royalties ....and unit expansion

Question:

 

If a well is drilled....say initially on a 177 acre unit.....then they want to increase the unit size to 640 acres (do they do that? can they?)

 

If so,

 

Won't this practice cheat some of the landowner's out of their royalties?

I mean...I would not want my acreage added to a unit 5 years down the road after a unit has been in production.

Views: 812

▶ Reply to This

Replies to This Discussion

Permalink Reply by Nelson Roe on November 14, 2011 at 10:27am

I believe they could if there was not an amendment clause in the leases that prevented it (or at least limited the amount of time that they have to ammend the unit size).  I would think that the main reason they would change a unit 5 years down the road would be so that they could add more horizontals to an existing well pad.  At which point, the increase in production should increase the amount of royalties being paid out.  But, it would also increase the # of landowners that were receiving them also...  There is always 2 sides to a coin...

Permalink Reply by Paul Martinelli on November 14, 2011 at 10:38am

The original landowner would be getting more than his/her fair share.

 

All royalties ( from the life of the unit) should be shared equally based on acres in the unit from each land owner.

2s72s0k9mm8gdPermalink Reply by 2s72s0k9mm8gd on November 14, 2011 at 10:58am

The way I heard it explained was well royalties are held to the specific unit size at the time that particular well or wells were drilled. Subsequent additions of acreage to increase unit size will only benefit from wells drilled thereafter. 

Permalink Reply by Jim Litwinowicz on November 14, 2011 at 4:32pm

Paul is right.  If a well produces from the original 177 acres for several years before the unit is expanded, then that landowner has gotten the full 100% royalties for his acreage but will get more royalties from other parcels once the unit is expanded and drilled without contributing to the other landowners.  Doesn't seem right.

Permalink Reply by LAE on November 14, 2011 at 4:55pm

 I have to say, I never heard of a 177 acre unit! Where is this mini unit?

Permalink Reply by LAE on November 15, 2011 at 1:16am

Wow! the smallest I've seen in PA is about double that, with the average slightly over a square mile!

RSS

© 2024   Created by Keith Mauck (Site Publisher).   Powered by

Badges  |  Report an Issue  |  Terms of Service