Ozark Highlands Unit - Fayetteville Shale
Southwestern Energy has just mailed a huge package to all of us in the Western area of the Fayetteville Shale play. Here's how SWN describes our new opportunity:
"Our newest project in Arkansas is the Ozark Highlands Unit, which contains approximately 185,000 acres within the Ozark National Forest in Conway, Johnson, Pope, and Van Buren counties."
The company is proposing the new unit for federal unitization. More than 86% of the planned unit area is public lands. The company is inviting private mineral lease holders to sign a contract to join the new unit and allow the company to explore, develop, and operate under a comprehensive plan of development between the unit operator, the unit participants, and the Bureau of Land Management.
The company says this new unitization will allow a geologically defined area to be explored more efficiently and developed by a single designated operator. The land being unititized is mountainous, with streams and lakes. It is difficult to access some areas and impossible to drill some areas due to the terrain.
SWN says the plan will operate "pusuant to unit plan regulations 43 CFR 3180."
This will pool the entire area into a 184,600 acre unit. The company explains, "Depending on when and where wells are drilled and completed, the area "reasonably proven to be productive" or the "participating area" can include one or many sections (640 acres per section) of land. All owners of mineral rights and royalties are allocated production in proportion to their land within the participating area." The letter then gives an example of a pooling of four sections into a 2,560 acre participating unit.
The company sent me a $7 packet, signature required, containing a 13 page legal brief filed with the Bureau of Land Management, a giant map of the area being unitized (153,766 acres of public land under lease, 5,489 acres of public land unleased, 202 acres of state lands, and 25,144 acres of private land like ours), a two page description of the new Ozark Highlands Unit, 5 pages of frequently asked questions with answers, one page with the description of our lands, a two page letter from the Bureau of Land Management accepting the SWN unitization plan, 6 contracts (identical) to join our land into the new Ozark Highlands Unit, and a two page letter to Anna and I with instructions on joining. We've since submitted a couple of questions by email and gotten a couple of pages of reply.
The company is giving a committment in writing to 11 new exploratory wells in the next three years.
Our analysis is this: If we join, we will likely get small royalties that will build over time as the number of wells increases. In the short term, our royalties will be very diminished by the dilution of all those acres. We are more likely to see steady royalty increases over time and extending to our Sons upon our death and our grandchildren upon our Sons' deaths. If we don't sign, it becomes less likely that SWN will drill on land that is not part of their hugh unit.
Do any of you have experience with anything like this?
Do you have any advice?
"Our newest project in Arkansas is the Ozark Highlands Unit, which contains approximately 185,000 acres within the Ozark National Forest in Conway, Johnson, Pope, and Van Buren counties."
The company is proposing the new unit for federal unitization. More than 86% of the planned unit area is public lands. The company is inviting private mineral lease holders to sign a contract to join the new unit and allow the company to explore, develop, and operate under a comprehensive plan of development between the unit operator, the unit participants, and the Bureau of Land Management.
The company says this new unitization will allow a geologically defined area to be explored more efficiently and developed by a single designated operator. The land being unititized is mountainous, with streams and lakes. It is difficult to access some areas and impossible to drill some areas due to the terrain.
SWN says the plan will operate "pusuant to unit plan regulations 43 CFR 3180."
This will pool the entire area into a 184,600 acre unit. The company explains, "Depending on when and where wells are drilled and completed, the area "reasonably proven to be productive" or the "participating area" can include one or many sections (640 acres per section) of land. All owners of mineral rights and royalties are allocated production in proportion to their land within the participating area." The letter then gives an example of a pooling of four sections into a 2,560 acre participating unit.
The company sent me a $7 packet, signature required, containing a 13 page legal brief filed with the Bureau of Land Management, a giant map of the area being unitized (153,766 acres of public land under lease, 5,489 acres of public land unleased, 202 acres of state lands, and 25,144 acres of private land like ours), a two page description of the new Ozark Highlands Unit, 5 pages of frequently asked questions with answers, one page with the description of our lands, a two page letter from the Bureau of Land Management accepting the SWN unitization plan, 6 contracts (identical) to join our land into the new Ozark Highlands Unit, and a two page letter to Anna and I with instructions on joining. We've since submitted a couple of questions by email and gotten a couple of pages of reply.
The company is giving a committment in writing to 11 new exploratory wells in the next three years.
Our analysis is this: If we join, we will likely get small royalties that will build over time as the number of wells increases. In the short term, our royalties will be very diminished by the dilution of all those acres. We are more likely to see steady royalty increases over time and extending to our Sons upon our death and our grandchildren upon our Sons' deaths. If we don't sign, it becomes less likely that SWN will drill on land that is not part of their hugh unit.
Do any of you have experience with anything like this?
Do you have any advice?
Views: 564
Replies to This Discussion
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Permalink Reply by WayneandAnna on
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With a tear in our eyes, we left it all to you.
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Permalink Reply by Cathaus on
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Now I don't want to be greedy. I will share equally with my precious brothers. Please change the will to reflect my new-found generosity!
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Permalink Reply by Skip Peel - Mineral Consultant on -
WayneandAnna. Invest in a qualified Oil & Gas attorney. In my experience, looking back, the vast majority of mineral owners consider their decision to get professional counsel to be one of the best they made when considering this type of opportunity. The other thought that comes to mind is that in a mountainous area with limited access, landowners should protect their ability to benefit monetarily from surface operations. In challenging terrain the value of right of ways for roads and pipelines, well sites, etc. is generally greater. Though much of the area to be developed is public, private land will provide many of the key surface locations.
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Permalink Reply by WayneandAnna on
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Skip, the company has expressed an interest in our surface access. We'll keep your advice in mind. Thanks.
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Permalink Reply by john goodday on
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I own a mineral interest in Van Buren Co. - 10N-17W. Surrounded by BLM, but have not seen the Seeco proposal. Where is your property in relation to ours which is in the corner of Van Buren, Pope & Conway.
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Permalink Reply by WayneandAnna on
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John, we're at 7-10N-20W. Close to Long Pool. Our property is surrounded on three sides by the Ozark National Forest. We have access out without having to cross federal land.
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Is it your understanding that they propose to pool or unitized thousands of acres into one large Federal Unit? I'm sure anything can happen, but can they (SEECO) really expect to get away with holding tons of acreage with the drilling of a couple of wells.
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Permalink Reply by WayneandAnna on
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John, my understanding is that they will eventually segment the land into "participating units" based on the geology as they drill and with consent of an overseeing authority. But, the units will be much larger than traditional 640 acre sections, probably 4-6 sections combined.
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Permalink Reply by Checkmateking on
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I don't like that idea at all.
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Permalink Reply by Cathaus on
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Mom & Dad,
These over-sized units are going to seriously cut into my monthly allowance. -
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Permalink Reply by WayneandAnna on
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Checkmateking, like it or not, SWN is in a position to dictate this unit. They already have the federal lands under lease. This is the way they want to administer the area. If we sign to be included, we likely get royalties; if we hold out, we may not see royalties. We see no choice.
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