Pre Conference Notice (What the heck does it say and what the heck does it mean).

Pre Conference Notice (What the heck does it say and what the heck does it mean).

I’m going to try to lay out what the things on a pre conference notice mean in simple terms to a layman (from a layman). If I get it wrong, please correct me. If it is a nuance difference that is only useful to those of us that love to pick apart every lease clause and obsess over everything oil and gas, please be kind and post it somewhere else. Let's keep it simple. I hope that this blog and comments to it are understandable to anyone who knows nothing about the shale and maybe doesn’t even want to know (I’m obsessed but there are people who have a life - so let’s try to keep it simple).

1. I got this letter, what does it mean and what do I need to do about it?

A oil and gas company wants the right to “pool” a section of land to drill for gas. I section is generally 640 acres. If they don’t have the whole 640 acres leased they have to have a means to account for the unleased property and a measuring stick to decide who gets paid when they drill a well. If you own some mineral rights within the boundary of that 640 acre section then you will get paid from that well.

If you have signed a lease, you will get paid according to the terms of your lease.

If you are unleased, there is nothing to be afraid of, you will get your proportionate share after expenses are paid. It AIN’T as easy as it sounds but YOU WILL NOT BE LEFT OUT. (Search UMI on this site). You will get 100% instead of the % (usually 25%) that the leased mineral owners will get, but you will need to be prepared to put forth the effort to make sure that expenses are "legal" expenses. I don't plan to be UMI and don't recomend it unless you really believe that they won't give you a reasonable lease.

2. But it says they are going to FORCE POOL the property, isn’t that something to be upset about?

No it just means that the owners of the section will get their proportionate share as outlined above. It’s just the legal mumble jumble word that they use for it.

3. But I’m not leased, can they steal my minerals?

No. See above.

4. I’m scared, I haven’t signed a lease, so I’m going to be left out. Shouldn’t I sign now and take whatever they will give me so I won’t be left out.

Yeah, go ahead and sign if you are the kid who would rather give your lunch money away so the bully won’t beat you up.

If on the other hand, you are an adult and want to be treated as such, only sign what YOU think is a fair lease.

No one can define what this figure or the terms are for you. You can see what others are getting in your area. You can hire an attorney. You can consult a magic eight ball. But at the end of the day, YOU are the only one who can determine what your needs are. Make the best deal that you can and then move on after you have the cash in the bank (IMHO).

5. The letter says “X” wants to “unitize” the section, but I’m leased to “Y”.

“X” and “Y” will work together. You will get whatever the terms of your lease state.

6. It says, that the ….. As defined by ….. In Section “X”, Township “Y”, Range “Z” is 10,546 feet to 12,846 feet. This isn’t the section that I am in, but the map on the last page is where my property is located. What does this mean?

They are establishing the stratigraphic (layer) boundaries of the Haynesville Shale in your area. In one area the shale may be more shallow than in another area. The layers are like a stack of pancakes, but pretend that a 5 year old cooked the pancakes for you. They are all bent up and lumpy, but they are still individual pancakes. If you measured down from the top to reach the bottom pancake it might be 5 centimeters in the middle but if you measured on the edge of the stack it might only measure 4 centimeters to reach down to the bottom pancake. The bottom pancake is the bottom pancake no matter what distance you have to travel to get to it. Geologist can determine which layer (think pancake) in a given area by examining a log.

7. Does this mean that the company is ready to drill a well and I’m fixin’ to get some mailbox money?

No. Only the company knows when they plan to drill and just like our plans sometimes they change their plans.

8. I don’t own mineral rights in the section, why did I get this notice?

If you live close to that section you may receive a notice so that you can object as to why the unit is not “fair”. In my opinion, the system has been in place and it pretty much works. If you have mineral rights within the 640 you get paid. If your outside of it you don’t and you will get paid if and when they drill your section. I don’t think they could ever come up with a system that would make everyone happy, but this one is relatively easy to understand and work with. So in my opinion, if it AIN’T broke don’t fix it. All the reasons it “might” not be “fair” are technical, so I would leave it to the technical people to argue about (remember I am writing this for people who have a life other than obsessing about oil and gas).

If you own surface rights without minerals you will also get a copy of the notice. I’m sorry, but if you don’t own minerals I wouldn’t waste any time with this. You may care where a drilling rig will be located in the future, but it’s not going to be addressed at this conference.

9. So what do I need to do?

You may want to attend just for the heck of it. Darn this stuff is exciting and interesting and something novel that you don’t deal with everyday. At the end of the day, you might not even know more than you did before you went, but you may see some of your neighbors that you haven’t seen in a while and you can compare notes about what you’ve heard and what you “hope” will happen when. Kind of like a funeral but nobody died. OK, maybe more like a class reunion.

