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Permalink Reply by danny meyers on May 28, 2009 at 15:42

Harold . Post the list

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Permalink Reply by Harold5011 on May 30, 2009 at 8:44

KB - thank you very much for the information. I remember back in the early 1960's one of the Liskow and Lewis attorneys gave an indepth, comprehensive, A-Z presentation at the Mineral Law Institue solely on this topic. It was bound into the then annually published MLI green books. I, now that I need it, can't seem to find that lengthy article or my copy of that particular edition of the MLI green books. If anyone knows of any other article or publication covering the ins and outs of how the Commissioner determines what are deductible drilling and operating costs which ones are thrown out, and if the detail produced by the operator was sufficient, when calculating how much to pay an unleased mineral owner for his or her share, I would very much appreciate it if you could direct me to it. Again, thank you for your help. Harold

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Permalink Reply by Greedy Landowner on May 29, 2009 at 7:37

Who is the operator?

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Permalink Reply by Harold5011 on May 30, 2009 at 10:43

I just noticed on the sworn detailed list of well costs that the operator deducts approximaty $730,000 for a salt water disposal well. This well is situated very close to the unit well. Is the cost of a saltwater disposal well a type of cost the commissioner would allow an operator in the calculations of how much an unleased mineral owner is due?

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Permalink Reply by danny meyers on May 30, 2009 at 16:05

Harold. Could you scan the sworn detailed list of well costs andpost it ?

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Permalink Reply by The_Baron on June 12, 2009 at 3:08

They could charge for disposal of salt water, why not for a SWD??

The SWD is probaly a lot cheaoper to pay for than hauling off the SW.

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Permalink Reply by Hicksbaugh Ltd. on May 31, 2009 at 2:57

This is a good example that needs to be brought to the Commissioner of Conservation's attention when units are formed. My impression is that the Commissioner is forming these units without any attention to whether there will be responsible operators. Responsibility includes:

1. financial integrity
2. restoration and protection of surface rights
3 responsible accounting practices
4. ability to control drilling costs.

My own thought on this is that more landowners, royalty owners, and unleased mineral interest owners need to appear at pre-app conferences and unit hearings (in Baton Rouge) to express concern. I believe if this began to occur frequently, suddenly these types of issues would go away.

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Permalink Reply by Harold5011 on June 11, 2009 at 14:35

The well is not on or under the UMI tract. Unitization as to the producing unit occured about a month after the well was spudded. Therefore significant well costs occured prior to my tract being included in the unit. Would the well costs incurred prior to unitization be costs that are deductible to the UMI interest?

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Permalink Reply by Harold5011 on June 12, 2009 at 3:25

Prior to comming uphole to the zone that was eventually unitized, the operator spent considerable sums ttying completions in deeper intervals, without success (before any units were created). Are those costs as to the deeper intervals (never unitized) and for the driling below the unitized interval deductible as well costs to an UMI owner?

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Permalink Reply by Harold5011 on June 12, 2009 at 11:13

To be sure - in regard to a UMI in an 11,000' sand producing unit, if the well was drilled to a TVD of 14,500' but nothing commercial produced below the base of the 11,000' sand, then the operator can not (should not) charge the UMI owner for the cost of drilling below the base of the 11,000' unitized sand (i.e the cost of drilling from 11,000' to 14,500') ?

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Permalink Reply by Harold5011 on June 12, 2009 at 11:47

KB - On the income side of the calculation of payout, am I correct in thinking that If the operator shouldn't be deducting leasehold royalty (which they did) and transportation costs (which they did), they shouldn't be deducting severance taxes either in their calculation of the payout date?

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Permalink Reply by Harold5011 on June 12, 2009 at 16:40

Yes, in their calculations for payout, the operator aggregated the value of all (8/8ths) of all unit production each month and then deducted all seveverance taxes paid by everyone (WI, ORR & RI) who has an interest in unit production. For instance, as to condensate, in a single pre-payout month the well produced approximately $300,000 in condensate, and the operator deducted in the payout computations about $37,500 for that month in severance taxes (i.e. almost exactly 12.5%) and then used the net (i.e. 8/8ths of gross value, less 8/8ths of all severance taxes) as the monthly income as to condensate for determining payout. The operator also deducted in their payout computations 8/8ths of the whole unit's payment of oilfield restoration fees, the gathering charges on gas and the transporation charges on gas (which the transportation charges alone on gas aggregated about half a million dollars in the operator's payout calculations).

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