Unitization

So, the company that drills the well, and creates the Unit can exclude certain acreage (donut holes) from the unit, and not pay any royalties for the gas it removes to those excluded landowners?

Has anyone found any successful recourse?

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Permalink Reply by jason irvine on May 20, 2014 at 3:26am
If they take gas from under your land they cannot exclude you....I hope. If the gas doesn't come from you then they may be able to exclude. Unfortunetly they have not drilled on mine so I have no first hand knowledge. My guess is start pushing the company for info
Permalink Reply by Ed on May 20, 2014 at 4:01am

I think it depends on your state laws.  In PA they can capture your gas from the adjacent property without leasing you as long as the actual well bore doesn't go under any part of your property.  They can still drill under you without leasing you, but they are risking a lawsuit.  So common sense would tell me they can leave doughnut holes in a drilling unit and still capture your gas.  This is just my opinion. 

Permalink Reply by Philip Brutz on May 20, 2014 at 5:02am

Duane do you have a plat map of a unit with a donut hole in it that you can post?

Permalink Reply by Philip Thackray on May 20, 2014 at 6:05am

Philip B,

Go here: http://gomarcellusshale.com/group/butler_county/forum/topics/what-s...

Page 1 Oliver Perry- click on - Rex-Reno Unit Declaration.pdf

Page 9 FairMarketValue - click on - feree1H.jpg

 

Permalink Reply by Philip Thackray on May 20, 2014 at 5:12am

What Ed said.

In Ohio the well bore has to be 500 feet away from any adjacent property that is not in the unit.  But the Oil and Gas company can still leave a donut hole.

The only way there would be a donut hole would be if the landowner refused to lease the land.  That is certainly not the O&G company's fault. 

It is important to realize that additional property added to a unit does not cost the O&G company any more royalty payments.  The additional property would cost the O&G company the upfront "bonus payment" which, on a small piece of property, would not be that much.  For this reason, the O&G company will usually keep trying to lease donut hole properties up to some point in the drilling and completion process.

Phil

Permalink Reply by Duane D Clark on May 20, 2014 at 9:10am

I am in Bradford County PA, and in my case, have a lease with Chief O&G, but Chesapeake drilled a couple of wells (not on my land) some distance away. I have 3 acres in Well#4 Unit, no problem, but my 9 acres are physically in the well#5 area, but Chesapeake chose to exclude all Chief leased acreage from this unit?    So everyone around me with leases through Range Resources, Stat Oil, Anandarko, every company except Chief is in the unit & will get royalties.

I would understand if Chesapeake didn't want to honor the Chief royalty %, but they should have to pay me the minimum 12.5%.  They are removing gas from my property that I have the rights to.

Believe me, I have been on the phone with both of them

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Permalink Reply by Philip Thackray on May 20, 2014 at 9:35am

Duane,

That is an unusual situation.  What does a lawyer say? 

I have a friend in Montrose, PA who has a Cabot well pad on his property plus, he is in the oil and gas industry.  He might be able to recommend a good lawyer if you don't have one.

Good luck!

Phil

Permalink Reply by Duane D Clark on May 21, 2014 at 3:04am

I just found out about this last Friday so I have been trying to get answers or positive results from Chesapeake & Chief before I go the lawyer route.  But if that's the PA law, then I guess I'm screwed. It is just infuriating to find out that what you had been told and were expecting for 6 years now turns out to be lies.  Chief has told me that they will ask Chesapeake why Chief acreage was excluded. I'll wait & see.

Permalink Reply by Frank Walker on May 20, 2014 at 11:08am

Duane, I disagree . . respectfully, of course.  So long as Chesapeake does not drill your land, they can do pretty much whatever they want.  In particular, they can frac your land and collect the natural gas thereby released which finds its way to their wellhead.

I'm not asserting this is right or fair in any manner whatsoever.  But sadly, it is legal in Pennsylvania.

In an ideal world your lease with Chief would have an Addendum item forcing Chief to drill you pronto if your gas is threatened to be taken in this manner.  Regrettably, most landowners do not have such protective language in their leases.

Permalink Reply by Philip Thackray on May 20, 2014 at 11:27am

Frank,

Chesapeake can do what they want but it seems that they are losing about 1000' of potentially two laterals.  That affects the income to all the remaining lessees.  Why throw that away?  It seems like cutting off your nose to spite your face.

Phil

Permalink Reply by Duane D Clark on May 21, 2014 at 2:50am

I do understand that,  more so now that it affects me personally,  but it is the inconsistency that does not seem logical.  Why doesn't the driller only pay royalties to the landowner where the well is drilled then?  What benefit do they get from paying royalties to the other 600+ acres in the Unit?    And if they pay royalties to some, why exclude some? It just doesn't make logical sense to exclude approx 40 acres from a 635 acre unit, just because they have the right to.

Permalink Reply by jason irvine on May 20, 2014 at 2:44pm
Im confused. They can remove and sell gas from under my property and I'm not included in the royalty payments. Wow I would want to take that in front of a jury. It would be hard to convince me that is right. Is this allowed in wv? There are two kinds of people someone who crap happens to and someone who makes crap happen. Go get em. Even with all there power I think it is a dead loser. Especially how bad they have recently looked in the public eyes with these royalty post cost deductions. If you can find a few more even better. Maybe a class. I'm no for suing anyone but it would be hard to convince me how that is right. Good luck

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