Replies to This Discussion

Permalink Reply by Cary Miller on August 13, 2012 at 16:54

I would suggest you get a very experienced and recommended oil and gas attorney.   These leases are way too complicated for a layman to understand and negotiate.   It will be worth every penny you pay to have professional help.

 

BTW, I am assuming  you have not already signed the lease in which this language is contained.   If you have signed it, and used the services of an attorney, you have every right to ask them to explain it  to you.

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Permalink Reply by Annette on August 13, 2012 at 16:56

Any recommendations of a good attorney who represents land/mineral owners in texas who is not in bed with the O & G?

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Permalink Reply by Cary Miller on August 13, 2012 at 17:07

No, sorry.   I'm in Tennessee.   But I think trying to understand that technical language with only a layman's knowledge is outright near impossible and suicidal in negotiating a contract that protects your interests.

Perhaps someone on this board can assist you with a recommendation.  In our case, I called a distant cousin I trusted to recommend someone HE trusted in the area of our mineral rights.

Please don't let your paranoia or concern  about someone being in bed with the O&G industry cause you to sign something you don't fully understand with no help.  NO ONE is looking out for your interests if you don't pay them to do so.   You are dealing with entities who KNOW what they are doing.    It would be better to research attorneys on the internet and blindly choose a firm who specializes in O&G leases than to try to negotiate a lease with no understanding of what you are signing.  Good luck!

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Permalink Reply by GoshDarn on August 13, 2012 at 18:34

Ben Elmore

Is Your Friend

 

 

Annette:  GHS has a number of O&G attorneys as members.

 

Now, it seems to me, from what I've read of Ben Elmore's post, that he is a pro-landowner lawyer who practices in TX.

 

So you might try friending him.  Or, y'know, you could go to his firm's website:  http://www.wattbeckworth.com/attorneys/ben_elmore

 

Ben's in Houston. 

 

And the advice to get a good O&G lawyer is spot-on.  Smart move.

 

Good luck.

 

GD

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Permalink Reply by little ole 1st grade teacher on August 14, 2012 at 14:55

Yes, Ben Elmore is from Houston.  He is Pro-landowner lawyer.

 

 

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Permalink Reply by Henry on August 13, 2012 at 23:30

I agree with GoshDarn.  Try Ben Elmore.

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Permalink Reply by Dion Warr, CPL on August 14, 2012 at 10:12

Annette:

 

It's a relatively fair provision.  In short, your basic retained acreage provision encased in a heavy dose of legalese, with a dash of stratigraphic Pugh language thrown in for good measure.  Lessee is allowed to retain 80 acres around a vertical oil well, up to 320 acres around a vertical gas well drilled and capable or producing at shallow depths (6,000' and above) and 640 acres for any vertical gas well drilled and capable or producing at "deeper" depths (below 6,000').  Dependent upon where your property is located, this depth would probably be around the top of the Travis Peak, which is an acceptable break point between shallow and deep production zones.

 

In the case of a horizontal completion, you will have a formula to determine maximum retained / pooled acreage allowed under the terms of the lease (typically an area determined by a width anywhere between 660' - 2640' on either side of a proposed lateral well track by the length of the perforated wellbore length plus 330' - 660' measured on a line extending through and parallel to the wellbore, dependent upon depth and product intended to be produced).

 

You have two stated exceptions to these contracted rules: (1) a ±10% tolerance in area is allowed (typically to accommodate for geography and/or other units/pooled areas already in existence ("conditions on the ground"), and (2) accommodations as may be regulated or required by the appropriate jurisdicational authority, which may create an area which the lessor and lessee would find themselves subject to by rule or order which may put the "spirit" of this provision, ie. "fair retained acreage provisions" at odds with the letter of a rule or order issued by a proper regulatory authority.

 

You also have a "no grace" stratigraphic Pugh provision in this paragraph which terminates the lease as to any and all depths 100' below the deepest depth drilled, with a requirement made upon Lessee to timely file a release that indicates what land(s) and depth(s) are released from the lease.  The enforcement of this provision removes any possible cloud on the title as to the acreage and depths not held by the lessee at the end of the primary term (or as extended by continuous development provisions in the lease).  I do not see any penalty associated with Lessee not filing a timely release, which is something about you may wish to inquire.

