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Permalink Reply by HBP on August 27, 2009 at 10:30

From my understanding, this method is the most efficient way to produce the shale without leaving portions of the formation within the unit unproduced - that would be missed with the traditional horizontal bore. I have known some landowners who have signed these and the servitude and area where the well bore crosses (the backbuild as you describe) is very deep below the surface and very deep below the water table, etc... (usually closer to total depth - but an engineer would know better) Therefore there is no noticeable intrusion from the surface.

As long as the company will indemnify you regarding this activity, its really a minimal intrusion if they are already going to drill near there anyway.

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Permalink Reply by Buddy on August 27, 2009 at 10:34

A few things come to mind.
If you are inclined to do this, limit it to one year - single well only. They cannot log nor perforate on your land and they must deal with your Lessee first to be sure their bore onto your land will not be in the way of any plans your Lessee has. ALso, they need to hold you harmless as well as agree to be responsible for any damage they may cause into any gas producing sand/shale on you. After they drill, they need to give you a sub surface directional survey or gyroscopic multi shot survey indicating the depth at which the bore entered and exited your land and to the extent that they extended into your subsurface. No surface operations on you unless they pay. If in conflict with your lease, they need to hold you harmless for that as well, and to indemnify you of any relief sought by your Lessee. Nothing you are signing should vest them with any interest in any minerals under your land. Sorry for the ramblings, just random thoughts quickly jotted down - I'm sure I've left lots out.

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Permalink Reply by HBP on August 27, 2009 at 11:10

I think some of that is accurate, and they aren't allowed to perforate in the backbuild area anyway if it falls outside the unit - they know the DOC will make sure of that.

As far as getting the Lessee involved: this is a surface situation, and since they aren't perforating (producing) in the servitude area, then it doesn't conflict with the exploration rights granted to the lessee. Just like if the surface owner allowed a pipeline Right of Way (ROW) on their property where there is an existing lease. If lessee already doesn't have a bore in that specific area, then the pipeline company is free to place the line there where the surface owner allowed, even if the ROW agreement comes after the lease. If the Lessees had to sign off on all future surface rights a landowner chooses to exercise- then nobody would sign leases because that would be an extraordinary encumbrance to the surface owner's rights to deal on their property. Are landowners going to contact the lessee for permission to place a storage shed on their property or a barn? Of course not.

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Permalink Reply by E & E on August 27, 2009 at 11:34

HBP,
Wouldn't it be prudent for C.Simmons to check with the lessee? Let's say their property is on a corner and they way that HA wells are being handled(placement) IMHO it would be best to verify that the lessee isn't planning on drilling there - therefore cutting a drillsite out of the unit that C.Simmons has an interest in. In other words wouldn't C.Simmons lose money allowing for their surface to be used for another unit if the lessee does have plans?
Earlene the barefooted UMO

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Permalink Reply by HBP on August 27, 2009 at 11:45

I understand that. But What if C. Simmons doesn't own his minerals, then it should be his right to choose how to exercise his surface rights without being governed by a lessee he has no interest with.

I also think in some cases, the area would benefit from a company willing to do a backbuild because by producing the formation mroe effectively, you could get a higher IP, proving the area, and then more attention for future exploration.

I see your point, but at least some companies are willing to backbuild and do it right, instead of drilling verticals just to hold acreage in some areas (CHK) or not drilling at all yet.

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Permalink Reply by Mac Davis on August 27, 2009 at 12:16

How much money are they offering, how many acres do you have? How convenient will it be for them to go around your property?

I wonder if anyone ever gets such an agreement with a royalty or yearly rental attached?

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Permalink Reply by c. simmons on August 27, 2009 at 12:17

This is a situation where they want to put the drill site in the unit south of my property. The section line is close to the
proposed site. I have no mineral interest in the unit being drilled although I do own 13 acres there but the US owns the minerals. I own 146 acre in the section they want to back build and I share minerals there due to a usafruct.
I really appreciate all the info and comments. I still learning as I go. CS.

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Permalink Reply by Mac Davis on August 27, 2009 at 17:45

How much money did they offer?

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Permalink Reply by c. simmons on August 28, 2009 at 1:16

mac,
I was told that the normal payment was about $1000. A one time deal. I' m thinking like your suggestion. A rental along with an initial fee since I would be "helping" them to make alot more $ and produce more. They wanted to put the well site on my property and wanted to pay a one time fee of about $5000. /acre and I said no to that so thats when the back build idea came up.
I don't know what the norm is but for responsible property owners I can't see watching someone make $ off of my land without having a small piece, considering I am the landlord here.
Maybe I'm wrong but thats the way it is. cs

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Permalink Reply by Mac Davis on August 28, 2009 at 11:59

$1000 is insane. Why would you even bother with such a paltry offer for ANYTHING to do with your land that might tie up the land in some sense from now on out? What if you want to sell and the "servitude" on the land is somehow of concern to the buyer, morgage company, etc.? What if someone wants to buy some other sort of rights to your land later and finds that they can't do what they want because of the existing wellbore? You could get embroiled in some sort of legal or regulatory conflict. You need to worry about terms, gotchas, etc. What if the government changes some regulation that somehow obligates you to something or restricts your mineral rights due to the existing well bore? What if you find that there's some sort of insurance problem in the future?

Heck, for $1000, it wouldn't even be worth it to me to bother to figure out how to word the agreements to protect me from possible problems.

$5000 for a well is ABSOLUTELY insane for the same reasons above, but even stronger.

I'm not talking about whether it's a "fair" offer. It just wouldn't make any sense to me as a property owner to consider.

Maybe I'd end up with no deal if I owned the land, but I wouldn't lose any sleep over such a paltry sum of money if I owned 159 acres, and I probably would lose sleep if I DID sign such an agreement.

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Permalink Reply by c. simmons on August 28, 2009 at 1:19

Caliente,
I just got the copy of the initial proposal. But those offers have not come up. Do you mind explaining just alittle so I might be just alittle bit intelligent went I bring it up? thanks cs

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Permalink Reply by The_Baron on August 28, 2009 at 2:52

thats a good point. I would ask for an override (say 1-3%), you might just get it.

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