Property "units"

In a earlier discussion Mr. Knapp explained that the gas co. will assign the units for production useing "unit operation designation" filed at the court house, he also explained that these units could be any size because Pa had no legal limits other than what was stated in your lease. In the lease that I have been presented with it stated "no units can exceed 640acres plus 10% or 704 ac. I was wondering what the typical unit size is in Pa? Is it all based on the geological investigations? It's only logical that royalties would be higher for each landowner in a smaller unit. Has anyone heard of a unit that is has a 100acres or less?

 

 

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Permalink Reply by Frank Walker on January 25, 2011 at 5:16am

In PA, yes.

 

You're forcing me to go into more detail, and to get into frac trespass which is immensely controversial:

 

ABSENT fracking, PA law allows drilling of Marcellus horizontals right up to the property line.

However, gas companies are skittish regarding frac trespass here in PA because the matter has not been adjudicated.  They are well aware of frac trespass, believe me, much more so than the average landowner.

So what to do?  Most gas companies drilling in PA have avoided and sidestepped the issue by voluntarily setting back their horizontals from property lines.  This might not entirely avoid frac trespass, but it does minimize such trespass (possibility for frac trespass depends on the precise nature of the shale because that is an important factor in determination of frac outreach or radius).

If you study Garza, you will see the wisdom of the Texas Supreme Court as regards this issue.  The Texas Supremes decreed that frac trespass is legal in Texas.  But they were aware at the time they ruled that in Texas, unlike here in Pennsylvania, there IS a formal 330 foot setback for drilling of horizontals.  And that's the critical difference between the two states.

 

Frac trespass (fracking of unleased shale) is the issue it is because of two conflicting imperatives:

 

1.  Any Lessee should be entitled to frac all of its leased shale.

2.  No landowner should be subjected to having his shale fracked except by his Lessee.

 

Our PA Rule of Capture further muddies the water on this issue.  Absent fracking, there is no uncertainty regarding legality of free gas capture via off premises drilling;  it's legal.  The rub, the dilemma, comes when driller seeks to steal gas by first stimulating (fracking) unleased land in order to free that gas.  

Permalink Reply by rmc on January 25, 2011 at 2:36pm
Hello this might be a little bit off topic now .In our lease we negotiated 120 acre units x the number of wells on the pad so 6 wells would create a 720 acre unit. That was the best we could get at the time. The ideal was the laterials would be 5000' and would drain gas 500' from each side of the laterial .So 5000'x1000'divided by 43560(sguare feet in an acre) =114.78 acres Since then the company we leased to now wants to drill there laterials 8000' + and say that they can comply to the unit size restriction in doing so .Hope this helps
Permalink Reply by Mmmarkkk on January 27, 2011 at 4:26am
Thanks!
Permalink Reply by Robin Fehrenbach Scala on January 28, 2011 at 3:26pm

Whew, my blood pressure was rising and then you jumped in right on time, Frank.

 

So many issues...the depressurization was killing me...but you nailed that too.

 

Listen to this advice, everyone. AND REMEMBER, THIS IS NOT TEXAS, or Oklahoma or any other state. Not even NY, which also has pooling/unitization laws but no drilling right now.

 

Pennsy is a totally different animal and the guys who hail from the south have to remember that when giving advice or comments on any gas forum.

Permalink Reply by Frank Walker on January 29, 2011 at 3:43am

No problemo, Robin.  And good to hear from you once again.

 

I always do my best to be on guard  where such matters are concerned.  ;-)

Permalink Reply by Robin Fehrenbach Scala on January 29, 2011 at 4:25am
Gotcha. How true.
Permalink Reply by Henry J. Cittone on January 27, 2011 at 10:56pm

i have there is an 86.5 acre unit in auburn township.

poulsen 1H well is in a 122 acre unit.

poulsen 2H well is in an 86.5 acre unit

 

(now i may be missing something here because the 1H 2H etc. refer to the horizontal bore (a fully done up well should have 6 (1H-6H) according to Chesapeake's people), and this company "Epsilon" might just be dividing up the horizontals they are drilling off the same well pad, in which case the smaller unti size would make sense since it woudl be x6.  If anyone knows where these two wells are located or if they are the same well pad that would help sort it out.

 

This is where people fight...the big landowners don't want their little neighbors in a unit. 

 

it is dangerous for the gas Cos though..people might sue if their land is fracked and they are not in a unit (the factures can extend well past the horizontal bore holes of the well - it's a rather random process.  this may tbe the reason Chesapeake has so far been very conservative about units - White, Roger and Clapper pools are all around 600 acres.  I heard a rumor there was a trespassing lawsuit over fracking in PA...anyone shed light on this?

 

 

 

 

Permalink Reply by Dan on January 28, 2011 at 4:13am

Could someone please describe/define the 'unit' for me?

 

Am I right in thinking that each lateral may draw 1000 ft wide, and let's say it's 6000ft long.  That's 137 acres.  If a pad has 5 wells, then the unit would be 685 acres (these are just made up numbers to get to my real question about percentage ownership of units).

 

Let's say I own 500 acres under an old :-(  lease, and 5 neighbors each have 100 acres under lease with the same GasCo.  But, that well pad will be on me and branch out to their lands. 

 

(Ans A ?): Is that unit size actually 1000 acres and I would own 50%, (10% to each of the others).

(Ans B ?): Is that unit size 685 and I would get whatever area is actually drawn from the laterals while under my land?  Just to put fictional numbers to it, let's say the runs are 5000 ft on me and 1000 ft on each of the others.  So, I would have 5000/6000 or 83% of the royalty (to my old 12.5% rate from any given lateral)?  If this is the correct answer, is the royalty based on the actual % for each lateral, or is it all lumped together (all 5 laterals). 

 

 

 

Permalink Reply by Paul Martinelli on January 28, 2011 at 4:32am
I would think Answer A.   All is divided up based on acreage owned in the unit.
Permalink Reply by Mike Knapp on January 28, 2011 at 5:31am
Answer A
Permalink Reply by Dan on January 28, 2011 at 12:02pm

Thanks Guys -- although that's not what I wanted to hear.  

I guess, just to clarify, no new unitization leases have been signed - we each just have our old original leases.  What gets me is how can the person who may have 50 physical acres in his property (old lease) boundary, but only have a short part of a spur pass under say 10 acres worth of pull area, be eligible for 10% of the total. 

Permalink Reply by FXEF on January 28, 2011 at 1:09pm

Dan,

Each land owner will get his proportional share according to the acreage owned within the unit. It does not matter where the acreage is located, just as long as it is within the boundaries of the unit. 

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