State the ProblemA critical issue for any exploration company wishing to economically exploit an oil or natural gas formation revolves around determining the appropriate number of horizontal wells to place within of the formation to effectively drain the hydrocarbons into place. The number of wells per section or proportional unit is called well density. In the state of New Mexico, a standard proration unit is 320 acres, or half of a congressional section. The number of wells that may be drilled within a section of a formation in the state of New Mexico is determined by the New Mexico State Petroleum Conservation District (NMOCD). Recently, the NMOCD proposed changes to the existing horizontal rules and the proposed changes, case 14744, were heard before the Oil Conservation Commission (OCC) on October 20, 2011. The OCC has the authority to approve the proposed changes and, if approved, the new rules will ultimately allow each oil and gas operator to independently determine the number of horizontal wells to drill within any formation. Likewise, once this rule is approved, it will be up to WPX Energy to determine the appropriate number of horizontal wells to drill within the Mancos shale formation, in order to effectively drain the gas in place without drilling too many wells and wasting resources or time. How a risk-based system would help alleviate the problem Risk assessment helps define the sensitivity of a project to all threats and opportunities. When all parties fully understand the complexity and nature of the threats, better project objectives and contingencies can be defined and mitigation strategies created in advance. When using risk assessment in the project planning process… middle of paper… series ago). World Prime Minister Today. (Vol. XI, number V), 1-3.Koller, Glenn. (2009). A synopsis of the risk assessment/management journey (part 10 of a series). World Prime Minister Today. (Vol. XI, number IX), 1-4.Koller, Glenn. (2011) Monetizing Risk: Converting Threats and Opportunities into Impact on Project Value. Boca Raton, Florida: CRC Press.New Mexico Energy Minerals and Natural Resources Department (EMNRD), Title 19 (Section 15: Oil and Gas Regulations) http://www.emnrd.state.nm.us/ ocd/documents/20098 -5currentrules-new17and39.pdfNew Mexico Petroleum Conservation District, Case 14774, hearing date October 20, 2011. (Proposed Changes to Horizontal Drilling Rules) http://www.emnrd.state. nm.us/ocd/documents/10-20OCCHEARING .pdfOracle (2009). The benefits of risk assessment for projects, portfolios and businesses. Online at http://www.oracle.com/us/products/applications/042743.pdf