Marcellus Shale Experts,
I am looking for some advice on some property that my family has in Butler County. We have 19 acres and we have been contacted by Royal Dutch Shell. We are trying to decide if we want to accept some of the current offers for leasing and royalty rights OR if we should wait a couple years and see if the prices increase. As a family we do not necessarily need the money now and we are interested in seeing how much the prices might increase over the next 5 years, BUT we are concerned about the following and are looking for advice on these particular issues.
1. If the neighbors around us lease their rights to Royal Dutch Shell in the near future, does that limit us on competitors? If Royal Dutch Shell starts to put in infrastructure on neighboring properties, will other competitors still solicit us for leasing rights?
2. No one in our family is currently living in Pennsylvania, so our "on ground" knowledge is minimal. Is there a leader of a property owner group in Butler Country that we could talk to?
Thanks for any help!
I've also attached photos of the letters we have received if that helps at all.
Thanks a bunch for responding. Have you heard reports of this happening? I know it had to be hard to really tell how the companies are drilling, but if they get caught doing that, wouldn't they get in big trouble? Does the government inspect at all?
The number that geologists and mining engineers throw around is 330 feet. That means that a horizontal well will draw gas 330 feet in all directions. I have no idea where this number comes from. In most states there is a 500 foot setback from an unleased property line. I believe this holds true for PA (someone can correct me on this if I'm wrong). But really, do you have the means to actually go down and check this?
Yes - companies would be in BIG trouble. They could lose the entire well. They must file their drill plan with the DEP (these are available to the public for a fee) but I'll ask the above question again: Who is going to check them? I'm not asking this question to stir up trouble or to insinuate that the gas companies are dishonest. I am simply throwing out the question because that's the crux of the issue.
"... But really, do you have the means to actually go down and check this? ... "
Yes, I think do. They can "go down and check this" by drilling core samples at farther and farther distances from the Horizontal Production Pipe until they see no more FRAC Fluid or Proppant. This will give the Driller a very good estimate of how far they have actually frac'd the shale and how well the proppant is holding the fractures open at that particular drilling site. Given similar geology they could then extrapolate previous results to new drilling locations.
Patrick - good question, who is going to check them? No one. And, how would they absolutely be able to prove it.
Someone in my area lost production from a vertical marcellus well when a horizontal was being drilled THOUSANDS of feet away. I don't think this was just a coincidence. The gas company is confident that their new horizontal well drained the gas from the vertical well. I think this shows that the gas can travel quite a distance.
I'm probably just north of you in Irwin Township, Venango County. I can tell you that I and several others in the area are working with Jason from Shell, who authored the letter shown in your first attachment. You will ultimately have to do what makes sense for you and your financial situation.
I was approached by a landman about 2 years ago. He was offering $1500 per acre and 15% royalty at the time. I decided to pass on his offer, only to see the offers dry up for more than a year. I recently contacted Shell (Jason) and received an offer of $3000/18% from him. Maybe I could hold out for more, but I'm feeling pretty good about this offer. I can tell you that Jason, in my opinion, is a decent guy. But always remember, the landmen don't work for you. They are trying to broker an agreement between you and the gas company. Ultimately, they need to get the best deal they can for their employer, which is not you, the landowner. On the other hand, they won't do themselves any favors by taking advantage of someone like you who owns 19 acres. The bad publicity isn't worth the paltry sum they would save by cheating you out of $500 or $1000 per acre.
If you want more information about my experience, friend me and send me a message. We are all here to help each other. This site helps to educate all of us so we can make better and informed decisions.
When was that offer? I have negotiated more per acre in your area.