Replies to This Discussion

Permalink Reply by Bluflame on December 2, 2012 at 3:44pm

Jack & J-O,

  A prime example of "The Law of Unintended Consequences". Let's plug the regulatory stream until we all better understand the technical issues with the Utica Shale Play.

BluFlame

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Permalink Reply by Joseph-Ohio on December 2, 2012 at 3:47pm

Right on.

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Permalink Reply by Jack Straw on December 2, 2012 at 4:22pm

375’ is a ‘consensus” estimate, seemingly more anecdotal than scientific; but this “rule of thumb” is all I have to hang on to – baring any credible hard data.

Many in the Industry doubtless have knowledge that is kept “proprietary”.

Often a Micro-Seismic Survey is run coincident with fracing to provide the O&G Operator data allowing them to gauge the efficacy of the frac job; but these data do not seem to have yet made it into the public domain.

Also, in situations where adjacent parallel horizontal wells have been drilled on a pad, I believe that it would be possible to determine if these wells were in communication (via a Pulse Test); although I am not sure whether such studies have been made.

 

Lacking (peer reviewed) studies, that anecdotal consensus of 375’ is all I have to accept (though I am not entirely comfortable with a “one size fits all” number).   

 

All IMHO,

                   JS

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Permalink Reply by Joseph-Ohio on December 3, 2012 at 6:53am

Actually perhaps not necessarily incorporating the adjacent property into the drilling unit but rather creating two (2) drilling units instead.

I guess it all depends on if 375 feet were factually the maximized drainage limit.

Don't think we can say that with certainty in all instances since it would seem to me that there would be variables within the strata being drained to contend with.

How exact a science is it ?

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Permalink Reply by Bluflame on December 2, 2012 at 2:41pm

   I see the 1280 acre unit size as "neutral" to positive. it gives a 200-acre landowner a smaller piece of many more wells. This may reduce early royalties, but also spread risk over many wells and stretches  royalty return over a much longer time period. The bad news is the E&P's can HBP property much quicker, then take their sweet time to drill additional wells. The "greed factor" will be in play; the most secondary drilling will occur quickest on 1280 units with great results from the first well.

   My preference would be to resist the urge to over-regulate until we all (including the E & P's) have more data. We run the risk of creating a "Law of Unintended Consequences" situation. It is incumbent upon us individual landowners to perform our own "due diligence" and not rely on the state of Ohio to provide blanket protection.

IMHO 

BluFlame

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Permalink Reply by Nathan Henceroth on December 2, 2012 at 3:58pm

Bluflame, my concern is that landowners, no matter how vigilant, stand no chance in taking on a large corporation like Chesapeake.  We've seen the lawsuits in Texas, Louisiana, and Michigan; and on the one thread on here, it appears like they've continued this policy of shorting royalties in PA as well.  As is stands, there's no real incentive for them to abide by the contracts with landowners, since there hasn't been much of a price to pay when they get caught.  And even then, from what I've read, they simply refuse to pay up on the decided settlements.

The state, on the other hand, could change this relationship by being in the position to pull permits when Chesapeake is breaking contract language.  Unless you're Phil Anshutz, you're in no position as a landowner to take on someone like them.  To me, this wouldn't be an act of "over-regulation", this would be an act of ensuring that large energy companies aren't able to steamroll landowners simply because they've got the resources to drag out any court proceeding knowing that the landowner probably can't afford several hundred thousand in lawyer fees.

While I see the importance of obtaining the technological aspects of 500 or 750 feet, I feel we may be overlooking a far more important issue at stake, which would be that now Chesapeake would know that they're likely to run afoul of the state, and not just some powerless landowner (which is what we all are if we're honest about it).

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Permalink Reply by Bluflame on December 2, 2012 at 4:18pm

Hi Nathan,

  I'm actually a CHK lessor in the Utica. So far, it's been a good experience, although they've yet to pull a permit on my property. It would be really difficult for the State of Ohio to concoct legislation that would effectively protect all CHK lessors. The place to have done that is in the leases themselves. Unfortunately, many CHK leases were signed before any of us landowners had a clue about the actual Utica potential.

   So, chalk me up as sympathetic to your concern, but skeptical of the practicality of writing legislation that would achieve the objective. And, yes, I concur that individually, we are fairly powerless against CHK or any of the other E&P's for that matter.

