Drilling unit vs production unit

There is an interesting discussion on the Ohio Landowners page re. drilling units and production units. If I understand it correctly, it is possible to be in a producing drilling unit and still not be paid royalties because you are not in a subset called the production unit. This is new to me as I thought that if your land was in a drilling unit, you benefitted from all of the wells drilled in that unit. Is this new or did I miss something in discussions about the potential benefits of being in a larger unit?

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Permalink Reply by Kathi Albertson on February 12, 2014 at 3:03pm
TM,

Thanks for your clear answer although I have to say that it differs from what I have heard at multiple meetings that I have attended. Given your reply, I have to say that I see little value in amending an HBP lease to be put in a larger unit.
Permalink Reply by Boone on February 12, 2014 at 6:14am
So would you still be considered "held by production"?
Permalink Reply by evan on February 12, 2014 at 6:38am
Oh I'm sure of that
Permalink Reply by Kathleen on February 13, 2014 at 2:36am
Hi,

I haven't read the ohio landowners page in a while, but if you are in production unit you still get paid on the smaller subset (single well).
Think of it this way. If only the people who are actually over the bore in the 163 acre subset get paid while the rest in the larger production unit doesn't, that is completely unfair. The 1st leg mineral owners would have a higher percentage for the 1st leg in the unit and their % would fall as new legs are added to the unit. The rest of the mineral owners in that unit would have a cow, since those 1st lucky ones would now also be apart of a new leg under their land while they weren't in the money part of the 1st leg. Everyones % of the unit stays steady in a production unit.
People are not added in the money making part as other smaller subset units (legs) are drilled to go under their property.
This is why there are production units. All minerals included in the production unit, regardless of where the well was drilled under get paid.
If the unit was only 163 acres, that would then be called a production unit and would be filled as a "declaration of a pooled unit" listing only those 163 acres.
There is a lot of people who will wrongly stand their ground, stating only those who's minerals are in the leg get paid. That's a leg of a bigger production unit where many more legs can be added if desired by the driller. The only thing that changes in the "pooled unit" is legs (more drilled wells) not mineral owners.
Now can they add a hold out mineral owner after a declaration of pooled unit is declared and the well is producing? yes, but that mineral owner will know they missed out on any production numbers until they were added. Then a revised declaration of a pooled unit will made up and sent to the county and the ODNR adding that new mineral owner.
Anyone who really wants to know for sure how big the unit is, who's in the unit, needs to go and look at the "declaration of pooled unit" that is now on their deed.
In columbiana county you can go online and see if one is attached to your deed. To actually see it, you have to go to the court house.
Also in time the driller send you this paperwork.
Permalink Reply by Mike Fulper on February 13, 2014 at 4:50am

If a driller lists his pad as a "production unit"....I think that means the SECTION or 640 acres

is ALL in the Production unit...

No matter how many wells are drilled in that Section... all acreage gets a Royalty...

I don't think any Production Unit is less then 640 acres......

They can drill ONE well.. and HOLD the rest of the 640 for future use....

Where it gets complicate is when the PAD is in ONE SECTION....of a 640....and one of the legs reaches into ANOTHER 640 section....

Then that drilled leg only pays Royalties to whomever is UNDER the leg....usually about 160 acre leg...

When a leg goes into another 640 section is when they want to POOL.....

Just my guess....

OIL LUBRICATES....GAS DOESNT.... OIL is what they want.....!!

The World operates on OIL....not Gas....:)

Permalink Reply by evan on February 13, 2014 at 5:17am
You can check on odnr website under the permit that the well was drilled on and it lists the future royalty landowners The only ones that are listed are the ones in the 137 acre unit that the well covers. Meanwhile I'm sti in the 639 acre unit and will not be paid
Permalink Reply by TM on February 13, 2014 at 7:13am

Very true Evan. If you look at the second 5H well there is only 1 person that will be paid royalty on that lateral. I would not be happy about that if I was in this unit. Most units I see show everyone getting paid for all laterals drilled within the unit. Chesapeake must do things different with their units.

Permalink Reply by Kathleen on February 13, 2014 at 9:44am
Hi Evan,

You are only seeing the one leg on the ODNR site, not the full production unit which will list all the mineral owners, not just the ones in that leg.
Please go to the court house and look up your name. There you will see the whole production unit, not just the one leg.
If that 137 acres is in the 639 production unit, you will receive royalties on that one leg, no question.
When I look for my well on ODNR I can only find the leg, but at the court house I found the whole production unit. Then a few months later I received the courthouse filed paperwork from CHK.
Permalink Reply by Mike Fulper on February 13, 2014 at 10:12am

Hot diggity dog...

I sure hope EQT has Section 13 in spencer twp as a "production unit"

they are drilling 5 wells right now in our 640....

I didn't know that they list the wells as either "production units" or "drilling units"

at the COUNTY COURTHOUSE...

They must do that when they apply for the permits ??

Im heading to the Court house in Cambridge TOMORROW   !!

Do I have to ask the Clerk for anything in particular  ?

In Guernsey county the records are ONLINE.. but I don't see under my name

anything about royalties....??

Mike

Permalink Reply by TM on February 13, 2014 at 10:25am

EQT might not have filed anything yet Mike. The declaration of a pooled unit will be filed with your lease and deed at the county courthouse. It will show the total size of the unit and landowner acreage totals in the unit or your percentage of the unit.

Some companies file them quickly at the courthouse and others might wait until the well is completed and then file the paperwork.

Permalink Reply by evan on February 13, 2014 at 10:57am

Mike on odnrs website you can look at the permits and at the bottom left hand corner in blue writing click on that and it should show you people who will get royalties from that we'll

Permalink Reply by Mike Fulper on February 13, 2014 at 11:03am

Ok will check.. thanks, Mike

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