Replies to This Discussion

Permalink Reply by Kat S8/T18/R15 on August 17, 2008 at 12:30

Rick, it seems the deeper we get into this, the more complicated it gets. I don't mind waiting - I just wish I knew what for!!! I know all about bird-in-the-hand, but I feel that waiting a bit longer isn't being greedy, just smart. I hope it doesn't prove out the other way. I don't know if I am quite armed with the info I need, but I am trying to learn. Thanks for the info and Good Luck!!! Kathy

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Permalink Reply by Rick on August 18, 2008 at 18:31

Kathy, no one can or should blame you for waiting if that is what you feel is best for you. There have been many discussions and replys over the past several weeks on this issue and I feel there is no real "one size fits all" answer, I think each situation depends on the indivdual and their own circumstances. I feel that I have a little advantage over some of the folks on here that are wondering what to do based on questions of whether the gas companies will drill in their section anytime soon because I have a rig drilling out my backdoor already and they are about 6 weeks into the hole, so whether I lease or not, I don't have long to wait to know what is happening and whether a good well will be drilled in my section or not. It makes one a little more brave knowing that a well is being drilled and knowing that information will eventually be released about it.

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Permalink Reply by SharonB T18N R15W S8 on August 14, 2008 at 7:52

Thanks Rick. I'm in Kathy's section and a part of the last 40 acres unsigned so any info helps. I'm looking for a timeline here, though I know there are a lot of variables. So the legal notice came in May and the well was drilled in July...that's pretty fast. Our section needs to be drilled by mid-November for Exco to remain in control - if not, top leases kick in and CHK has the majority. Doesn't it stand to reason that Exco will drill before mid November and that the forced pool notices should be a priority since they are in a hurry to drill to hold the leases that will soon expire? I'm definately holding out and may ride the well down at this point since it seems like we could be in production pretty quickly.

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Permalink Reply by Rick on August 18, 2008 at 18:49

Hi Sharon B, yes to me it does make sense that they would want to drill before mid-November, but I'm not an O&G expert. I believe the reason drilling started in this section as quick as it did was because the section had an existing lease and it was like your section, running low on days. The time line for me being informed by CHK lawyers fell at almost exactly two week intervals, from the first notice I got till they started drilling, May 15, May 29, June 10, rig on location July 10. So when they are pressed by a end of lease date, they can get things done from filing to rig on site in apparently less than 2 months. I don't think they have to wait for all the final paper work to be approved to start drilling because drilling started here a few days before the July 15 approval meeting date in Baton Rouge. I don't know how close the lease end date was because I don't know the landowner personally that is being drilled on but I would expect they would have to allow enough time to let them reach a productive zone and get the well producing before the lease end date unless there is wording in the lease that allows additional time for completion after the drilling starts.

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Permalink Reply by Grice on August 14, 2008 at 11:07

When two or more tracts of land are within a drilling unit, the owners may agree to pool their interests and to develop their lands as a drilling unit.

Where the owners have not agreed to pool their interests, the commissioner shall require them to do so and to develop their lands as a drilling unit.

All orders requiring pooling shall be made after notice and hearing.

The terms and conditions will afford the owner of each tract the opportunity to recover or receive his just and equitable share of the oil and gas in the pool without unnecessary expense.

The portion of the production allocated to the owner of each tract, when produced, be considered as if it had been produced from his tract by a well drilled thereon.

In the event pooling is required, the cost of development and operation of the pooled unit chargeable to the owners therein shall be determined and recovered.
Any owner drilling may, by certified mail, return receipt requested, notify all other owners in the unit of the drilling and give each owner an opportunity to elect to participate in the risk and expense of such well.

Such notice shall contain:
An estimate of the cost of drilling, testing, completing, and equipping.
The proposed location of the unit well.
The proposed objective depth of the unit well.
All data from the unit well which has not been made public.

Election to participate must be exercised by mailing written notice, by certified mail, return receipt requested, to the owner drilling the unit well within thirty days after receipt of the initial notice.

Failure to give timely written notice of the election to participate shall be deemed to be an election not to participate.

Another notice must be sent if the drilling of the proposed unit well is not commenced within ninety days after receipt of the initial notice.

Should a owner elect not to participate (or should elect to participate and then fail to pay his share of expenses within sixty days of receipt of detailed invoices), the owner drilling same shall, be entitled to own and recover the nonparticipating owner’s allocated share of the expenditures incurred in drilling, testing, completing, equipping, and operating the unit well, a charge for supervision, a risk charge (risk charge shall be 100 percent of the cost of drilling, testing, and completing the unit well).

Any owner not notified shall bear only his share of the expenditures incurred in drilling, testing, completing, equipping, and operating the unit well, including a charge for supervision.

Should a drilling unit be created around a well already drilled, the provisions for notice, election, and participation shall be applicable; however, the cost of the well shall be reduced in the same proportion as prior production in which said tract did not participate prior to determining the share of cost.