   The E&P's have likely also crossed the palms of legislators with campaign silver, further complicating the task of getting effective legislation.

IMHO (love that expression!)

BluFlame

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Permalink Reply by Nathan Henceroth on December 2, 2012 at 4:39pm

Blueflame, I definitely understand where you're coming from, and I'm not someone who likes to see government in places it doesn't need to be.  My family's also CHK lessor, and frankly it's been nothing like your experience.  CHK landmen (I know they outsource all their activities, but these are still CHK subsidiaries) have been unbelievably disrespectful, especially the seismic guys (dealing with old vertical lease that was flipped), to outright condescension from the landman attorney in OKC in our refusal to alter a contract that they themselves decided to purchase.   From indirect threats of lawsuits, to harassing phone calls when they've been told not that we're not interested unless certain demands are met (pipeline subsidiary).  Having to run guys off our land who knew they hadn't permission to be there, to having my father out for a walk realize that the pipeline people decided to place iron markers on our land.

In other words, and I speak only for my immediate family, we've gone from supporters of CHK to the point where we expect nothing but the worst from them.  There's also another issue that was a clear breach of contract, but I won't go into the details of that on here.

That all being said, it's been our experience that CHK has shown us that without a stronger entity to push back against them, we simply have to accept what they do, since to fight back would be pyrrhic even in the best case.   That's why I've become of the opinion that the state is the only reasonable party who can ensure that these corporations play by the rules.  It goes without saying that any bill in Columbus ought to be critiqued for technological contexts, but having in place some sort of legislation by which all these energy companies are put on notice that the state is watching would likely prove beneficial for individual landowners.

This is only my opinion on this, but my family's seen firsthand how CHK goes about its business (we're in 1, maybe 2 drilling units), and it's soured me on their ability to be forthright in their activities.  If the state is able to provide decent protections, in my opinion, it's a good thing.  At least we're getting something back from our taxes.

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Permalink Reply by Bluflame on December 2, 2012 at 5:55pm

Nathan,

  Sorry to hear about your bad experience. Have they drilled and are you receiving royalties as yet? I still cannot envision how the state could intervene in your circumstance. Maybe they could legislate selective generic issues relating to lease terms, but it sounds like you have very specific problems.

   Nathan, I'm not trying to be argumentative. As a lessor myself, I'm sympathetic to problems incurred by fellow lessors. I'm merely skeptical of the practicality (and willingness) of the state to assume a blanket protective posture with lessors.

   Have you considered retaining a "junk yard dog" attorney? You might find one willing to work on your specific problems on a "contingency" basis.

BluFlame

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Permalink Reply by 0i7okn54zwbdo on December 2, 2012 at 6:22pm

I find the idea of regulating landmen to be amusing. Many of these decent rural people--who frequently vote for small government republicans--now want the government to start regulating private contracts between private citizens. I fail to understand the logic behind it, other than politicians trying to gain votes with some twisted sense of populism.

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Permalink Reply by Kathleen on December 2, 2012 at 6:46pm

I've thought oboist this for hours and IMO if passed even with the 750 set back I like this bill.
It addresses one huge issue I've personally written our governor about which is the net lease. I bet by now everyone on this tread read the PA royalty thread. By the time this man was charged for everything what was his take 7-8%?
I understand a gross lease may not be 100% gross but for those landowners that are
stuck with a 12.5 net lease and the maybe new taxes coming at the well head, this off sets any negative to me.
Yes some hydrocarbons will be left in the ground or the drillers can figure all wells to maximize their acreage. Also if its needed in time they will get it.
Another huge one is making sure these landowners know what they are signing. I can see some abuse of this still but at least it's something.
I also really like them limiting the units to no larger than 1280, right now the standard CHK lease calls for as big as they like and not continuous.
I do not believe this is government over reach, IMO I think they are trying to level the playing field for their taxpayers.
The net to gross with the landowner having to be compensated is really something that needs to be address IMO.

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Permalink Reply by 0i7okn54zwbdo on December 2, 2012 at 7:05pm

I don't get the calls for intervention. If you think a NET lease is a bad deal then don't sign it. It isn't the job of the government--paid for by OUR taxes--to protect people from signing contracts with private companies.

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