For Whom The Well Tolls

“No man is an island, entire of itself” begins the poem “For Whom The Bell Tolls,” but landowners atop the Haynesville Shale may not enjoy the discrimination they’ll find in drilling units. Louisiana state law requires our Commissioner of Conservation to prescribe units that can be drained by one well. Haynesville units being created, however, often will require more than one well and do not conform to state law. That leaves landowners vulnerable to discrimination as there is often unfair apportionment of drilling and production. With the drilling of each well, more and more property rights are affected, putting more and more investments at risk. If not corrected, this will expose oil companies and Louisiana to relentless damage lawsuits. It is critical for Louisiana to enact a new type of compulsory unit specifically for the Haynesville Shale that will provide equal protection for property owners.

Our Governor is informed of the situation but has not taken action. At present, one landowner may have a well and experience all surface damage and gas drainage in a unit yet his income may be divided with others whose gas bearing land will never be drained. If his lessee has better terms in another unit, those owners may prosper with many wells while he is stuck with one. The possibilities for discrimination are endless. The average citizen is unaware that companies have been crossing the line or that our state has been content to let them. Attorneys for our state argue that the Commissioner has the broad authority to make any reasonable rules, but we contend that violating state law is not reasonable! Highly respected Tulane law professor, Luther McDougal, studied this issue, and was described by his colleagues as a leader, “speaking only when he has something to say and only when something needs to be said. His judgment and opinions are respected by his colleagues. We know he is a man of honor, integrity, high standards and common sense. There is no hidden agenda. There is no ‘what’s in it for me.’” McDougal concluded that once a producing well is located on the drilling unit, the unit is a developed area, and no other well can be drilled on the unit. The Louisiana Supreme Court has ruled that the only restriction on the Commissioner in establishing drilling units is that “such an order be reasonable and unit prescribed must not exceed the maximum area which one well can efficiently and economically drain.”

It is unconscionable to ask Chesapeake Energy and the other companies to play guessing games with our state on the legality and future of these enormously expensive wells. A new type of compulsory unit is needed that will allow multi-well, 640-acre shale units, while providing equal protection for property owners. In order to turn this area into an economic oasis and maximize gas production, we must first provide a firm legislative foundation for future drilling. The time for inaction is over. The clock is ticking. So, property owners, exploration companies, and the State of Louisiana, do not ask for whom the well tolls. It tolls for all of us. (For details email: fairdrilling@aol.com)

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Permalink Reply by Andrew Walker on March 13, 2009 at 10:26
You are correct, KB. Too much discretion is being given to the operators of these units. It is the responsibility of the Office of Conservation, not the landowners, to provide equal protection...as required by our state and federal constitutions...and they are not providing it
Permalink Reply by Andrew Walker on March 13, 2009 at 10:28
you are close to what I have suggested in my long article, KB
Permalink Reply by Bob on March 13, 2009 at 11:53
unrelated to mandible.
Permalink Reply by Grillin' - MmmMmm on March 14, 2009 at 5:35
I'm not sure you want government agencies dictating the type of wells that will have to be drilled. Vertical v horizontal, but why stop there? Will we then want them to dictate the length of the horizontal? The number of frac stages per horizontal? If you require a horizontal, then someone can go drill 100 feet horizontal and call it good. I think there needs to be a severe limit on what the gov't can tell a company they have to do with their investments. Guess that makes me a constitutional conservative?? haha

Now, the lease could stipulate something like this, but I really don't think that's very plausible. Years ago none of us were thinking about this technology. And I can guarantee you in a few years some one will have come up with a better technology. Remember, in 2004 and 2005, we were still drilling vertical wells in the Barnett and were quite happy with them!! As operators and as mineral owners!

At the end of the day, it is in the operator's best interest to produce maximum amounts of gas; just maybe not this year or next year but within a few years, everyone wants to get the gas out of the ground quickly. And I would argue that some of the operators are doing the mineral owners a favor by only producing small amounts of gas right now. In today's price environment, I'd rather they shut the wells in and wait for the prices to go up...which they will in a year or so. give or take a year!
Permalink Reply by Jay Murrell on March 13, 2009 at 10:26
Andrew:

Could you reply to Mmmarkkk's query above, it would help to clear up a couple of things for me.

Thanks,

Jay
Permalink Reply by Spring Branch,mineral owner on March 14, 2009 at 3:30
But Jim Krow, how is what you described above for the Hosston/Cotton Valley, bad for the mineral owner? He is receiving royalty income from the WI owner that he would not otherwise ever receive from wells that economically should never have been drilled. What might be bad for the over zealous operator, ain't bad for the mineral owner. No royalties are derived from leaving the gas in the ground.
Permalink Reply by Andrew Walker on March 14, 2009 at 4:18
But what about the surface owner, Spring Branch? He is suffering excessive surface loss for unnecessary wells. What about his rights?
Permalink Reply by Jay Murrell on March 14, 2009 at 4:20
Andrew:

The mineral estate primes the surface estate. You want to change that?

JM
Permalink Reply by Andrew Walker on March 14, 2009 at 4:22
There is no room for arbitrary discrimination in compulsory unitization. Everyone force pooled should have equal protection and this includes the surface owners.
Permalink Reply by Jay Murrell on March 14, 2009 at 4:36
Are you in favor of changing the law to give the surface estate equal footing with the mineral estate?
Permalink Reply by Andrew Walker on March 14, 2009 at 6:12
No Jay, I am not. I am just saying that surface owners who find themselves in these compulsory units deserve fair treatment. For example, I own surface in one unit where I own exactly 1/2 of the land included in the unit. There are 6 Cotton Valley wells in the unit, 5 of which are on my land. Two more have been approved for the unit and the operator has the discretion to locate these anywhere in the unit he wants. Within a year I could end up with 7 Cotton Valley wells on my land with none on the other half of the unit (as that one is very old and probably facing P&A soon). I would be suffering 100% of the surface loss in the unit for no geological reason. Furthermore, the Commissioner is no longer enforcing the one-well-per-unit limit and there is NO limit to the number of wells that can be drilled for the Cotton Valley on my land. I attended a hearing before the Commission and presented a chart on initial flowing tubing pressures that demonstrated existing wells were adequately draining the gas under my portion of the unit. The company's expert had no evidence and admitted he was not even famaliar with results of the drilling in this unit. Nevertheless the Commissioner approved those new wells in the face of evidence they were not necessary. This was the same sort of evidence used to substantiate the need for alternate wells in the first place! Nope, this is not right. The first Commissioner of Conservation under Title 30 stated that these drilling units were designed to protect the rights of surface and mineral owners alike......obviously neither are a concern of the Commissioner today...
Permalink Reply by Andrew Walker on March 14, 2009 at 3:32
Jim: I don't think you understand my proposal. I hope everyone will take the time to read my article. Goshdarn is right - I've got a dog in this fight. I'm not barking just to hear myself bark. I've been on the front lines battling the gross injustices of these violations of state law. I hope others will join my fight before they too are caught in similar predicaments. No, there will never be a perfect system in divvying up these mineral resources but there is a better way and we must obey the law. No one is above it and immense discriminations are occurring as our Office of Conservation strays. I've been to their hearings and seen their biasd decisions. How many of you folks are, by the way, familiar with this state office? How many believe they are interested in protecting individual property rights? This office is nothing more than a fraternity of state officials and oil company representatives whose last motivation is property rights ...and conservation. Don't be so naive to believe that JIndal's ethics reform has reached this office! Please take the time to read my article and, whether you agree or disagree, write Jindal - give him your opinion and encourage equal protection of property owners over the Haynesville Shale!

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