Proposed Sub Surface Use Agreement.

Hi Skip, I received the attached proposal from an agent acting on behalf NWE. I am on section 25-14-10 Bracky Branch with a lot going on. 5 wells being drilled and an east to west pipeline. The agent said there will be drilling in adjacent sections but wants my land for the following, see below.  Can you please break down what this actually proposes in layman's terms'.  Thanks for any assistance in advance.  

           WHEREAS, Grantee proposes to drill one or more directional wells through the subsurface of the Property to a bottomhole location(s) underlying lands and/or waterbottoms near or in the vicinity of the Property, and, in order for Grantee to directionally drill such wells (all wells contemplated or authorized to be drilled hereunder are hereinafter referred to as the “Subject Wells,” whether such wells are unit wells or lease basis wells), it will be necessary to use the subsurface of a portion (or portions) of the Property

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Permalink Reply by billy on September 28, 2022 at 9:22

Thank you for that information. I appreciate it. 

Permalink Reply by Skip Peel - Mineral Consultant on September 28, 2022 at 11:36

billy, I'm not familiar with NWE.  What kind of company is NWE?  Your section is a Tellurian operated Haynesville Unit.  The section to your north is a SWN Haynesville Unit.  Since Tellurian operates section 36 to your south, this would appear to be a request that relates to SWN wanting to drill sections 24 and 13 to the north from a surface location in your section 25.  Since SWN does not hold the leases in your section, the company would need a subsurface easement to drill through you section to extend a lateral northward through 24 and into 13.  The only compensation your will receive if you approve the easement request is a one time payment.  You will receive no royalty from the well or wells drilled through your easement.  Subsurface easement requests are relatively rare so to know the value, I suggest you get help from an experienced O&G law firm.

Permalink Reply by billy on September 28, 2022 at 14:41

Sorry Skip, it is SWN. The agent said it would be a onetime flat fee, that's not something I am interested in. So glad you guys are there, you make a difference. Thanks. 

Permalink Reply by Skip Peel - Mineral Consultant on September 28, 2022 at 15:02

You're welcome.  Since the wells would not be producing from your section, no royalty for you.  However, the compensation for your granting of an easement could be significant.  Did the offer include purchase of surface acreage for a well pad or any other surface use?

Permalink Reply by Chad Ellis on September 28, 2022 at 15:11

Subsurface agreements are fairly common in Texas.  Think of it as a very deep pipeline row.  Could be a nice Christmas bonus.  

Permalink Reply by Rock Man on October 1, 2022 at 5:28

People may want to think about this as a "you scratch mine, I'll scratch yours" situation.

  • You grant the surface access so your neighbor's unit can be perforated over 100% of the length of the lateral on their unit.
  • And you would hope that the offset owners to your acreage / unit do the same so that you have 100% perforation / production on your block.

Using a 20 MMCF per day gas rate capability on a 10,000' lateral as an example, not being able to perforate / produce 500' to 1000' of the wellbore works out to a 5 to 10% reduction in gas production (which will never be tapped if an offsite location is not in place).

Something to keep in mind.

Permalink Reply by billy on October 1, 2022 at 12:31

Thank you, Rock Man, I will keep that in mind. Every reply on this site is a definite learning experience.   

Permalink Reply by Skip Peel - Mineral Consultant on October 2, 2022 at 12:32

For the right compensation, I would grant a subsurface easement.  There is no down side.

Permalink Reply by billy on October 3, 2022 at 3:40

If we can agree on a fair fee I will grant the subsurface easement. Thanks everyone.

Permalink Reply by Hale Yayuh on October 3, 2022 at 7:00

Just be aware that offers do not always hang around forever. Especially with multi-billion dollar companies. Yes, they want a deal but they can survive and prosper just fine without any one of us. You can get a very nice chunk of change and, to me, I would hope to make a deal because it's the right thing to do, all of mineral owners need to help one another and the country and world need the gas. Legal representation is warranted.

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