Replies to This Discussion

Permalink Reply by 0l1a6laz7smpf on April 9, 2012 at 8:40am

..

thanks so much both of you...

John, I hear you say that in Pa. there is no regulation (your above post)..but why does a state rep. GARTH mention (below in bold) that he thinks there is....where do you get your info that there isn't.

I know that I read online (and I cannot remember which source it came from) that a permit cannot be permitted for a larger unit unless the drilling company has adequate drilling equipment to do the job.  Perhaps if I contact DEP they can answer that.   The reason that I bring this up...is after reading about this at the below link and other articles about it...I could see that Chief was taking somewhat clever ways to extend someone's lease...so are they also doing it with unitization?

http://www.lexisnexis.com/community/emergingissues/blogs/oilgasande...

Most of these oil companies do not think that most of us can figure all this out easily (and you know they are right about that!).   Yet if they (some of them not all) are forming units with one well vertical and telling DEP that they plan on (in the future) (and I have an example) to drill one horiz. well (but it is just proposed not installed) then when the acreage of many surrounding that one vertical well is being held by production or even no production...how can they get away with that?   And then I read from the state rep. Garth's of Pa.'s own website that he thinks that the company needs about 10 horiz. wells installed to even form a large unit??  Where is he getting this info.

It is my understanding that currently up to 500 acres of land can be developed from a single five-acre drill pad assuming that 10 horizontal wells are drilled from the pad.  That means that a 1,000 acre unit can be almost fully developed from only two drill pads.

(now this statement of 'assuming that 10 horiz. wells are drilled from the pad...is that a law?) There needs to be laws about unitization...and soon if there aren't.   But maybe there are...

  Cause they put some of our acreage in a unit that is over 1200 acres and only one vertical well with one horiz. planned?  Whose okaying these permits that way...if Garth is right?   They only are holding about 30 of our acres also and have the entire almost 300 of our acres held on lease (unless I can prove otherwise) even though they are not using them and we are only one of many pages of landowners that are in that unit.  Now I am basing my info on the recent DEP report showing what wells are permitted.  Anyone else notice this about your unit?

Please if possible, who has the info online that would answer this and I can get it validated as what is policy even if it isn't defined on the contract.  If there is some sort of cheating going on...we need to know.

I visited the DEP site last night and couldn't find any info about ten Horiz. wells per drill pad...yet when I look at Chesapeakes permitted wells in a particular county in Pa. I discover that most of them have ten horiz. wells and in the same county Chief is doing only 1 or 2 wells (not necessarily both installed)...so why is Cheseapeake more agressive?   or is it required....and maybe in that county it isn't required...don't know.   What to find out.    This is the worst monopoly game I ever played...feel like I am not even on the board but sitting at the table with some players...and they are winning yet I have yet to play.

Here's the report from geology.com ...unless I read the report wrong about the one horiz. well not being installed.   And I assume that when a well is listed as NON horizontal then it must be vertical.

http://geology.com/marcellus-data/

 

I wrote the above and when returning to this discussion I find that Jack has posted some info that will really help explain more of this involved in planning units....so pls read his post above and the one I wrote above that mentions what happened when I called DEP.   there was more to tell...but for right now I am still figuring all this out.   My lease is not that far from expiration of primary and this research does take time...and if you are in an area where you think that the oil company just threw in a well to hold you and your neighbors leases for quite some time with NO production...then you best get studying all this also and see if there is a way out cause it also may be the reason that there are not pipelines yet in your area....though they blame the locals for not accepting low ball offers for the pipelines.

I ask you this.....if an area has no streets at all...just vacant land....and the neighboring city decides to install a traffic light in the middle of that vacant land....would you as taxpayers want to know if that was a good use of your tax payer money?   and if you found out that the traffic light got paid for and the company that sold it to the city made quite a profit ...and 3 years later there were still not roads to use that traffic light...what would you wonder about that decision?   And we are supposed to embrace these oil companies as our friends and even think they cannot make mistakes with our royalty calculations and caring that we also have production?   even care about our drinking water and land planning?  I don't know....I think profit wise they knew what they were doing  and knew most of us didn't.

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Permalink Reply by Jack Straw on April 9, 2012 at 9:24am

RE: "I hear you say that in Pa. there is no regulation (your above post)..but why does a state rep. GARTH mention (below in bold) that he thinks there is...."

What I believe Garth was referring to is the Pennsylvania House of Representatives Bill 1950. I believe (but am not positive) that this goes into effect later this month. But, it does not tackle Pooling, it is more envolved with extracting money from the industry.

The text can be downloaded on this PA State site:

http://www.legis.state.pa.us/cfdocs/billinfo/billinfo.cfm?syear=201...

I must warn you: every letter of text is underlined,

                           the format makes it very difficult to read,

                           the turgid prose makes it difficult to understand,

                           just attempting to read several pages will guarantee to cure insomnia.

