Does this wording mean a lease can be unitized?
To the Lawyers: Please translate this clause. Does this give the Oil and Gas Company the option to unitize the lease greater than 640 acres?
Lessee is hereby granted the right as to all or any part of the land described herein, without Lessor's joinder, at any time and from time to time, to combine, pool or unitize the land, royalty, or mineral interests covered by this lease, or any portion thereof, with any other land, lease or leases, royalty or mineral interests in or under any other tract or tracts of land in the vicinity thereof, whether owned by Lessee or some other person or corporation so as to create, by the combination of such lands and leases, one or more operating units, provided that no one operating unit shall, in the case of gas, including condensate, embrace more than six hundred forty (640) acres [except in the event of a horizontal oil or gas completion, in which event such unit may embrace as much as one thousand nine hundred twenty (1920) acres], and in the case of oil, including casinghead gas, (other than a horizontal oil or gas completion) embrace more than forty (40) acres; and provided further, however, that if any spacing or other rules and regulations of the State or Federal Commission, Agency, or regulatory body having or claiming jurisdiction has heretofore or shall at any time hereafter permit or prescribe a drilling or operating unit or spacing rule in the case of gas, including condensate greater than six hundred forty (640) acres, [or, in the case of a horizontal oil or gas completion, greater than one thousand nine hundred twenty (1920) acres], or in the case of oil or casinghead gas which is not a horizontal oil or gas completion, greater than forty (40) acres, then the unit or units herein contemplated may have, or may be redesigned so as to have, as the case may be, the same surface content as, but not more than the unit or the acreage in the spacing rule so permitted or prescribed. The term "horizontal completion" means an oil or gas well in which the horizontal component of the gross completion interval in the reservoir exceeds the vertical component thereof. However, it is further specifically understood and agreed, anything herein to the contrary notwithstanding, that the Lessee shall have the right to, and the benefit of an acreage tolerance of ten percent in excess of any drilling or operating unit authorized herein. The commencement of a well, or the completion of a well to production of either oil, gas, casinghead gas, condensate, or other minerals on any portion of an operating unit in which all or any part of the land described herein is embraced, or production of oil, gas, casinghead gas, condensate, or other minerals therefrom shall have the same effect under the terms of this lease as if a well were commenced, completed or producing oil, gas, casinghead gas, condensate, or other minerals in paying quantities on the land embraced by this lease. Lessee shall execute in writing and file for record in the records of the Parish in which the lands herein leased are located, an instrument identifying or describing the pooled acreage, or an instrument, supplemental thereto re-designating same, as the case may be. Any unit formed by Lessee hereunder may be created either prior to or during or after the drilling of the well, which is then or thereafter becomes the unit well. The failure of the leasehold title (in whole or in part) to any tract or interest therein included in a pooled unit shall not affect the validity of said unit as to the tracts or interests not subject to such failure. Either prior to the securing of production from any unit created under the authority hereinabove granted, or after cessation of production therefrom, Lessee shall have the right to dissolve the unit so created, without Lessor's joinder or further consent, by executing in writing and placing of record in the Parish or Parishes in which the lands making up such unit may be located, an instrument identifying and dissolving such unit. The provisions hereof shall be construed as a covenant running with the land and shall inure to the benefit of and be binding upon the parties hereto, their heirs, representatives, successors and assigns. In the event such operating unit or units is/are so created by Lessee, Lessor shall receive out of production or the proceeds from production from such operating unit or units or out of the shut-in royalty provided for above, subject to the provisions of Paragraph 8, such portion of the royalty specified herein as the number of acres (mineral acres) out of this lease placed in any such operating unit or units bears to the total number of acres included in such operating unit or units
