sinclair Oil is submitting an application to the Oil & Gas Division of the Railroad Commission of Texas to form two more pooled units related to the horizontal wells recently completed. The two new units – Comanche Trail and Marcy – will incorporate land around the State Park and Comanche Trail Golf Course.
“These [MIPA] applications are not for drilling. We are piggybacking off the existing wells from Parkway and Hearn. This is a way for us to include those who, for whatever reason, didn't participate. It's a way to allow everyone in,” Jonathan Baker, Sinclair Senior Landman and Project Team Leaders, said.
The Mineral Interest Pooling Act (MIPA) was originally created in 1965, but was updated by the 86th Texas Legislature in 2019. In general it requires a qualified owner to apply for MIPA – which in this case is Sinclair – and allows for the RRC to compel pooling for separately owned tracts in the same field reservoir and prevents unnecessary well drilling and waste and protected correlative rights. MIPA applications are typically used inside city limits. In this particular project, Sinclair was dealing with more than 10,000 lot owners.
“In recent years a company applied for this type of authority in the City of Midland and a few years ago, another company applied for this in Pecos,” William Osborn, Sinclair Attorney, said. “In these West Texas communities with underlying shales, it's common practice to go into the Railroad Commission and ask it's assistance to form a unit. In essence to speak for those who are silent; they don't object, they are just silent.”
The Sinclair projects began in 2016 by communication and discussion with city leaders and residents that would be potentially impacted by the well sites. The first of the three surface locations to be drilled was the FM 700 location, with drilling beginning at the end of 2019, immediately following was the location on the north end of Big Spring near the USDA facility, and the Parkway/Hearn location wrapped up the project. Each of the locations have two wells placed on the site with anticipated output in a year of 125,000 plus barrels per well in the first year.
“Horizontal wells generally come on very strong and then have a steep decline,” Jonathan Baker, said. “The barrels produced will decline quickly over the beginning life of the well and then stabilize on the production output.”
The City of Big Spring and the Big Spring Independent School District own minerals scattered throughout the units. Through this ownership, the City and BSISD, just as the residents who own mineral rights, will be receiving recurring royalty payments for the life of the well.
The pipeline component which is was the more intrusive portion of the project, and resulted in a couple of minor complaints, is nearly completed. According to Baker there were a few issues such as unmarked ,PVC piping that had to be replaced, and dust, but in general the complaints were identified and resolved in a quick and efficient manner. Sinclair is working with the City now to complete some road repairs necessitated by operations. The drilling operation – beginning last Spring – and the completion operations - ending last month - did not result in any significant complaints or issues. According to Baker, he was pleasantly surprised to hear from a few residents who expressed their appreciation for the extensive communication throughout the project.
“I am the beneficiary of lots of good planning on this project. So much work was done on the front end that helped this project go smoothly. Letters were sent out to ensure people [in close proximity to the Parkway and Hearn location] were able to understand what was going to be happening, if issues came up that they had contact information [for Sinclair and Four Sevens], and just to keep communication lines open,” Kelly Williams, Sinclair Land Manager, said. “Knowing this project was taking place in the middle of a neighborhood, making sure people were inconvenienced as little as possible was paramount.”
One of the mitigation factors that was put in place, before the project kicked off, was the use of Stealth Fleet – a quiet frac team – to conduct the work with as little noise as possible. In addition extra sound wall barriers 32 foot tall walls were placed around the Parkway and Hearn location to keep the noise contained as much as possible.
One reminder to the residents around the well sites, while the drilling portion of the projects have completed, there will be maintenance and repair work done over time on the wells as needed. During these repairs residents may see increased truck traffic or a small workover rig at the location, but it will be directly related to repair and will be in short increments.
“We can't tell you how often that will be, but it will depend on the nature of the repair,” Baker said. “Our hope is that we are using equipment that doesn't require a lot of repair, but it happens and things break down. We have tried to automate the majority of it and pull it away from that facility as to not have to be there as often.”
Throughout the project, Sinclair has utilized local talent and has been astounded by the support from the community. In addition, the project has been a joint venture with Four Sevens, to maintain a community presence. The partnership has worked well and will continue according to Sinclair representatives.
“We have tried to set up our infrastructure and surface layout as to reduce further impact as best we can,” Baker said.
Now that wells are coming online and production is beginning, Sinclair is beginning to send out Division Order Packets. These Packets include division order forms that allow mineral owners to confirm their proper decimal share of production from the wells, based on title. Automatic deposit/ACH forms and W-9 forms also are included. Individuals receiving the Packets should verify their mailing address and follow the enclosed instructions to sign and return the forms so that Sinclair can make payments by direct deposit..
“We have had some ask if this is a scam because it does ask for tax information for federal purposes and other information to allow us to be able to transfer funds,” Baker said. As the Operator, Sinclair is responsible for making payments on production from the wells. “A lot of people have never seen these before. A lot of people are familiar Four Sevens, who has and continues to do an excellent job of moving the project forward and they are still part of the project; they did a lot of the initial work and communication, but these Division Orders will be coming from Sinclair.”