Replies to This Discussion

Permalink Reply by Rock Man on August 30, 2018 at 4:36

When this well is all said and done, there is a 99.99% probability that this will be a dry hole and well will be plugged.

Permalink Reply by Dion Warr, CPL on August 30, 2018 at 18:49

Lisa:

IANAL, but I would state that an assessment of a "prescription well" is generally dubious unless certain conditions are likely to be met in a given situation and set of circumstances.  One must be dealing with an owner sophisticated enough to understand what one is trying to accomplish, "encourage" or induce a lessee / driller / operator to undertake such a proposition, and then make a viable attempt which consititutes "use" of the mineral right or servitude such that the action undertaken creates an interruption to prescription, which would then "reset the clock" on the underlying mineral servitude.  Additionally, what "value" is conserved and retained by the owner in light of such an operation also comes into consideration as to what measures such an owner would undertake in such an endeavor.

Unless the mineral owner were to undertake or underwrite the drilling of the well himself - as Rockman points out, geology and the promise of a viable prospect is what drives drilling for the most part.  A for-profit enterprise is never in the business of "drilling the well for you", unless you can in fact pay them for such a service - otherwise, they're drilling and completing wells in the pursuit of a reasonably profitable return.  And in most cases, the industry is far past the era of "drilling 'til we strike" - industry players have done their homework, pored over well and seismic data, identified viable areas and prospects.  Even the relatively few "wild-@$#!" guesses (WAGs) are "scientific" WAGs (SWAGs).  So, the average owner that would not have already been contacted by an interested lessee would at least have to possess something of interest to pursue.  In such a case, making one's land available for lease at favorable terms (less than market value) will sometimes induce a lessee to bite.

Use of the mineral right is not so much constrained by "reasonable and prudent" as much as the nature of the act meets the acceptable terms and definitions of "use" - that is to say, expectancy of profit is not the standard.  Rather, the pursuit of a good-faith operation to a stated depth or objective in a more or less continuous manner which would likely result in production in paying quantities is the standard.  Likely.  Not "expect" or "inevitable", not "50/50"...  So what does that mean?  Well...

Legal disputes of this type would usually revolve around the nature of the operations, the acts and conduct of the lessee / driller / operator in pursuing said operations, and whether the stated objective is "likely" to result in production in paying quantities.  And, as in most circumstances where "fuzzy" definitions are at play in Louisiana, each case brought to court and decided is based upon a judicial determination on a case-by-case basis as determined by the facts.  And there are some guidelines, and some cases upon which most judges and court rely, but no one "precedent" that makes the determination.

Likely?  Who determines that?  Generally, experts like Jay, who because of education, qualifications and experience can be rated as expert in such matters.  A landman (like me) can point out that one can drill 400' into the earth in some places in this state and hit a well (Bellevue Field) today, but in most places drilling 1,000' into the ground is going to be considered a really expensive posthole, but not a well that going to hold your minerals for another 10 years.  (Go to Caddo Pine Island, however, change the objective depth to 1,100' or so, and you're in business).  I can also state (reasonably, I feel) that if one were plan to drill 10,000' into the ground and do so anywhere in the state (with some sort of qualifiable objective on the permit application), you'd be hard pressed to find a court that would dismiss that as a good-faith attempt (unless you're demonstrably acting fraudulently or otherwise criminally) - "reasonable expectation" implies that one would not spend a couple of million dollars give or take drilling that hole on a whim.  However, the expert will be able to state whether a 3,800' Miocene well makes for a reasonable objective  ten miles away from areas that were last prospectively drilled for such shallow wells 50 years ago, and provide data to prove it upon request.  I can run well records and pull GIS and put a report of past activities together, but can't tell you what Jay can tell you expertly.  Thus I don't claim to be a geologist, either.

Experience states that one is less likely to run into trouble to permit for a stated shallower objective, and then amend to drill deeper, than the other way around.  But drilling to a reasonable stated objective and finding that formation non-productive, then coming uphole and testing a secondary shallower formation is not usually that suspect.  However, Katie bar the door if you try to hold a lease and do so, and delay for a period (say, around ninety days) before testing the shallow formation and saying your lease is good - but that's likely a different topic for a different day.