Lessee is hereby granted the right as to all or any part of the land described herein, without Lessor's joinder, at any time and from time to time, to combine, pool or unitize the land, royalty, or mineral interests covered by this lease, or any portion thereof, with any other land, lease or leases, royalty or mineral interests in or under any other tract or tracts of land in the vicinity thereof, whether owned by Lessee or some other person or corporation so as to create, by the combination of such lands and leases, one or more operating units, provided that no one operating unit shall, in the case of gas, including condensate, embrace more than six hundred forty (640) acres [except in the event of a horizontal oil or gas completion, in which event such unit may embrace as much as one thousand nine hundred twenty (1920) acres], and in the case of oil, including casinghead gas, (other than a horizontal oil or gas completion) embrace more than forty (40) acres; and provided further, however, that if any spacing or other rules and regulations of the State or Federal Commission, Agency, or regulatory body having or claiming jurisdiction has heretofore or shall at any time hereafter permit or prescribe a drilling or operating unit or spacing rule in the case of gas, including condensate greater than six hundred forty (640) acres, [or, in the case of a horizontal oil or gas completion, greater than one thousand nine hundred twenty (1920) acres], or in the case of oil or casinghead gas which is not a horizontal oil or gas completion, greater than forty (40) acres, then the unit or units herein contemplated may have, or may be redesigned so as to have, as the case may be, the same surface content as, but not more than the unit or the acreage in the spacing rule so permitted or prescribed. The term "horizontal completion" means an oil or gas well in which the horizontal component of the gross completion interval in the reservoir exceeds the vertical component thereof. However, it is further specifically understood and agreed, anything herein to the contrary notwithstanding, that the Lessee shall have the right to, and the benefit of an acreage tolerance of ten percent in excess of any drilling or operating unit authorized herein. The commencement of a well, or the completion of a well to production of either oil, gas, casinghead gas, condensate, or other minerals on any portion of an operating unit in which all or any part of the land described herein is embraced, or production of oil, gas, casinghead gas, condensate, or other minerals therefrom shall have the same effect under the terms of this lease as if a well were commenced, completed or producing oil, gas, casinghead gas, condensate, or other minerals in paying quantities on the land embraced by this lease. Lessee shall execute in writing and file for record in the records of the Parish in which the lands herein leased are located, an instrument identifying or describing the pooled acreage, or an instrument, supplemental thereto re-designating same, as the case may be. Any unit formed by Lessee hereunder may be created either prior to or during or after the drilling of the well, which is then or thereafter becomes the unit well. The failure of the leasehold title (in whole or in part) to any tract or interest therein included in a pooled unit shall not affect the validity of said unit as to the tracts or interests not subject to such failure. Either prior to the securing of production from any unit created under the authority hereinabove granted, or after cessation of production therefrom, Lessee shall have the right to dissolve the unit so created, without Lessor's joinder or further consent, by executing in writing and placing of record in the Parish or Parishes in which the lands making up such unit may be located, an instrument identifying and dissolving such unit. The provisions hereof shall be construed as a covenant running with the land and shall inure to the benefit of and be binding upon the parties hereto, their heirs, representatives, successors and assigns. In the event such operating unit or units is/are so created by Lessee, Lessor shall receive out of production or the proceeds from production from such operating unit or units or out of the shut-in royalty provided for above, subject to the provisions of Paragraph 8, such portion of the royalty specified herein as the number of acres (mineral acres) out of this lease placed in any such operating unit or units bears to the total number of acres included in such operating unit or units
Views: 145
Replies to This Discussion
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Permalink Reply by LP on
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Thank you. I wanted to be sure that the “legalese” language was actually saying that the lease was not limited to a 640 acre unit.
The sarcasm was not necessary.
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Permalink Reply by LP on
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I'm sure your sense of superiority is something you must enjoy but I needed a credentialed individual to state that this was a clause that provided the O&G company the option to unitize so that I can take that answer to another individual and explain what it meant, armed with a legal opinion.
Your response, such as it was given, is nevertheless...appreciated.
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Permalink Reply by Dion Warr, CPL on -
Yikes! Everyone wearing a helmet and a cup in this discussion?!
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Permalink Reply by KT on
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The provisions hereof shall be construed as a covenant running with the land and shall inure to the benefit of and be binding upon the parties hereto, their heirs, representatives, successors and assigns.