 

I suggest a google search for a summary of this Bill (aka Act 13).

 

For some additional light reading:

http://law.psu.edu/_file/aglaw/Rule_of_Capture_in_Pennsylvania_Oil_...

 

And when you have finished with that, here is one of my all time favorites (the Pennsylvania Oil & Gas Conservation Act of 1961) :

http://files.dep.state.pa.us/OilGas/BOGM/BOGMPortalFiles/LawsRegsGu...

 

And not to be missed:

http://www.pacode.com/secure/data/025/chapter78/chap78toc.html

 

http://www.pacode.com/secure/data/025/chapter79/chap79toc.html

 

 

All IMHO,

                   JS

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Permalink Reply by Jack Straw on April 9, 2012 at 9:58am

RE: "And then I read from the state rep. Garth's of Pa.'s own website that he thinks that the company needs about 10 horiz. wells installed to even form a large unit??  Where is he getting this info."

 

If he thinks that, he is very confused. As to " Where is he getting this info."; my only guess would involve him "pulling" it from a certain part of his anatomy.

 

RE: “I could see that Chief was taking somewhat clever ways to extend someone's lease...so are they also doing it with unitization?”

They will try any trick that they think that they can get away with; legal or not. If a Lessor believes that the operator has done something not allowed under the terms of the lease; the onus (expense) is upon the Lessor to take them to Court.

 

RE: “Yet if they (some of them not all) are forming units with one well vertical and telling DEP that they plan on (in the future) (and I have an example) to drill one horiz. well (but it is just proposed not installed) then when the acreage of many surrounding that one vertical well is being held by production or even no production...how can they get away with that?”

The get away with it by virtue of the crappy language contained within the text of the average (crappy) Lease.

 

RE: ”It is my understanding that currently up to 500 acres of land can be developed from a single five-acre drill pad assuming that 10 horizontal wells are drilled from the pad.  That means that a 1,000 acre unit can be almost fully developed from only two drill pads.”

You are not understanding matters correctly – there are not set number of wells that can be drilled in a set acreage. Many variables determine what makes sense as to what is either possible, practical or appropriate. That is why the O&G Companies have large, expensive professional staff; just to make such determinations.

 

RE: ”If there is some sort of cheating going on...we need to know.”

It is only cheating if it is against the Law. And since there are no Laws handling such practices, it is not cheating. From the O & G Companies standpoint, they have engaged in savvy business practices. From the Lessors standpoint, they have cheated themselves by signing a crappy lease.

 

RE: “I visited the DEP site last night and couldn't find any info about ten Horiz. wells per drill pad...yet when I look at Chesapeakes permitted wells in a particular county in Pa. I discover that most of them have ten horiz. wells and in the same county Chief is doing only 1 or 2 wells (not necessarily both installed)...so why is Cheseapeake more agressive?”

Chesapeake are famous for using OPM (other people’s money).  Chesapeake made a business decision (based upon their individual circumstances); Chief made a business decision (based upon their individual circumstances). Different strokes for differ folks.

 

RE: “I think profit wise they knew what they were doing and knew most of us didn't.”

The O & G Companies would refer to this as “Competitive Advantage”. It is like going to a Casino; (in the long term), the House always wins. You play their game, and you play by their rules (and they even stack the deck). All one can do is educate oneself and attempt to get the best deal you can. The Casinos just love the rubes who play the slot machines; the O & G Companies just love the Mullets that smile and sign the first Lease that is placed in front of them.

 

All INHO,

                  JS

 

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Permalink Reply by 0l1a6laz7smpf on April 9, 2012 at 11:08am

well stated Jack....  except when one leaves a Casino they leave the casino...they don't take it home with them and see it daily to remind them of their losses or gains.   The leasing of our lands involves seeing the operator of the drill site and whether it is loss or gain...they live there now and who knows for how long.   Now looking at the perspective that eventually they may show up to drill when and if the pipelines are put in....as what loss do they have if they work other counties and wait for years for the pipelines if they have exclusive hold of the folks acreage indefinitely because of the contract clauses?.....but if they do show up and do produce then most likely they hopefully will be agressive to add additonal horiz. legs to the site and amount of dollars can increase for both Lessee and Lessor...at at least we hope for even a 12.5royalty for the Lessor (of course we do not know the deductions on each lease).  

It is that most of us that have a lease from 2007, 2008 were made certain promises of being able to renegotiate based on the end of the primary term (heavily relied on those promises in ignorance) and because avoidance of the other clauses to explain the other clauses to us of that  unknown terminology created the problem that has led to the disgust...as brand new leases get anywhere from 3500K to even 7k per acre...

It is tough to know that the same company that negotiated as you say 'a crappy lease' is even holding out on production and intends to as long as they can't slapped by a higher authority for doing so!   This has been my quest to figure out just what did dad sign and what do I do to make use of this present lease that I have inherited?    From my DEP call today , I have learned the drilling company has even shut in two of the wells (but you know I don't even know if they are installed) and they did that last year.   Then again they may come drill and those wells may be astounding in production and they probably will wish they had started producing two years ago when they installed them!

