Replies to This Discussion

Permalink Reply by Joseph-Ohio on December 4, 2012 at 6:20am

Another way to state concerns (and possibly easier for all of us to understand) would be:

If 375 feet outboard of any fractured horizontal lateral (in all directions) is the maximum effective distance of resource recovery - why would a property further than 375 feet from the horizontal lateral be included in the drilling unit and paid royalty ?  I can't see why it would be; and I don't know why anyone would consider that it should be. 

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Permalink Reply by bo boboski on December 4, 2012 at 7:46am

Some drillers ARE declaring only the drainage area as the actual drilling unit. Only the landowners that have property in that unit get royalties from the O&G that is theirs/not anybody else's. Dont have to see neighbors 1/2 mile away getting $$$ out of your minerals. BUT, the driller cant hold any of the remaining 1000 acres or so by production. If they declare it a 1280 acre unit, all landowners in it get to share the royalties from O&G under you! Really dilutes the $$$. This will be fine if the driller drills 8 wells. Drains it all. then you will get $$$ from everyone else's minerals. Now that the "exploring" is getting them a good idea of what's down there, I can see the future leases that get signed will be leaning towards the 1280 acre units. Cheasepeake is already trying to rewrite their leases upgrading to 1280.

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Permalink Reply by Joseph-Ohio on December 4, 2012 at 9:01am

That's another key element for the Committee to consider.

Perhaps make it law that if a developer declares a drilling unit of any given size (I'm still sticking to a max. of 640 acres if there's to be a law) that the entire drilling unit must be developed simultaneously.

An 'Open Architecture Law' still the best option from my perspective.

 

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Permalink Reply by Jim Litwinowicz on December 4, 2012 at 12:00pm

Joseph, so what happens if they drill a well and its production is low? Do they still have to drill all the wells? Or if the prices drop below that which they can make a profit? Make it a law to drill all wells at once?  What about areas with multiple strata to develop?  Do they have to drill 25-30 wells all at once? I thought this was a country based on capitalism not fascism.

And drilling all the wells simultaneously doesn't make sense just from a production point of view.  Drilling six or eight wells at once would produce so much gas that the gathering lines couldn't handle it all.  They would just have to shut down wells for years at a time anyway. Not to mention the drop in pricing that would result or the high taxes you pay for huge first year checks. Better to spread out the production.

And if your mandate was law, they would lease much less land, only that which they could rapidly produce and sell the gas at a profit. Fewer landowners would get offers until decades later as other areas depleted.

Further, the wells they are drilling now are greatly out-producing the ones they drilled just a couple of years ago. Thats because they are continually improving their methods Drill them all at once and you will not get the benefit of advances in drilling technologies.

What I would prefer is a lease that states they must drill at certain intervals.  Maybe at one well per five years. Or even 7-8 years. That seems much more fair and do-able.

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Permalink Reply by Joseph-Ohio on December 4, 2012 at 1:53pm

Jim,

I'm not coming up with the idea to write the law in the 1st place.

If a law is written however it needs to be not only O & G Industry / Developer friendly, it needs to be Landowner friendly since we're both under the legislative microscope.

Your part about '.......they would lease much less land, only that which they could rapidly produce.......', seems to me is already happening to some extent and I would really like to see that change.

I'd rather see no new law in these regards especially.  But, unfortunately, that doesn't seem to be the case.

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Permalink Reply by Miller on December 4, 2012 at 11:43am

There is one aspect of this that nobody seems to talk about. Where I see the larger (exp. 1280) unit sizes come into play is smaller land owners. If I own 25  or even 5 or 10 acres and I am part of a 640 acre unit that is great, but it is a whole lot easier to just go around and not include my acreage with smaller units. Then I get nothing, with 1280 acre units that include me at least I get a small piece of the pie.

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Permalink Reply by Joseph-Ohio on December 4, 2012 at 1:57pm

Miller,

Exactly opposite to your thinking, I think that smaller tracts would be more easily incorporated into smaller drilling units rather than larger.

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Permalink Reply by Kathleen on December 4, 2012 at 2:37pm

Either way this law is not saying to make the units 1280, its just saying they want that to be the max size. 640 would still happen, 380's would still happen and 1280 would still happen if your lease allowed it.
I like the restriction on how big they can be and of course being continuos.
I feel this is all mineral owner and landowner friendly.

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