i am in a CV unit in texas and recently received a new division order to sign. the new DO accounts for the addition of 4 acres to the unit. this unit has been in production for about three years. i have it on (pretty good) authority that this would be a rare occurrence and that all interest owners must agree and the royalty must be adjusted all the way back to the beginning of production in order to redistribute the revenue according to the new division.
does anyone else have experience with a situation like this?
kj
Tags: amendments, division, order., unit
Mike R,
CHK still has a duty to protect you from drainage by the unit, unless your lease expressly states otherwise.
Adubu, it is true operators can add contiguous acreage to existing units, but just because with the added acreage the unit remains within RRC permitted unit size does not automatically make it okay. Yes it is evidence it is okay, but that does not end the discussion. Nor does a JV with another operator make it okay. In the case you describe, it seems to me it is not a timing of the increase in unit size that is the issue (i.e., they did not add it a year or two after continuous production), the issue your situation raises in my mind is will the one well adequately develop the larger unit? If not, they have a duty to drill additional wells on the unit to develop it. By your description, they have substantially diluted the royalty of the original unit owners. Going from 40 to 480 is a substantial dilution. The fact that they originally permitted it as a 40 acre unit tends to indicate that they believed the well would only drain those 40 acres. I would want to know their plans forfully developing the 480 acre unit.
Mike,
How much time do you have left ticking with that CHK lease? Seems resonable to contact the operator once again after the CHK lease expires and then negotiate getting pooled into that producing unit. If they do eventually agree to that, then make sure that you have your royalty interest back-calculated based upon the pools date of 1st production and not from your date of signing.
DJG
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