I agree,1920 acres in horizontal well. Concise. But is it just me or is the above the scariest part of the whole thing? Makes me want to run to a lawyer for self defense.
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Permalink Reply by Dion Warr, CPL on
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Keith:
I would say 'not really', as such clauses are typically equipped with such language (although since it is this clause is also predicated upon the action of the OOC, the implementing of such a clause as a 'covenant running with the land' is somewhat vague). These clauses were first instituted (at least in the unit sizes indicated) when the Austin Chalk play was in full swing, and dual lateral completions (updip and downdip) joining several faults were all the rage. (Actually, I have seen these up to 2080 ac. by definition, and an isolated occasion of 2560 ac. units - 4 sq. mi.!)
Considering that N LA District and OOC seemed contented with 640 ac. spacing w/ rare exception, the full extent of the clause (as included in HS leases) has not been used. But, it is there should an operator wish to try it.
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Permalink Reply by LP on
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Thank you, Dion and Keith, for the logical analysis of the clause in question. You understood the intent of the question/discussion was not to simply underline the obvious of what the clause states specifically regarding unitizing but what potential exists within it that should be fully understood by the landowner.
Your input as well as your courteous tone is much appreciated.
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Hope its US steel, not that Brasil or China stuff. Saw a trailer loaded with stainless pipe the other day. Looked like 4" with collared ends. Well stuff? Looked expensive.
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Permalink Reply by Dion Warr, CPL on
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Colonel Vitriol, you should really learn to diagram sentences before you start a rant.
Keith said "... I agree, 1920 acres in horizontal well. Concise. But is it just me, or is the above [my emphasis] the scariest part of the whole thing?"
The "above" cited by Keith reads as follows:
"The provisions hereof shall be construed as a covenant running with the land and shall inure to the benefit of and be binding upon the parties hereto, their heirs, representatives, successors and assigns."
If you had cared enough to read the thread properly, Herr Jim, you would have noted, that in replying to Keith's post (as evidenced by addressing him as Keith in the header, and the indent under his post which indicates a reply to his post (please brush up on outline format if you did not grasp this), I responded to his question, "Is [the above] passage the scariest part of this whole thing" by stating, "No, not really," as the thrust of the rights conferred to Lessee in the paragraph primarily referred to rights that only have relevance during the productive life of the lease, and are effectively extinguished at the expiration thereof. Alas, I could only assume that this was yet another attempt by you to recreate a pedantic web version of "Hitler's march through the Low Countries" while attempting to reaffirm yourself on this thread and elsewhere as "the smartest man in the room". Rest assured, you have not crossed into Northern France when you crossed me.
Should you have taken the time to notice, rather than mindlessly pick at the sores on your own ego, I actually referred to the existence of horizontal units larger than 640 acres. Considering that I also commented (as you did) on a couple of those same discussions re: the 720 acre units to which you refer, I would submit that you should have been aware of my knowledge of their existence, if not the existence of your fellow contributors.
Additionally, I would submit your reference of geologic units is not germane to this discussion. At this time, the HS is being unitized on a geographic basis, using governmental sections and quarter-quarters for unit boundaries, and it would appear that this strata will continue to be unitized in this manner for the foreseeable future. Therefore I cannot view your reference to geologic units in S LA as anything other than yet more evidence of your self-appointed claim of "the smartest man in the room".
What I can tell you, Jim, is that your general tone and treatment of others on this website combined with your brandishing of "CPL" in your signature is casting a ruddy light on our profession, and probably contributes greatly to the general landowner perception on this website (and related forums) of the oil and gas business looking upon them as dupes.
I would suggest that you begin shedding light on discussions on this site in a constructive manner and desist in dragging more light unto yourself and your nameplate through these pithy little games you have insisted on playing with curious individuals who humbly admit to their own ignorance in these matters. It is obvious that you possess knowledge and experience that could be beneficial to others and well received if it weren't imparted with such a pompous and patrician tone.
P. S. I wouldn't find it very surprising, sight unseen and solely based upon your general manner, that if we ever met in person, that I would be... taller.
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