2018 PJVA-CAPL Pad Site Sharing Agreement
This is a 2018 industry document to reflect the increasing number of wells being drilled from shared well pads in which wells and the related facilities are not held in common interests. The project was a joint collaboration of PJVA and CAPL, with significant involvement of CAPLA and PASC. The project is put in context with the following extract from the Introduction to the document:
Industry is drilling increasingly from shared well pads in which wells and facilities are not held in common interests. This is done to mitigate the environmental footprint and to optimize operating efficiencies for construction costs and shared site-specific infrastructure. Many well pads serving different ownership wells already exist without any documentation to address the wide range of issues inherent in a pad sharing scenario.
The Pad Site Sharing Agreement ("PSSA") reflects a shared belief by the PJVA and CAPL that the only efficient and effective way to address this growing issue is to seek an industry solution to this industry problem by creating a precedent that can be used as a starting point for the vast majority of pad sharing arrangements. Increased commonality in addressing these issues will allow for optimized business outcomes and the completion of these agreements in a much more timely and efficient manner than would otherwise be the case.
Pad sharing arrangements may at first appear to be a simple surface sharing arrangement designed to decrease the environmental footprint and to enhance operating efficiencies. The cost of the construction of the Pad Site and the installation of the shared Facility to manage production will also typically be very modest relative to the investments in the Wells. The relationship of the Owners is much more complex, though, because of the issues resulting from differences in ownership between the Pad Site (and the related common Facility) and the Wells located on the Pad Site (e.g., cross-indemnifications, a staged abandonment, Enlargements).
Given the ongoing need to manage the Pad Site and the Facility located on the Pad Site, the starting point used to create this document was the 1999 PJVA CO&O Agreement. That document was then modified, firstly, to reflect more recent work that CAPL had done to update similar concepts in the 2007 and 2015 CAPL Operating Procedures and, secondly, to address the interrelationship of the PSSA with specific Land Activities being conducted by the respective mineral rights holders under any applicable Land Agreements. The integration of the modern CAPL content also reflects the fact that the PJVA CO&O Operating Procedure was largely based on the 1990 CAPL Operating Procedure for comparable topics. Anchoring the document to these familiar and accepted industry standards is expected to facilitate industry’s transition to the document.
Here is a link to the Introduction of the Pad Site Sharing Agreement.
Here is a link to the presentation made at the industry rollout session following release of the 2018 PJVA-CAPL Pad Site Sharing Agreement. Permission was obtained from the other presenters to share this presentation here.
Here is a link to a PDF of an article on the document that was published in the Negotiator in October 2022 that outlines the consequences of certain incidents in the situations in which a Pad Site Sharing Agreement is and is not in place. The overarching theme is that there could be significant adverse consequences to the applicable owners of a shared pad site if a Pad Site Sharing Agreement is not in place. Put more simply, a decision not to put a Pad Site Sharing Agreement in place for a shared well pad is ultimately a conscious choice to assume risk. Permission was obtained from those contributing to the article to share it here.
Nightmare on Pad Street (Negotiator, October 2022)
Here is link to a PDF of three articles on the document that were published in the Negotiator in 2016-2018. Insofar as others were involved in writing those articles, their permission to include the articles in this compilation was obtained.