Replies to This Discussion

Permalink Reply by Doug Pierson on July 16, 2011 at 4:48am

Thanks for all your interests and I'll try to answer some questions.  I've got the drilling map as well as the unit map. There is one vertical and three horizontal wells showing so far and there are no more permits pending shown on the DEP efacts site.  Yes, they do all go out basically southeast from the vertical well at the pad, thus the unit boundaries are basically a rectangle oriented southeast. A major gathering pipeline has just been built that runs just a few hundred feet from the well pad, so I can't imagine any logistical reason for shutting-in the well. So, no wells are indicated and no permits have been applied for, for any wells in the opposite direction. Expanding the present unit to absorb land without wells would just water down the royalties for all. And what would be their strategy to expand the current unit to absorb other producing units? I think before I'd agree to anything, I'd want to know the specific expansion planned and how the royalty would be impacted. My lease seems to be void of any shut-in language what-so-ever. So, I agree with Scott - Shell must want something for themselves, otherwise why worry about it. I wasn't aware that a shut-in royalty typically needed paid back. Thanks for that info. As far as forced pooling goes - now that sounds like a form of thievery to me. Or maybe more like eminent domain for OGMs. Bottom line is that we live in Ohio. The landman was really anxious to come right over with the amendment until I told him that. Haven't heard a peep out of them now in a week and they have both snail mail and email information. Thanks.

Permalink Reply by Lynn Wigglesworth on July 19, 2011 at 3:07am

"I wasn't aware that a shut-in royalty typically needed paid back."

That isn't the case with a Shell lease (or at least not the older East version that I've seen). The shut-in fee is $5/acre/year, after one year of being shut in (and it doesn't start until the original lease expires); the only purpose of the shut-in fee is to maintain the lease 'in force' with no production.

Permalink Reply by Doug Pierson on July 19, 2011 at 5:34am

Lynn, would the absence of a shut-in clause PREVENT the company from shutting in the well?  I've got an old Phillips lease that was transfered to East and there is no shut-in language at all.

Permalink Reply by Lynn Wigglesworth on July 19, 2011 at 7:11am

I don't know. It might prevent them from holding your lease beyond it's expiration without production.

Permalink Reply by Ann Ticopa on July 19, 2011 at 7:30am

I have a copy of a 2000 vintage 10-year Phillips $5/2 lease.  I don't see anything about a shut-in fee, but the delay rental appears to cover some of the same ground:

"Upon the drilling of a nonproductive oil or gas well on the premises or on any other land pooled or unitized with this lease, or if no royalty is being paid for gas from any other well or wells on the leased premises , lessee may continue to hold the leased premises or unitzed acreage upon the reinstatement of of the payment of the delay rental, hereinbefore provided, until the expiration of the original term of this lease, or until operations are again commenced for drillling a well during the original term of this lease."

 

The unitization clause also provides for reinstatement of the delay rental on leased land that's excluded if/when the unit is redrawn.  640 acres is mentioned as the maximum unit size. 

 

For sure, I'd have an O/G lawyer check the lease before signing any amendment.  I only scanned the lease, but didn't see any language that would let the lessee extend the primary term on leased land that's not included in a unit.

 

 

 

Permalink Reply by Doug Pierson on July 19, 2011 at 8:31am

Thanks Ann.  That's exactly the wording on my lease.  The lease was to expire this year, but Shell put our land in a unit and commenced the operations for drilling the well before the lease expired.  The well is not on our land, but on neighboring land included in the unit.  You might notice that the original Unitization clause didn't mention the Marcellus, but other formations.  So a couple of years ago, the lease was amended to include that.  The entire parcel is in the unit.  Like you said, I'm not going to sign anything new unless I get it reviewed.  On the subject - since we live out of state - is there a lawyer in the Wellsboro / Mansfield area that you folks recommend?

Permalink Reply by Ann Ticopa on July 19, 2011 at 9:42am

I've yet to be offered a lease close enough on the non-financial terms to take it to a lawyer.   So I'd like suggestions of local lawyers too.

Permalink Reply by paleface on July 19, 2011 at 5:45am

 The East resources lease I have a copy of dosen't have a pay back claus,but if east didn't pay the $5. that doesn't cancel the lease?

Permalink Reply by Doug Pierson on July 19, 2011 at 6:14am

Well, it's the start of another week now, and I still haven't heard back from those guys.  I can't imagine any other property owners in the unit agreeing to raise their max. size to 1280 either.  The money I gain from a shut-in clause is small potatoes compared to the money we'd lose if we agreed to double the unit size.  Right now, I'll just wait.  If they are serious about something they'll get in touch.  The well is supposed to go into production by the end of the year, anyway.

Permalink Reply by paleface on July 19, 2011 at 6:49am

 Doug in the end when the wells are drilled you could be getting royaltys from several wells with a unit that size thats the upside.

Permalink Reply by Ann Ticopa on July 19, 2011 at 2:29am

According to Landex, SWEPI filed 45 lease ammendments July 13/14, the majority for Charleston Twp.  Wonder if this is what they are for?

Permalink Reply by paleface on July 20, 2011 at 1:59am

 The lattest Penn State report on the marcellus shale impact on PA, says the gas companys are drilling longer laterials and less wells and getting much higher production,maybe that has something to do with the unit size changing?

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