Anyone know what process Rice Energy uses to comprise their drilling units?

We're very near (bordering) a developing well pad with 5 wells going in being drilled by Rice Energy, with whom we are leased. We've always assumed that a unit is comprised of all of the surrounding properties leased by the gas co and each landowner shares in the total production of the unit based on the amount of land their part contributes to it (times your contracted percentage w/gas co, of course).  Recently, however, I've heard about landowners only getting royalties on land that a horizontal specifically goes under their property, despite being a part of a unit as a whole. This, to me, would not only be an accounting nightmare it also wouldn't account for gas captured from surrounding area, etc, and ultimately seems to defeat the entire purpose of pooling and unitization.  I'd heard that some situations dictate this method (though not sure what they are) and now wonder if it's an option up to the gas company?  Our lease cites our agreement to participate in unitization for royalties, which is fine, however the method definitely makes a difference.  Anyone out there a landowner in a unit developed by Rice Energy?

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003ho3nbn6dh7Permalink Reply by 003ho3nbn6dh7 on August 12, 2015 at 7:07am

Hi, Lori,

I represent landowners who are selling their oil and gas acreage, so I look at maps of the units pretty frequently, and it is not uncommon for a property very close to the well pad to be excluded from the unit. I'm looking at a Rice unit Declaration as we speak... this particular one has 3 units coming off a well pad, they are each very long and narrow, radiating out from the centrally located well pad at different angles. there are several parcels directly adjacent to the well pad that are not in any of these units.  Seems counterintuitive, but that's the way they sometimes draw the units.

Permalink Reply by Chris F on August 13, 2015 at 1:47am

Not sure exactly how Rice does it, but my understanding is that in PA the gas company can draw their unit any shape they wish as long as the land under the drill bore itself is in the unit.  PA doesn't cite any specific distances or shapes that the unit must be.  I believe Ohio is different and those units seem to include the bore hole with a specific offset distance making up the unit.  This leads to long rectangular unit shapes in Ohio compared to irregular shaped units in PA.

I think a lot of it has to do with strategic use of leased land.  For example they may include a property or a portion of a property in a unit that is not under the bore hole if the lease is about to expire.  In general though i would imagine if you are very close to a well pad and leased with the company that is doing the drilling it would make sense to put you in the Unit, otherwise they wasted their money on paying for your lease in the first place, unless they have some strategic reason to exclude you. 

Permalink Reply by Gas Boy on August 13, 2015 at 3:46am

I've seen well plats that show the "Unit" being comprised of acreage that is 330 feet away from the lateral, on either side, and the length of the lateral. 

Don't know how companies configure their drilling units.  Some oil & gas leases stipulate that the whole acreage, when unitized with other tracts, must be included - not a portion.

Permalink Reply by James on August 13, 2015 at 4:54am

Hi Lori--

Do you have the pad name? Or more specifically the API number for the well in question? If so, it may help us find the information you are looking for. 

Thanks!

-J

Permalink Reply by Lori Huber on August 30, 2015 at 1:13am

HI James. Haven't been on here for a while. In answer to your question, the pad that I am most interested in is the Wolverine well pad containing 5 horizontal wells located in Fallowfield Twp, Washington County, PA (Bentleyville address). I have individual well permit #'s.  I've heard that it is a 725 ac unit. Not sure of validity, though.

Permalink Reply by Bill Barnaby on August 31, 2015 at 5:26am

It seems like they decide the unit sizes with a couple factors, one factor which dictates it is everyone who is in the lease. If you have 20 property owners in the unit, but one property owner has a 200 acre unit maximum lease, then the unit size will have to be 220acres or less generally.

Permalink Reply by Lori Huber on August 31, 2015 at 6:55am

Thanks Bill. I'm pretty sure that they follow the standard pooled unitization format but wanted to verify.  They've leased a substantial amount of contiguous acreage surrounding the well pad and our land actually borders the property that the pad sits on with at least 2 of the laterals going directly under us and another within feet of one of our property lines (hence gas will definitely be pulled from under us on that one, as well).  None the less, there are also properties leased that do not have a lateral going directly underneath them (and there are 2 that don't go directly under us). Since the gas is pulled from more than the 3 ft or so wide area that the actual lateral takes up, it would seem fair that the surrounding leased properties should share in the cumulative royalties according to their percentage of contribution to the whole unit (at their leased royalty percentage, of course).  Unfortunately, "fair" isn't always the way it ends up being done, so I was curious.  I suppose we'll find out soon enough.  They finished drilling last week and I believe are ready to get the fracking team in. Water pipeline is complete and gathering line is almost completed to the compressor station. Appreciate all of the great information on here.  Thanks!

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