Property in 2 units

So I have 30.5265 acres in a unit of 604.71 acres that is already producing. My decimal interest at 17% is 0.0085818 for the west unit. I just received division orders for the south west unit that is 498.61. The 2 units over lap 92.8675 acres. Range Resources says my decimal interest is 0.00159838. There formula is 92.8675/498.61*.0085818. They are saying that since I'm already in a unit that I have to share with the whole unit. Is this how this works? I would think I would get paid separate from each unit for my acres that I have in each unit.

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Permalink Reply by Bob Shaw on May 13, 2015 at 3:29am

INAL, but it would seem to me that you are correct, that your entitlement of the production of each well should be based on the unit for that well, regardless of your holding in another wells production unit. The product will come up one well or another, and should be divided with the stake holders in proportion of that well.

The question to ask is, if you calculate your royalty on each well by itself, then compare it to the method offered by Range Resources, do you get the same amount or less,

If you get less using the Range Resources method, you should challenge the method.

Permalink Reply by Joseph-Ohio on May 13, 2015 at 3:32am
Curious to know how many of your acres fall within the 498.61 acre southwest unit and how many of those acres are also part of the 1st 604.71 acre unit (as I don't understand what you mean by 'The 2 units overlap 92.8675 acres').

Also curious to know and wondering if your leasehold agreement is 'strata specific' in any way (but from what you've written guessing not).

Anyway, it appears to me you've got a disagreement to deal with and wish you all the luck.
Permalink Reply by Mlmc3475 on May 13, 2015 at 6:00am
I have 30.5265 acres in the existing west unit and 30.5265 in the 92.8675 overlap of the 498.61 southwest unit.

The west unit calculation is
30.5265/604.71*17%=.0085818

I think the southwest should be
30.5265/498.61*17%=.01040794

Range calculation for southwest
92.8675/498.61*.0085818=.00159838

Our lease is 12.5% for above the Marcellus shell and 17% for Marcellus and below.
Permalink Reply by Joseph-Ohio on May 13, 2015 at 11:49am
Math doesn't add up for me either but guessing one unit is above Marcellus and the other Marcellus or lower (but don't know which is where).

Can't figure how to apply 92.8675 acres in your circumstance.

Seems to me that 30.5265 / 498.61 x either .125 or .17 (don't know which) + 30.5265 / 604.71 x .125 or .17 (don't know which) would make sense.

Try it both ways and see if you come up with their decimal.
Permalink Reply by Joseph-Ohio on May 13, 2015 at 2:05pm
The above math based on considering separate leases for separate strata and don't know if that's what you signed up for (maybe your latest lease prevails / supercedes an earlier one for instance) ?

Can't figure how 92.675 acres fits into the math at all myself.

When you get it all squared away kindly let us know how it panned out.

Good luck Mlmc3475.
Permalink Reply by Bob Shaw on May 13, 2015 at 11:35am

Again, INAL, but Range Resources is saying that the overlap is worth less to the second well than it is to the first,

a) If one well were sold to another company, would your royalty increase back to 1.04079441% in the 498.61 acre unit ?

b) If your interest is decreased proportionately in the 498.61 unit, are the other land owners increased by a proportionate amount ? If not, Range Resources is pocketing the difference.

c) If the two units could be magically combined, adding the total acres and subtracting the 92.8675 overlap, your interest would then be 0.51358228%, which is slightly higher than the Range Resources method.

All three questions lead back to the same place. The Range Resources method decreases your interest to their benefit in an arbitrary and unfair method.

Permalink Reply by Jim White on May 18, 2015 at 3:40pm

By overlapping, I assume there are two units side by side. Your property of 92 acres is totally contained within both Units. 30 in one unit and 62 in the second Unit. I have a situation just like this. Just for example sake, assume both units are exactly 600 acres each. Your decimal interest for the Unit with your 30 acres will be.......whatever it calculates out to be. Your decimal interest in the second Unit will be twice what it is in the other. You will be paid for production separately (but probably in the same check) for each well in each Unit according to your decimal interest. One Unit has three wells. You multiply your interest times the production of each well in THAT Unit. Same with the other. Maybe I am missing something?

Permalink Reply by Mlmc3475 on May 19, 2015 at 1:44am
I only own 30.5265 acres. All 30.5265 is in the west unit. 92 acres out of the west are overlapped with the southwest unit. My 30.5265 acres are in the 92 acres. It sounds like a math problem from grade school.
Permalink Reply by Joseph-Ohio on May 19, 2015 at 8:52am
Got it Mlmc3475.
Permalink Reply by Joseph-Ohio on May 20, 2015 at 2:07am
Mlmc3475,

That means to me both units include your 30.5265 acres.
Permalink Reply by Mlmc3475 on May 20, 2015 at 3:42am
Yes that is correct
Permalink Reply by Joseph-Ohio on May 20, 2015 at 6:14am
This is a long shot but it's only a few questions / inquiries, as I'm curious to understand what's going on here :

Could it be that your land is being 'Force Unitized' / 'Force Pooled' into a new unit that your E & P submitted to the ODNR and which the ODNR approved of and authorized ?

Wondering also if you were ever contacted by the E & P about including your land in another new lease agreement and refused it (on the account of (from your point of view) already being leased) ? To me, if that occurred it would hint at the 'Force Pooling' / 'Force Unitization' process being imposed on your land and over-riding previous lease agreements (since the ODNR Oil & Gas Division Chief presides) ?

Enough to give a man nightmares should you ask me.

Could that be what's happening to you / your land and causing the circumstance ?

Hope not - what are your thoughts on it all Mlmc3475 ?

Kindly keep us all informed.

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