Shallow Well -Deep Shale Drilling

I originally posted these questions in the "Blog" and got no response. A member graciously suggested I post it on the Shale site. I hope I am in the right place now.  Thanks,

'Being new to the group, I have some learning to do.  I am selling my surface land and retaining all mineral rights. I want to allow the buyer to have rights for a gas well for his home use and to share half of the royalties if any from that well. There are no wells on the property at this time. I understand that the deep well/shale drilling production does not present gas usable for surface owner use. If that is correct, would allowing him to pursue drilling of a shallow well  for his purposes affect my ability to sell or to lease deep well gas rights?  Also, if no well is drilled on the surface property but gas is drawn from horizontal legs from the property, I understand that royalties for that gas taken from adjacent property is not paid on a metered basis but on a percentage of acreage included in the rectangular drilling space. Am I correct?  If someone would enlighten me , I would be appreciative. Thanks..'.

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Permalink Reply by William A Thorman Jr on April 19, 2012 at 12:26am

Drill Baby Drill, you and apparently most of the members who have commented to my posting agree that complete separation of the Mineral Rights from the Land Surface Sale is best for both the Buyer and the Seller.  I am going to try to negotiate that with the Buyer.. Thanks for your helpful input.

Permalink Reply by Kathleen on April 19, 2012 at 7:55am
I wonder how long it will take the market in this part of the country to understand the minerals are separate? As a future buyer I would not want to buy the surface with this size acreage not knowing if or when something I did not want or benefit from was put in my field or woods. I would think there is a happy medium but i honestly can't think of one. When we sold in Arkansas we sat on that house for awhile since every buyer walked when they thought the mineral rights would not transfer. This was in a hot play area at the time, but since has quieted down due to NG prices.
I Wonder how this is handled in other areas of the country.
If you are not leased remember if your area was hot at some point it will be again "one day" so price it accordingly if the rights go with it. I've noticed here the land prices stayed almost the same but the rights are either sold separate or don't go with the sale. I do not believe anyone really knows how to price these minerals either. In time I think we all are going to face this problem or something similar.
Permalink Reply by William A Thorman Jr on April 19, 2012 at 10:29am

I , too, can understand a buyer's reluctance not to have the mineral rights transferred with the land but it does appear that is going to be a "thing of the past" in areas with potential exploration.  I would think there are some guidelines in State Law about the rights of the owner vs the mineral right and/or lease holder but maybe I am being naive.  Perhaps purchase contracts have to address this.  That leaves the door wide open for very complex, convoluted language.  All the more reason to keep the surface sale totally separate from the mineral rights.  The irony of the whole situation is that no one really knows if anything will come of the speculation in our area.  We just don't know whether government restrictions are going to play a big part and we don't know until we do some drilling if there is anything to be gained.   This entire scenario must be fertile opportunity for attorneys specializing in this field.

Permalink Reply by Kathleen on April 19, 2012 at 10:43am
Just curious where do you live. Just state and county would be enough, I'm not looking for your address :0).
Permalink Reply by William A Thorman Jr on April 19, 2012 at 11:21am

I live near Cincinnati but the property in question is in Morgan County, Ohio.  Any thoughts about the potential there?  I realize the maps and data I have been reading put it on the outer edge of the high potential area. BTW where are you located and have you property in Ohio?

 

Permalink Reply by Kathleen on April 19, 2012 at 11:45am
Here's a link to your county discussion group. http://gomarcellusshale.com/group/morgancountyohio
There isn't a ton of activity but it seems that last month a landowners group was having meetings. I would read a lot of those discussions and find someone or a few people that have their head on straight and friend them to talk about your area. The locals know the most sometimes. I can not find the updated odnr wet gas dry gas map right now. I'll find it at some point. I know they moved the wet gas further west in that area but at the same time you read the oil co.'s have their own feelings about this and are offering good leases in some places the odnr say is dry. I would bet on the oil co. when it comes to this.
I own 19 acres in columbiana county and leased this past January.
Permalink Reply by William A Thorman Jr on April 19, 2012 at 11:31am

I just saw this link and wondered if we possibly are talking about Oil rather than Gas in the Utica area,, even on the outer fringes of the rock,,(Morgan County, Ohio)?  Just curious.   http://www.anadarko.com/Investor/Pages/NewsReleases/NewsReleases.as...

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