Whenever I am at an Oil & Gas meeting, in OHIO, I typically hear someone say "You can be Held-By-Production with a 640 Acre Drilling Unit". I am told that this is the strategy that Drillers will use to hold the entire 640 Acres with just one horizontal well. In OHIO, we can typically fit about 6 horizontal wells within a 640 acre drilling unit. Using the Ohio DNR website, I have reviewed all of the well sites with Plat Maps. What I see are very small Drilling Units surrounding each and every Horizontal Well coming from the pad. I do not see a single large 640 Acre Drilling Unit. So, WHY is this? Typically, I see a 550' perimeter drawn around the horizontal well bore with a little extra around the well pad area and that is the Drilling Unit. The Drilling Units in Ohio are surpisingly small - as little 125 acres. Why?
I hear people worry and talk about 640 Acre Drilling Units all of the time but I just do not see that "strategy" being used at all in Ohio. If this is such a great strategy for the Drillers to lock-up the land then why are there no 640 Acre Drilling Units in Ohio ? Does anybody actually know why the Drilling Units in Ohio are so small?
I know of one example of a large Drilling Unit in Pa ...
The Thompson Well has a huge Drilling Unit, maybe 750 Acres +/- and it only has one horizontal well.
Is there something different between Ohio and PA that is preventing this from occuring in our state?
I mentioned this in another discussion and nobody had an explanation. I was also wondering if at a later date the units might be expanded to a larger size. This may sound like a strange theory but could the drilling company be keeping the units small to put people at ease with the idea of signing contracts with large unit sizes?
Now that I have learned that the ODNR "Unit Acre" boundary that is drawn on the ODNR Plat Map is not the real Production Unit boundaries, I do not think that the ODNR "Unit Acre" boundaries drawn will ever change. In fact, I have checked some older ODNR "Unit Acre" boundaries and they have not changed after additional legs were drilled. The ODNR "Unit Acre" boundaries are simply fixed setbacks per each horizontal well.
I do think, the real Production Unit boundaries (not shown) can/will change.
If you are looking at the maps that are on the state website of drilling units those are not the production units. (There is even a note of that on the side) Those acres you see are what is "required by law to be in the unit for that particular well. For example there has to be around 500 ft all directions from the hole, but when they put 5 or 6 legs on those sites that area keeps moving out further and both directions. Most units will then incorporate 400-600 acres when all said and done. More acres do not necessarily mean a bad thing. Depending on how many acres you personally own and the the fact that the more holes the better.
Thank You for the clarification ...
" ... If you are looking at the maps that are on the state website of drilling units those are not the production units ..."
Do you know how to view a map of the REAL Production Unit boundaries?
I believe those are filed with the county recorder in the county where the well is located.
Here is a Google Earth map of a couple of units that are getting bigger. The FREC GUER SPENCER A1 has just added 2 more wells to the drill pad. The HICKENBOTTOM 1 unit seems to be a classic HBP unit. It has a unusual shape and has 3 parcels in the middle of it that are not part of the unit. One of them is owned by Belmont Co. Can you force pool the Government? You will need Google Earth installed on your computer to view the maps. You can click on the placemarkers to view the well documentation.
the danger of 640 acre drilling units is in the actual chronology of events. this is how it works. you sign a lease with a unit size limit of 640 acres for 5 years. in the lease, the gasco can keep perpetual control of that lease as long as some drilling activity is evident on a 640 acre unit which contains all or part of your acerage, depending on the specific wording of your lease. One month before your lease runs out, no wells have been drilled anywhere. Suddenly, the gasco shows up with a simple drilling rig, probably not even capable of drilling horizontally, and punches a hole down to the shale it is after. The driller packs up the rig and moves on. This vertical, non-producing well is not even on your property. It is on your neighbor's. The gasco declares a 640 acre unit around the well, including some or all of your property, the politicians back the gasco's claim by "right of production" on this useless vertical well, and you are stuck with your current lease and a pipe sticking out of the ground on your neighbor's property indefinitely. Many, many years later, the gasco comes back and actually finishes the well and its corresponding sibling horizontal wells and then actually set up the smaller units for each individual well that are proportionally accurate to what portion of the shale that well can actually draw from. You, or your grand children, are still getting paid the proper amount stipulated by your antique lease for the gas that you owned, but you have waited a long, long, time when you could have been releasing your land term after term for better royalty percentiges and bigger bonus money with competing companies. also, over all of this wasted time the politicians have been building more and more tax structure against your little wind fall. this is not imaginative thinking. this has already been common practice. People in Ohio dealing in Utica Shale look to people who have already experienced these practices in the Marcellus in Pa.
The law firm Graham and Graham out of zanesville ohio are headed up a landowner group and their acreage is doubled 1280 acres.
I am not to hype on giving Graham & Graham a fee of 7.5% on the sign bonus and a perpetual royalty percentage on top of the lease bonus. They are offering $3,500/acre while we hear of offers of over $5,000/acre? Of course they could always say that's all we could negotiate for and show it on paper to a group but hit the purchasers of the lease for legal fees eating up a worth of $5000/acre. Work both ends not unheard of.
To each there own but I personally do not trust Graham & Graham in this process.
I wonder where Graham and Graham came up with the 1280 acres??
It allows for maximum acerage locked up by drilling horizontals in two opposite directions from the same pad and basicly declaring a 640 acre unit in both directions and combining these units. actually, a single vertical well is all that is required to hold that much acerage. all the gasco needs to do is declare the intention of future horizontals.
" ... actually, a single vertical well is all that is required to hold that much acerage ..."
Actually, many of the leases in NE Ohio have a clause that specifcally addresses the "vertical well only" issue that you present. My lease and many other leases has langauge that attempts to counteract HPB with only a vertical well.