Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on September 22, 2009 at 12:20

Missy. The surface location of the well does not determine which mineral owners receive royalty. The perforations in the well bore determine who gets royalty. If the perforations are in your section/unit, you get paid. Where possible, operators have the benefit of a longer lateral within the unit/section when they can drill from an adjoining section due to the radius required to go from vertical to horizontal. Drilling the lateral from a surface location within the unit produces a shorter lateral.

Permalink Reply by Missy on September 22, 2009 at 13:02

Is there a way to get information on their plan before I agree to have the well on my property? I would like to know beforehand if they plan to pull minerals from my section or just use my property for the site.

Permalink Reply by Skip Peel - Mineral Consultant on September 22, 2009 at 13:08

Missy. If the well is on your surface but drilling into an adjoining section, you should be compensated for the well site, access road and pipeline rights-of way. It is also quite common to receive compensation from granting a well bore easement. Are you currently leased?

Permalink Reply by Missy on September 22, 2009 at 14:47

Yes, I am leased. Thanks for the info. I willkeep the well bore easement in mind. I have no idea what amount of comp. for that. I hope that this scenerio is not the case. If I must have the monstrosity on the property, I would prefer to benefit from the royalty.

Permalink Reply by Cal (17-18)N 7W on September 30, 2009 at 9:42

amen to that Missy -- totally unfair !

Permalink Reply by Hobbs on October 26, 2009 at 9:51

Missy: By being "leased", do you mean that only your minerals in the section adjacent to the perforated section are leased, that your surface is separately leased for use as a well site, or both? Normally, companies that drill from a surface location in one section/unit to a completion point in another section/unit (and in many cases, when drilling and perforating in the same section/unit) obtain a surface lease separate from the oil and gas lease and pay a separate consideration. This is done because a) normal oil and gas leases don't contain the detailed provisions that a surface lease does to handle surface operations, and b) most oil and gas lease bonus (consideration) is not calculated to include surface operations when the lessor is not benefitting from royalty produced from a well located on the property.

I don't think it's appropriate to comment on fairness without all the facts, but if your situation is as described in b) above, and there's not a separate surface lease with separate consideration, you may have an "unjust enrichment" issue with your lessor. However, on the good side, it is great to have a well drilling in your area - if a good shale completion is made, it greatly improve the chances that your section/unit will see a completed shale well in the near future, and you probably won't have that one in your back yard.

Permalink Reply by Missy on October 27, 2009 at 8:58

I leased with O&G some years back. It was pretty much a standard lease with a surface damage clause added. (That compensation would be paid for damages.) Company has come to me with a surface damage and pipeline ROW agreement. We are in process of working out the details. My concern was that the rig would be on my property and they would drill into another section, and I would not get royalties, just surface damage. Which I understand, but hope isn't the case. I have been assured by the landman that the bottom hole will be in my section and I think that means I will be getting royalties. Would you agree??

Permalink Reply by Skip Peel - Mineral Consultant on October 27, 2009 at 9:02

The question should be, "Would an experienced Oil & Gas attorney agree?" Missy, this question warrants the council of a professional.

Permalink Reply by Missy on October 27, 2009 at 13:56

I am going to take your advice . Thanks Skip.

Permalink Reply by Hobbs on October 28, 2009 at 9:48

Ditto Skip's advice - and have him/her get that landman's assurance in writing.

Drilling from your section/unit to produce from another may be ok with you, as long as you are compensated appropriately. Royalties wouldn't be payable, but a market-based (or better) compensation and sufficient damage protection might be acceptable. As I said before, you might not get royalties under the scenario you describe, but encouraging drilling unitizing your interests with an adjacent completion is a great thing, as that's the real value in all this. If the shale is under the neighboring section, it is under yours. My bet is that, because of your location relative to the well you describe, the well producing your minerals will not bother you and your property.

Permalink Reply by Hobbs on October 28, 2009 at 10:42

Missy, your standard lease some years back probably did not give that lessee the right to drill from your land to produce a unit that doesn't include acreage in your lease. If the original lessee is the same as the drilling company, then the surface damage and P/L ROW agreements are "starting from scratch". New ball game - you can say no and keep them away if you don't get what you want. If they had the right to drill "off lease" or "off unit" in the standard lease, the surface damage and P/L ROW agreements would be detailing (or expanding) of the rights already granted in the standard lease.

Permalink Reply by Missy on October 28, 2009 at 14:17

Thanks for pointing that out, I have looked again at the lease which gives the right to (either from said lands or acreage pooled therewith),. I believe this would refer to my section/unit. My original lease was with Petro-Chem./ Will Drill, now farmed out to Questar. I don't know if this means they are the same. I really appreciate all the help.

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