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Permalink Reply by Nathan Henceroth on December 1, 2012 at 4:53pm

How is this punitive to the landowner?  Wouldn't that bill (493) ensure that Chesapeake wouldn't be allowed to claim HPB on land that isn't contiguous? The 750 foot setback ensures that they couldn't steal someone else's minerals. Shouldn't these "landmen" be regulated?  These guys remind me of someone I'd expect to see at a used-car dealership.

I'm sorry, but I just don't see how having these regulations would be punitive to the landowner.  I can see how it'd be punitive to Chesapeake, but considering their past and present behavior, someone needs to stand up to them and force them to abide by the law.  Look at all the lawsuits against them by landowners.  Having something like this would benefit landowners, not hurt them.

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Permalink Reply by Nathan Henceroth on December 1, 2012 at 7:54pm

I read the PDF file again, and I actually see more that's beneficial to the landowner.  This bill would set the minimum royalty rate to 15% gross, which is much better than a lot of these 12.5% older leases that were never meant for horizontal drilling in the first place.

I honestly can't see how this bill is anti-landowner.  If I'm missing something, please point out which clauses are to the detriment of landowners.  I normally only read posts on here, but I'd hate to see misinformation being spread that affects those owning land under lease.

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Permalink Reply by Joseph-Ohio on December 2, 2012 at 9:35am

Larger drilling units mean less of a percentage of production to each participant of a given drilling unit.

A greater setback means more tracts included in a drilling unit which translates into a lesser percentage of production royalty per participant.

Landman regulation is good.

Minimum 15% of gross is good.

That's the major bad and good of it the way I see it.

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Permalink Reply by Billy Park Whyde on December 2, 2012 at 2:01am

HB 528 seems to me as contradiction to the "Minimum 15% of gross is good" why would you need a accounting for deductions if your getting gross with no deductions?

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Permalink Reply by bo boboski on December 2, 2012 at 2:21am

As a BP landman asked me, "define Gross"? Gross of What? What O&G co. sells oil or gas "at the wellhead"? they have to get it to the processing plant by truck or by pipe. Will you get your percentage of the "gross" sales at the processing plant? or after it is seperated & sold to the refinerys? When does the actual sale of the product take place?  This guy thinks the royalties should be paid out of the price they get when they sell the oil or gas to whoever buys it.  with the driller paying for the transportation. This is why "gross at the wellhead" gets tricky.  I'm hoping that the new bills deal with the wording of leases pertaining to when the royalty percentage gets figured in.Some of the current leases leave alot of details out so they can do whatever they want.

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Permalink Reply by Joseph-Ohio on December 2, 2012 at 9:34am

A 750 foot setback may also cause lands to be held by production that wouldn't be otherwise.

 

Looks to me like another opportunity for development to be delayed while tying up the minerals for who knows how long.

Still a bad idea.

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Permalink Reply by Jim Litwinowicz on December 2, 2012 at 5:01am

The larger drilling units are a result of advanced technology. Using 1280 units allow 2 sq miles of land to be produced all from a single well pad, a single pipeline, a single access road. All of that is very good for landowners and the environment.

It does dilute the royalties for the first couple of wells but gives one a better chance of getting royalties.  A 200 acre segment may not produce very well but the next segment over may be good.  This averages out the risk and the royalties considerably.

The 750' setback can be detrimental in areas that have mixed housing/ag.  That large a setback will make some ares undrillable, especially urban areas. Perhaps include a clause to lower setbacks where all landowners within the 750' zone agree to a lesser setback.

Just my .02 cents

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Permalink Reply by Kathleen on December 2, 2012 at 5:10am

Hi Jim,

Aren't the drillers now following a 500ft set back already on their own?

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Permalink Reply by Jim Litwinowicz on December 2, 2012 at 6:25am

Kathleen, depends on the lease. Some are less than that.  But going from 500' to 750' is a big difference that will make more land of limits.

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Permalink Reply by Nathan Henceroth on December 2, 2012 at 8:25am

Joe-Ohio, I see what you mean about the increased 1280 drilling unit size.

But, if they'd be willing to change the bill to read something like 640 acres, but kept a lot of the  rest of the language, it seems to me to be a good thing for landowners.  As it stands now, we have no power over Chesapeake, they simply do whatever they feel like doing and it's up to someone else to try and stop them.  Our best bet is to get politicians to lay the hammer down on them, and when they are found to be shorting on royalties, claiming HPB when it's clear that they missed deadlines (but it ends up being too expensive to go the court route), or committing fraud the state is able to threaten to pull their permits if they don't remedy the situation in a timely fashion.

In my opinion, this bill seems to be better than what we have now, which is pretty much nothing.

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Permalink Reply by Jack Straw on December 2, 2012 at 8:39am

I would be interested in hearing a rational argument for a 750 foot setback - from a Geological or a Reservoir Engineering standpoint.

 

A 750 foot set back would result in no two horizontal wells (in adjacent units) being drilled any closer than 1500 feet apart (750 foot setback from unit A plus 750 foot setback from unit B).

 

From what I understand, current fracing technology in Shales is such that is unlikely that a frac would extend horizontally beyond 375 feet; and it is highly unlikely that a frac would extend to 750 feet. There will always be unusual subsurface circumstances that might result in a greater distance, but such occurrences would likely be both uncommon and unpredictable.  

 

In my opinion, a 750 foot setback would likely result in long corridors of the subsurface in which the natural Gas/NGLs/Oil would be forever left behind. I see this as an unwarranted waste of a resource.

 

I would like to see laws/regulations incorporate the best currently available scientific and engineering knowledge prior to deciding upon a change in setback.

 

The desire to avoid frac trespass should be tempered with the desire to not unnecessarily and permanently leave a resource in the ground.  

 

If anyone has knowledge or information that would dispute my estimate of the horizontal distance that a frac typically achieves, I would appreciate hearing about it; I am always happy to revise my beliefs (when evidence indicates that this is appropriate).

 

All IMHO,

                   JS

 

 

 

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Permalink Reply by Joseph-Ohio on December 2, 2012 at 9:26am

Thank you for voicing these thoughts.

Similar concerns occurred to me quite awhile ago.

I always wondered what the optimum outboard distance from any given horizontal lateral needed to be to facilitate complete drainage of the resource.  I gather from your post that current technology pegs the distance as being 375'.  That tells me that even at 500' setback from a property line there is ungathered resource left in the ground (unless another lateral on the adjacent property is installed a maximum of 750' from the 1st lateral and the adjacent property becomes part of the drilling unit / production).

Looking at it from that perspective (technology's optimum drainage distance) seems to guide toward locating laterals 375' feet from property lines / 750' apart and incorporating the adjacent properties into a common drilling unit.   

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