In any event, a well determined to be drilled in good-faith, in a more or less continuous manner to a stated depth or objective, logged and tested, even if a complete dry hole and anything other than a "pipe dream" (pun intended) is likely going to considered "use" and interrupt the prescription of a mineral servitude.

So, do "prescription wells" exist?  Yes absolutely.  But your usual such well - drilled on timber acreage or former timberage, minerals owned by a large institutional owner, such well likely to hold hundreds if not thousands of acres of contiguous mineral servitude, possesses other prospects on this are other properties, access to which would prove enticing for a trade for a prospective lessee to perform a service...  Doesn't seem like this situation necessarily fits the bill. Determinate upon the acts however.

Permalink Reply by Dion Warr, CPL on August 31, 2018 at 7:07

Jay:

Could clearly be extending the lease - but one does not need to change the permit to a deeper objective to do that.  Also - if a prescription well - there are likely cheaper ways to do that than paying for an amended permit and rig time (or footage) on another 1200' of hole to make.  "More or less continuous manner" does not imply "expeditious" or "most efficient" manner.  If one wanted to be nefarious about it - trip up and down the hole.  Run some tools.  Do some logging.  Go fish for lost equipment.  It only has to be reasonably defensible.  Maybe one figures "while we're here this far" one'll just go test the Frio for another 1200'.  Beats me.  In my experience, it's been easier and cheaper for an E&P to send the landman out to go extend a lease for an additional 90 days than pay to keep the rig and crew onsite.

Permalink Reply by Lisa Melder-Johnson on August 30, 2018 at 4:14

Thanks Jay!   I was just looking at that too.   They are doing a lot of work at that site building a very nice road into it & they have dug & buried something on left/rig side of the road all the way to the closest creek (roaring creek) which is 1/2 or so but stops there with no outlet that I see.   Jay I was just in that area yesterday.   There is also a pipeline (with high pressure gas warning), 2 large sand/gravel pits (Grayson Co?) & a separation station near pipeline that was put in during the mid 90's by Chesapeake? that separate gas/oil/propane etc.  The Monroe well is close to this pipeline area on Melder Rd.  What puzzles me the most is this location is in a heavily wooded area with entrance right next to a older home & his area was leased in mid 90s along with mine but there was never any drilling really close to that.   There was a very bid track hoe by the entrance yesterday.   I cannot see the well pad or rig from the road.  I know this is a 100 acre track of land.

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Permalink Reply by Lisa Melder-Johnson on August 26, 2018 at 13:52

Understanding that Gordon well 215222 could be a prescription well, amazing that this area was never drilled in before or at least not this far west towards Melder. And it was still leased up until 8/31/18. Could be because its lawyer owned.

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Permalink Reply by Rock Man on August 26, 2018 at 15:28

Lawyer owned minerals not controlling historical drilling activity- geology is.

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Permalink Reply by Lisa Melder-Johnson on August 26, 2018 at 16:06

Good deal! Understood geology never lies.  I know 25 plus years ago this area was seismographed heavily.  

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Permalink Reply by Rock Man on August 26, 2018 at 16:14

That historical seismic data can be used by present day operators to find out a lot about the subsurface

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Permalink Reply by Lisa Melder-Johnson on August 30, 2018 at 5:26

Thanks RM, you are probably right on.   This is just to make sure the 10 years gets extended.

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Permalink Reply by Lisa Melder-Johnson on August 31, 2018 at 4:04

THANKS Dion & Jay for taking the time to help me understand it all!    Wow so much at play here & so much unknown.   

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Permalink Reply by Two Dogs, Pirate on August 31, 2018 at 8:29

Without running out the title but just from a cursory standpoint this doesn't smell like a prescription well to me. The OGML is dated July 19, 2018 and the term is for 3 years. There was nothing that jumped out at me saying prescription well.

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Permalink Reply by Skip Peel - Mineral Consultant on August 31, 2018 at 8:31

On top of things in your backyard as usual, TDP.  Thanks.

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