Without finding rules persay in force for Pa. regarding these unitization clauses then there isn't much hope that  any change to the present contracts (those crappy ones as you say) will change....unless of course the Leasing arm of the oil companies that handed out those leases decide we have really been greedy and deceiving in thinking that these old folks or young folks ignorant of our gas/oil contractual techniques should be held to our contracts as we did send the forms that way in hopes that they couldn't figure them out and just sign...we should amend or renew the lease with them at the new bonus rates and actually give them the money and give them fair and realistic clauses for a better relationship ongoing...amen.

 

also...Jack, you stated:

RE: ”It is my understanding that currently up to 500 acres of land can be developed from a single five-acre drill pad assuming that 10 horizontal wells are drilled from the pad.  That means that a 1,000 acre unit can be almost fully developed from only two drill pads.”

You are not understanding matters correctly – there are not set number of wells that can be drilled in a set acreage. Many variables determine what makes sense as to what is either possible, practical or appropriate. That is why the O&G Companies have large, expensive professional staff; just to make such determinations

Jack, that wasn't my words ..that is on the website of Rep. Garth (PA) and that is why I want to know...where did he get that info?   perhaps there is some ruling somewhere with that kind of logic...or maybe he thinks that is how the oil companies do plan their units.

I hope that any of you that read this discussion and have yet to do an amendment for a larger unit size or even a new lease agreement....pls see that this is so very important that not only the unitization clause be best worded for you  (and the oil company cause they have some risk and money in it)...but that other clauses are also important that work with the unit size clause.   This is why the word 'balanced' means a fair contractual arrangement that pleases both parties in the lease contract to make for a continuuing comfortable arrangement instead of the greedy one sided approach of let's see what we can get from them attitude.

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Permalink Reply by Jack Straw on April 9, 2012 at 11:50am

If it is Rep Garth Everret's understanding that "currently up to 500 acres of land can be developed from a single five-acre drill pad assuming that 10 horizontal wells are drilled from the pad.  That means that a 1,000 acre unit can be almost fully developed from only two drill pads.”; he is making a blanket statement that may or may not be true for a particular one tract in one particular area. To make a blanket statement suggesting that these parameters are universal is like saying "a potato weighs one pound".

If you go through a big sack of potatoes, you will find several potatoes that each weigh one pound; BUT THE VAST MAJORITY OF POTATOES WILL NOT WEIGH ONE POUND.

It frightens me to think that he might be introducing a Bill directed at “Marcellus Pooling Legislation”, as several statements made on his website suggest to me that he in not qualified to propose such legislation. His Biography does not make mention of any education or training in Geology or Petroleum Engineering. Perhaps he should consider a career change – he might make a good shoe salesman.

I repeat - there are no set number of wells that can (or should) be drilled in a set acreage. Many variables determine what makes sense as to what is either: possible, practical or appropriate. That is why the O&G Companies have large, expensive professional staff; just to make such determinations.

One size does not fit all.

 

JS

 

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Permalink Reply by 0l1a6laz7smpf on April 9, 2012 at 1:41pm

Thks Jack again...

I meant to put the link to Rep. Garth's  page in the above post though it is in a few more posts up..

that way someone could read right from the page that I copies and pasted the exerpt of that you have there...

http://www.repeverett.com/MarcellusLeg.aspx

The date of the what appears to be straight from him...doesn't show on the page so I don't even know if it this year.   But there is a SB 1950 that I started to review at his website , here is the link to that info. 

http://stateimpact.npr.org/pennsylvania/tag/impact-fee/

looks like that needs more discussion in its own discussion topic.

yet I do see that they list a website called fracfocus as a website where pertinent info will be posted, maybe that will have eventually some rules regarding forming units in Pa of natural gas drilling.  (it has some info)

http://fracfocus.org/regulations-state

I want to thank each of you that have helped me to understand more...I really have no one to talk with locally about this...not in the area of the leasing..so I always look forward to what your input will be.   I am a novice at all of this...and only am sharing what I can as I see others also have a situation where they also have been neglected in this gas lease rush....and i think we all are tired of hearing how we should have read the contract before signing.

 

hey, finally found what I have been looking for all day...and then some...now to read quite a bit.

http://www.pacode.com/secure/data/025/chapter78/chap78toc.html

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Permalink Reply by melissa humphrey on April 9, 2012 at 3:28pm

Depends, where are you?Larger gives you more geo diversity

and spreads out risks in general.

 

Thye can spli a unit into 2 which forces 2 wells, vs 1, true.

In NE PA so far, gascos are doing 2  / unit, but that may change.

 

Good luck--if you don't need $$, now BIG is GOOD

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