I went to one. It was ……… a little interesting…….but mainly a waste of my time. I should have just went and had a manicure. But I’m obsessed so I wouldn’t have missed it, but I haven’t been to another one.

If no one request the pre conference hearing they probably won’t have one. That ought to tell you how important they are. IMHO.

10. Are they going to try to lease me now?

Maybe. Maybe not.

You can even sign a lease AFTER the well has been drilled. There is no hurry unless you need the money or you think that your section will never be drilled. I personally don’t think any of these companies throw away money without a good reason, but it’s your mineral rights not mine. So, it’s back to no one can really make the decision for you. They can advise you, but it’s YOUR decision.

I HOPE THAT THIS GIVES YOU SOME BASIC HELPFUL INFORMATION. Les, Skip and Baron (and the other experts) understand it all a bunch better than I do, but I hope I made it simple.

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Comment by mary on October 31, 2009 at 11:11pm
Chesapeake has just revised its recent three unit request to include a 960 acre unit, splitting section 33 and combining it will all of section 34 in the Greenwood Waskom Field. There is no precedent for this type of unit formation so I suppose they are now trying to establish a new precedent...create any size unit, in any location for any reason. In this case, it appears that reason amounts to...because we asked. It seems that with the Commissioner it's a matter of ask and you shall receive, that is, if you are a large oil and gas company.
Comment by Dion Warr, CPL on October 29, 2009 at 11:59am
Great post, Parker. Excellent descriptions and advice for the layman. And I would definitely point others to read Baron's comments as to non-640-acre unitization around larger geographical features which would preclude most regular drilling operations (Toledo Bend, other reservoirs or water impoundments, Red River batture particularly behind the levees, etc.). Typically the operators will enlarge the units in these areas rather than reduce them, and in most cases this is not designed to HBP more acreage with a single well, but it would behoove the landowners affected to attend the meetings and be vigilant as to proposed units of extreme size.
Comment by Jack B2 on October 28, 2009 at 9:13pm
Parker, thanks. Good post. We will have to bump this one from time to time.
Comment by J B Nabors on October 28, 2009 at 3:58pm
Very nice post. It applies to most of the notices. However, I have two comments:

1. IF you go to the conference, you can ask all the questions you have about the applicant's plans: what strata they plan to drill; how many wells; where do they plan to place the wells; when do they envision drilling, etc. You can also ask any questions you have about O&G generally.

2. Most importantly, however, if the 'pre-conference' notice makes ***any*** reference to Rule 8, be sure you go. "Rule 8" in a nutshell means: the producer is running out of time, and if he does not drill ASAP he runs the risk of current leases expiring and having to be renegotiated. It allows an expedited unitization procedure, so that the producer can start drilling under an older and (for him) more profitable lease. Even if your lease is not expiring soon, the reference to "Rule 8" guarantees that somebody's lease is.
Comment by Bobi Carr ("parker") on October 27, 2009 at 9:59pm
Thank you.
Comment by I. Meade Hufford on October 27, 2009 at 2:07pm
I have been in the oil and gas business for 47 years and that is the BEST description of the Louisiana Conservation Unit procedures and its affect on landowners. You should be a public speaker to guide these landowners........Good Job.
I. Meade Hufford
Comment by Skip Peel - Independent Landman on October 27, 2009 at 10:02am
Good post, parker. I would add that pre-conference meetings are definitely not heldunless an interested party requests that they be held. And the IP list by regulation should contain all mineral and surface ownership within the boundaries of the proposed drilling unit and all others immediately adjoining for a distance of 1000'. As far as I can determine the LOC doesn't have strict standards regarding the IP lists so omissions and incorrect address information are not uncommon.
Comment by The_Baron on October 27, 2009 at 9:35am

Just thought I would toss this out there to show how crazy units can be in south LA. this is a "Geologic Unit" as opposed to the "Geographic units we see in north LA. Whats even crazier, is these Geologic units can change shape as more drilling occurs, and more knowledge of the resvoir is obtained. This is where the real arguments over the units geology can occur.
Comment by The_Baron on October 27, 2009 at 9:31am
Good Read. All I would like to add is that units are not always along section lines. Units tend to be 640 acre units in North LA, but almost never in south LA. Also, units can vary in size and shape due to geographical reasons, like near the state line or lakes and rivers (toledo bend comes to mind). I also believe we will see more large irregular units, Like the 1200 acre unit Petrohawk formed in Southeast Shreveport as drilling moves into the more urbanized areas.

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