Should a drilling unit be revised to include an additional tract, the provisions for notice, election, and participation shall be applicable; however, the cost of the unit well shall be reduced in the same proportion as prior production in which said tract did not participate prior to determining the share of cost.

Should a drilling unit be revised to exclude a tract, the cost of the unit well shall be reduced in the same proportion as the prior production, to determine the share of cost to the subsequently excluded tract or tracts.

The provisions with respect to the risk charge shall not apply to any unleased interest. The royalty owner and overriding royalty owner shall receive that portion of production due to them under the terms of the contract creating the royalty.

In the event of a dispute relative to the calculation of unit well costs, the commissioner shall determine the proper costs.

If there is unleased interests for which the party entitled to market production have not made arrangements to separately dispose of such production, and the unit operator proceeds with the sale of unit production, then the unit operator shall pay to such party's pro rata share of the proceeds of the sale within 180 days of the sale.

Should the owners within a drilling unit fail to agree upon the pooling of the tracts, and should it be established by judgment of court that the commissioner is without authority to require pooling, then the owner of each tract within the drilling unit may drill thereon. The allowable production shall be proportion for the full unit, as the area of the separately owned tract bears to the full drilling unit.

_______________________

I attempted to make the information more reader-friendly, while providing as much useful information as I could. I hope it helps some to better understand what is involved when a O&G Company decides to force pool mineral rights.

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Permalink Reply by Wildflower on August 19, 2008 at 6:08

I am in Section 21, Township 16 North, Range 13 West.

I have a similar situation that is happening right now. July 8th we received the notice for a public meeting to be held July 31st here in Shreveport (which I attended), addressing forced pooling, creation of additional drilling units, exceptions for drilling spacing provisions that apply to our specific future well, and to redefine reservoir zones. July 15th we rec'd notice of a public meeting Aug. 19th in Baton Rouge before Comm. of Conservation, James Welsh. On Aug. 12/13th the partner company began cutting trees in preparation of a pad. Our primary lease expires Aug. 24th. We were recently top leased with better points. So we see this as a race to keep the primary lease in play. How can they begin drilling legally without a permit? How can cutting trees be construed as reasonable diligence in conducting drilling when no work had been done prior to this? The company has told us that cutting trees now can be defined as drilling!!!

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Permalink Reply by Kat S8/T18/R15 on August 19, 2008 at 17:55

Jim, I have another question for you. I was told by an Exco landman that if their company has the majority of the section that they can drill whenever they decide to drill and that the only time they have to unitize is when they combine units from differents sections in order to form a "unitized section." Is this true? Thanks Kathy

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Permalink Reply by The_Baron on August 19, 2008 at 8:48

It's not unusual to start building a pad while waiting on DOC to approve the permit. They may have just filed and its not yet in DOC system. In any case this would probally go to court as the o/g will argue that building the location was part of "continued operations". Watch carefully, look for breaks in the timeline where there is no activity. Don't be afraid to talk to workers onsite, take pictures, and most importantly keep a detailed log of ALL activity no matter how trivial it may seem. Good records are the best defense.

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Permalink Reply by Wildflower on August 19, 2008 at 9:10

Thank you Jim & Baron...you better believe I have been keeping records. The company's story has changed three times as to what 'drilling' means in the past 8 weeks. First it was production, then a drill bit in the ground, and two weeks ago became cutting trees.

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Permalink Reply by Rick on August 19, 2008 at 9:50

Grice, I suppose this is an extraction from some LA state law, and I appreciate the post. I don't know what kind of time period is allowed for these things to happen, but so far most have not happened for me yet.
-No order requiring pooling was made after notice and hearing.
-No certified mail notifying all other owners in the unit of drilling nor opportunity to participate in risk.
-No notice of cost of drilling, proposed objective depth, nor data which has not been made public.
From reading this, my understanding of my situation would fall under "Any owner not notified shall bear only his share of the expenditures incurred in drilling, testing, completing, equipping, and operating the unit well, including the charge of supervision but not a risk charge as indicated in the sentence, "The provisions with respect to the risk charge shall not apply to any unleased interest.
I will see how this all applies and report to others on this forum as things unfold, hopefully I will hear something soon as I saw a wireline truck and crew drive by about an hour ago and I think that is the only well being drilled on this road right now.

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Permalink Reply by Grice on August 19, 2008 at 10:32

Do you own the mineral rights within the section of the well? With no notice from the operator, nor the commissioner, would suggest you are not an active party in the well.

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Permalink Reply by Rick on August 19, 2008 at 13:06

Well, I haven't checked with the parish nor talked to an attorney, but I have had 5 different people contact me in the past 1 1/2 years offering to lease my land so I kinda figured that if they had researched enough to know to make an offer, they had researched enough to indicate that the information they had showed I had the mineral rights...? Also, I received the 3 letters from Chesapeake's attornies informing me of the application process and I didn't feel like I would have gotten those if the attornies didn't have information showing that I was a mineral owner in the section that they had to by law send the application information.

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