Once a well is drilled in PA, how is the production area dertermined for the purpose of paying royalties? E.g. does the gas company chart the area that the well will draw from and then make payments? Does the State have a say in those determinations?

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Production units are determined by the drilling company based on many factors, most important being the geology and best possible site for the well from a gas-return standpoint. Topography is also important. Pennsylvania land is mountainous, contains numerous wetlands and natural obstacles to drilling. Also, its not the unit boundaries themsleves that tend to follow the nnw-sse orientation -- its the lateral lines of the well itself. That orientation is considered to be the general direction of natural fractures in the shale -- drillers want their wells to intersect those natural fractures, allowing more gas to be produced.

Its interesting to hear Ruby say he feels it common to see unleased parcels in unit boundaries. When it comes to horizontal drilling, drillers must have leases for any land under which lateral wells are placed. In the case of vertical wells its likely that only one property would be impacted. If he's seeing unleased land within the unit, I would hope that the company who had designed the unit would be planning to go after those additional leases, or redesign the unit later if unable to do so.

Ruby is corrcet to say that if a well properly placed on one property drains gas fom under another property, law of capture in Pennsylvania says the landowner/driller of the property on which the well is drilled is entitled to that gas, as long as the other parcel is not damaged. However, this concern is a little more common with shallower wells. Keep in mind, the Marcellus is a very tight formation, hence the need to hydrofrac. While its hard to know exactly how far the length of fissues from fracing can extend, most drillers probably would agree that they do not extend hundreds of feet into the formation. However, there is the chance that created fractures can intersect natural fractures, and drain more gas -- but currently, this is also quite difficult to asess. After all, each well is different, and the formation varies in almost every case.

The state does not approve units. But its important to think about this logically -- the driller has done the research, studied the geology, and knows better than anyone where the best possible location for the well or wells is based on the limitations (topography, leases, etc) present. The most important factor is that the driller (in the case of horizontal wells) holds leases with all landowners under whose property the well bores run.
In Pennsylvania, no land owner can be forced to unitize. Its his choice to lease or not lease.


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