 

Please understand that I am not throwing rocks at you, but this is a clause that would be considered reasonable and customary (if not a preferred provision) to place onto a lease rider for lessors in your area.  For an oil and gas professional or mineral law attorney, this is straightforward language, and conveys reasonably acceptable pro-lessor terms (though I have not seen the horizontal well retained acreage computation, or any other provisions from the lease or the lease rider).  The thrust here is, if this clause leaves you befuddled, you may be in over your head as to the interpretation of other meaningful clauses in the lease.  In that event, you should definitely consult a professional.

 

In my opinion, a competent land professional should be able to discuss these issues with you.  Even if you want to take the discussion with a grain of salt and have it evaluated by someone retained by you, to look after your best interest, a good landman should be able to explain these things to you in a common sense way.  If they can't, or if you find that they have provided errant information, you should seriously inquire as to whether you can deal with someone who can.

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Permalink Reply by Joe Aldridge on August 14, 2012 at 23:15

Dion,

My concern is with the "standard" 100' grace in the addendum. My understanding is: There is not 100' between the Austin Chalk and the Eagle ford. In Louisiana there in not 100' between the TMS and the Tusc sands. So how would this affect a property where the 100' grace extends into another possible productive formation? I would be concerned with that being included in a lease. I am in agreement with your points on the rest of the addendum. 

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Permalink Reply by Dion Warr, CPL on August 15, 2012 at 2:45

Joe:

IMO the impact of the 100' is debatable and could (perhaps should) be modified depending upon conditions and intent of the lessor and lessee.  As you state, there are multiple formations literally stacked on top of each other in the stratigraphic column, and a "hard and fast" footage for this provision can get in the way of that; it can happen to be too large or too small of a value.  One particular situation comes to mind from the early days of the HS play in certain operators requesting amendments of this provision from 100' to 300' as their chosen depth of their laterals posed a good possibility that such a provision would cut out the base of the HA zone (as the effective pay zone was in excess of 200' thick in certain areas).  Translate such a clause into the context of the Cotton Valley series and depending upon field definition the formation tops to the bases can range into the hundreds if not thousands of feet thick.

 

Of course, if one could reasonably define the objective strata in a manner agreeable to both lessor and lessee, one could limit the release to, say, the "base" of the deepest formation penetrated.  However, there are ways around this, too: an operator could simply punch their hole just past the top of the next formation beneath the target zone and then try to hold that from base to formation top, or alternately, petition to "redefine" the formation by way of the field order, then point to that as the "definition" of the zone.  In light of the possibility of such shenanigans, the above contemplated clause is relatively clean: how deep the operator actually drilled the well (stratigraphic equivalent), plus 100'.

 

FYI, the smallest I have seen this number being reduced to is 50'.  The 100' measurement is more or less "standard".

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Permalink Reply by Skip Peel - Mineral Consultant on August 15, 2012 at 3:02

Regardless of the depth in feet that a lessor may choose to cite in a depth clause, I prefer to base the language on the deepest depth produced, not the deepest depth drilled.  I think that wording is less ambiguous and in the lessor's best interest.

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Permalink Reply by Joe Aldridge on August 15, 2012 at 4:34

Good point Skip. Personally I would go with that.

Thanks for the input.

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Permalink Reply by Dion Warr, CPL on August 15, 2012 at 7:58

Skip:

The only blowback that you might get from E&P is as to formations penetrated by and within the TVD of the wellbore that may be deemed "capable" of producing oil, gas or other hydrocarbons but for whatever reason (e.g., excess water cut in a deeper zone which would necessitate further operations for SWD, for one example) that cannot be optimally produced by the end of the primary term.  Operators would want the right to "earn" those depths by virtue of drilling the well that would require another lessee to drill an additional well through depths already held by ordinary operations and/or production.

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