Unit and Drilling Question

We are part of a Unit with one pad and six horizontal wells. We are only being paid for the production of three of these wells. Possibly, there is no production yet from the three we are not being paid for and there are no production numbers listed from the state since it is a new site. My question is whether the drilling company could have used that one pad in our unit to drill those three wells into a different unit (other than ours) and therefore we would not be entitled to anything from the production of the other unit. Does this happen?

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Permalink Reply by Philip Thackray on May 17, 2014 at 12:09am

Jim,

Multiple units can be drilled from a single pad.  Here in Butler County, PA there is a unit, Shipley South, where the unit does not contain the well pad!!  A future unit will contain the well pad.

In PA, there is "declaration of unit" document which is "recorded" by the Recorder of Deeds.  The document contains a map showing the unit borders and the properties contained within.

Of course, something else may be going on.

Phil

 

Permalink Reply by Jim White on May 17, 2014 at 5:23am

Thanks Philip. That is what I was afraid of. Oh well, shouldn't get TOO greedy....:)

Permalink Reply by Nancy Mosley on May 17, 2014 at 6:03am

Hi Jim, I just remembered that when a permit is issued, there is a list of mineral rights owners for the area included in the permit. If it is too many to be listed there, you can contact the Office of Oil and Gas (I think there is some information on the form for that) and get the full list. I had to do that for a permit including our lease acreage. The company (Noble) has not yet declared the unit in the County Clerk's office so it might change. But a place to start.

Permalink Reply by Jon on May 17, 2014 at 6:51am

there's a difference between the drilling unit and the production unit.

Permalink Reply by Jim White on May 17, 2014 at 8:22am

Jon

The 640 or so acre "unit" that we are paid the royalties from. Is that called a drilling or a production unit? To make this a little more complicated, our piece is 140 acres out of the total....whatever. They have one pad with apparently 3 well out of six producing from 100 of our acres and a second pad nearby with three well out of the six producing from the other 40 acres. That is what they told me. Didn't ask about the other well.  Confusing. Need to call them again.

Permalink Reply by Carl Krebsbach on May 17, 2014 at 9:06am

Jim,

A landowner's acreage will only be included in one unit because units are an area of land encompassing  specific parcels or parts of parcels and no two units hold land in common.  Think back to school when you studied set theory, where you drew circles like this:  http://www.tbiomed.com/content/3/1/37/figure/F2?highres=y  The situation in the picture where there is land in common (area f, g, h) will never occur because circle A and Circle B (Unit A and Unit B) are always drawn so that they never overlap.
If the pad is located on your property, you should have asked to be paid for having a pad on your property, but that is a separate issue from the land being in a unit.. (It is an issue of the company paying for the right to use a specific amount of the surface of the land).

Permalink Reply by Carl Krebsbach on May 17, 2014 at 8:55am

What is the difference, Jon?

In looking at platmaps submitted to the ODNR, I am only seeing one thing referred to as a "unit", and it is a grouping of laterals whose well heads may or may not be all on the same pad.  The plans only call it a unit, not a production unit or a drilling unit.  Here is an example:  http://apps.ohiodnr.gov/mineral/oil/MRMImages/17/1/227523.pdf

Similarly, laterals whose well heads are all on the same pad may or may not be all in the same unit.

Landowners with acreage within the boundaries of the unit receive royalties according to their lease terms which normally would include the ratio of the acreage they own to the acreage contained within the unit.

Permalink Reply by Nancy Mosley on May 17, 2014 at 9:03am
Perhaps there is a difference in rules between Ohio and West Virginia. Anybody know?
Permalink Reply by rmc on May 17, 2014 at 12:36pm
Nancy the way it was explained to me by Noble Energy is they usually have two units per pad the North Unit and the South unit.
When they apply for the drilling permits they include all the properties that the lateral or laterals go through.
Doesn't matter if you have a thousand acre deed it will show all you're acreage in the drilling unit.
Now when they get close to production they will declare a production unit a long rectangle. You will draw royalties from the properties you have within the rectangle.
Permalink Reply by Nancy Mosley on May 17, 2014 at 12:55pm

RMC, thanks a lot for that clarification. I just have to keep watching for the new information.

Permalink Reply by Carl Krebsbach on May 17, 2014 at 2:35pm

I found this earlier discussion on the topic on this web site:

http://gomarcellusshale.com/forum/topics/drilling-unit-vs-productio...

Permalink Reply by Nancy Mosley on May 17, 2014 at 3:19pm

Thanks, Carl!

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