SO...NOW I HAVE NO MORALS?!

As I sat this morning...barely awake and sleepy eyed, I inhale my second mug of coffee.  WKYC news (channel 3 in my area) is on...not really listening at this point, then I see the headline on the screen.....MONEY OR MORALS?  This news segment was about the Utica shale drilling in Ohio and the decision that landowners face regarding to lease or not lease.  They interviewed a gentleman who owned 10 acres and has yet decided to lease or not, due to the possible environmental concerns.  It was your typical news segment on the pros and cons for a landowner, but what REALLY ticked me off was that headline! My family calls me a tree hugger...I feed every stray animal that wanders into my woods, I help the injured, I do nature photography, I donate to charities when I can.  I've paid for food for strangers and I've taken the chance to intervene on certain outright immoral situations when I saw them unfold...BUT, since I HAVE leased with an oil/gas company...I have no morals?!  Of course it couldn't possibly be that I have done enormous amounts of research on the pros/cons of this type of drilling, spent quite a bit of time sorting this all out in my mind and have made an informed decision?!  I have great hope and faith in the overall safety of this type of drilling.  Nothing like adding 'fuel' to the fire!  I'm done venting.

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Permalink Reply by Nelson Roe on December 15, 2011 at 9:46am

Wouldn't the recorder's office only have the Memorandum of Lease?  I didn't think the actual lease was ever recorded in full format at the recorders office to protect the financial & other interests of both parties involved...

Permalink Reply by George Brown on December 15, 2011 at 10:03am

Nelson you are correct.  However, the memorandum of lease assignment will typically have the terms of the lease, such as the duration, and with whom it was entered.  I found one on my property that was entered into on 4 August 1942 for a period of 10 years.  The actual "Operating Agreement" does contain a lot of details and is not typically recorded at the courthouse.

Permalink Reply by Jack Straw on December 15, 2011 at 8:55am

RE: "Has a vertical  only been used to drill for the Utica? "

They can and do drill vertical Marcellus Shale wells; but, these wells are marginal producers.

Vertical wells are much cheaper to drill than the horizontal wells (which are accompanied by massive multi-stage fracs).

The economic production of the Marcellus Shale is largely dependant upon encountering a number of the vertical joints (fractures) within the shale. To intersect a number of vertical fractures, you need too drill horizontally.

The obvious question is “Why drill vertical wells?”.

Two reasons:

A stratigraphic test well – to cheaply determine the physical parameters of the Marcellus Shale in a new area, to know the exact depths to top and bottom of the Marcellus Shale, to calibrate well data to seismic data.

To cheaply tie up acreage in a unit, until they have the money and the will to return and fully exploit. At some future date, they can re-enter the vertical well and kick it out as a horizontal well.

 

All in my humble opinion

One size fits most.

 

JS

 

Permalink Reply by Kim D on December 15, 2011 at 9:24pm

Jack Straw....I must say...I love to read your replies.  Your answers of the many times confusing aspects of the entire drilling process are clearly defined.  For a person, such as myself, just beginning to understand this oil/gas business, I appreciate the straight forward facts presented.  That being said, what is your opinion on the future of all these shallow wells?  Meaning...will they 'sit' longer...simply remain HBP...while new horizontal wells in other areas are being constructed and put into production?  From what I understand, my area is considered strong in the oil and NGL's, yet there are many old shallow wells here.  Would it be worthwhile for CHK to 'convert' (if that is what they do to the older vertical) or construct new wells to these areas?  Anyone else care to give their opinion on this as well?  I suppose depending on what I find out from the old lease, I'm wondering if a 12-1/2% net or less interest will be worth our while keeping or mineral rights.  Now, initially, at 20% gross...I would never have considered this option.

Permalink Reply by dr j on December 16, 2011 at 7:49am

Kim- do I understand you - you are considering selling your mineral rights now?  Unless you are in dire need of the money, don't do it.   Very good chance that old HBP lease will have to be renegotiated when the time comes- and even if not, eventually you will be in some type of unit most likely- so worst case scenario is the 12.5 % .     

Permalink Reply by Kim D on December 16, 2011 at 8:37am

Is 12.5% a minimum for Ohio? It is probably net, too, since it was completed in 1983.  That is why I previously inquired to GMS members about approximate royalties at that percentage (12.5)...worst case scenario, with average amount of deductions taken out if it's net...and assuming an average of oil/gas produced in the new horizontal wells here in Carroll County.  I know it would be very a hypothetical answer...but just need an idea...a 'somewhere out there in the ballpark' figure.  I understand it will be a far cry from the 20% gross...just wonder if it may be worth my while to investigate all options at this point.  I never would've considered selling before...now ?  Actually, at this point, I don't even know now if I own mineral rights...still waiting on EnerVest.  If I do own the rights, and they renegotiate...would I have the option to ask for a higher % and possible upgrade to gross?

Permalink Reply by dr j on December 16, 2011 at 8:48am

If they have to renegotiate the lease to unitize, it's almost as good as starting from the beginning as I understand it.  At that point- you want at least what your neighbors are getting- so keep the lines of communication open.   

Permalink Reply by Kim D on December 16, 2011 at 2:14pm

I can back you up on your statement, Ken.  I intensely observe nature and the animals in my woods as I photograph them on a daily basis.  We have a pond in our woods, we have had algae as well as oily deposits floating on the surface.  I watch as the turtles dig their nesting holes into the sides of the sloping banks.  Oh... one more thing...no fracking going on in or around our woods.

Permalink Reply by Finnbear on December 16, 2011 at 2:22pm

I'll third that. There is a seep on some land I own that has an oily film on the surface all the time. There are no wells, new or old, anywhere near it and the last piece of machinery that was anywhere near it was a log skidder about 30 years ago.

And snapping turtles love southern facing sandy banks to dig and lay eggs in and I have seen them travel a half mile just to find places like that.

Permalink Reply by time will tell on December 16, 2011 at 4:07pm

the oily sheen you see is most likely due to mining in the past .When mining sulfur is in the coal , water crosses the deposit and there's the sheen .

Permalink Reply by Kim D on December 17, 2011 at 1:30am

We've been told there has been no mining on our property, but then again, we had no idea that our property was attached to an old lease, so who knows?

Permalink Reply by Jack Straw on December 16, 2011 at 4:28pm

Most oil is generated from the organic material deposited in marine shales.

But a very rich source of oil are lacustrine shales. (For some reason science tends to obscure meanings by using names borrowed from another language; lacustrine means lake.)

The organic material in these lacustrine shales (deposited in a large fresh water lake) is derived from algae.

The oil sourced from the algal material in the lacustrine shales tends to be "waxy" crude with a lot of parafins.

An example of lacustrine oil (derived from lacustrine shales) is the oil produed fom the Uinta Basin of Utah. 

That oily substance could simply have been the residue of rotting algae.

 

All in my humble opinion.

One size fits most.

 

JS

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