Papers - Unitization - Discussion of Unitization

G. O. SMITH,* Washington, D. C.—This program is itself a demonstration of the widespread interest in the subject of more efficient development and operation of oil fields. The statements of fact already presented and the views expressed are sufficient evidence that the engineering and economic principles fundamental to the idea of unit operation are much more generally accepted than they were even one year ago. And real progress has been made in putting these principles to the test. No one realizes better than I that the fight against waste, whether physical or economic, must be waged in the front-line trenches: Washington at best is only an observation post. Yet viewed from this distance the advance made in the last few months has been notable and to a high degree encouraging. Five years ago the Federal Oil Conservation Board, in its first contacts with the industry, raised the question, "How can new pools be explored without exploitation until new production is warranted by the country's needs?" Three and one-half years ago the Board, in its first report to the President, paid largest attention, among what it listed as fundamental conservation measures, to "cooperative methods in sane development of new fields." A year ago, in its third report, the Board again endorsed as the essential factor in conserving the nation's reserves of oil, "full cooperation in unit control, whether by voluntary agreement or by state enforcement." The function of this federal agency has been purely fact-finding and educational. The Oil Conservation Board early declared that the major part of its task was to help the industry "formulate the broader by-laws in the sense of conservation." And now, after these five years of eventful history in the oil industry, may I size up the situation as I see it from the Washington point of view? First of all, and fundamental to a successful issue, I have observed in the industry a gradual acceptance of technical opinion as the guide to executive action; and this has at last led to some agreement as to what procedure offers most promise. Analyzed in more detail, this highly desirable progress has consisted in "self-restraint actuated by enlightened self-interest." We see emerging the general desire of oil producers for efficiency in operation, which means low costs and high recovery. As shown by facts presented at this meeting, competition in drilling is in direct opposition to efficiency in oil production, in that such competition increases costs and lowers recovery. The only route to conservation of this natural resource and also of the capital and labor involved in making it available is through unit control, which substitutes cooperative, well-planned action for competitive, unregulated activity, forced by the individualism of a small minority of landowners or perhaps by a single operator. Or, in terms of actual experience, development of an oil field and its subsequent operation under unit control means the substitution of majority rule for minority rule, yet the minority enjoys to the full the resulting economic benefits. So far as it affects the public interest, unit operation of oil properties deserves unqualified approval. It means more oil from the same area over a longer period