Well Pad Compensation

Hi folks, this is my first post on this enlightening forum.

I am in the early negotiations for a well pad on my farm, and was wondering what a typical compensation would be for that acreage CHK mentioned $2000 / disturbed acre as an average arbitated figure. This is in Carroll county Thanks for your replies

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Permalink Reply by Donald on November 23, 2012 at 4:18am

Seems low to me ,col. co. wellpads are going as high as 35,000 5acr pad. hilcorp has offered 25,000 for 5acr.pad+ 3,000 pr.acr over 5 .why would you sell your land for 2,000 an acr.?

Permalink Reply by Jim Litwinowicz on November 23, 2012 at 4:48am

If there is timber on the land get he $3000/acre plus the value of the timber.  Same if there is a standing crop on the field when they start work.

Permalink Reply by William K Watkins Jr on November 23, 2012 at 5:28am

I vote with Donald.  Here in Belmont Co  it is at least 20K.

Permalink Reply by Jack Straw on November 23, 2012 at 5:25am

An average Marcellus/Utica Pad will be of the order of 5 acres.

This is land that you will continue to pay property taxes on, yet will be lost to you for (at the very least) 40 years. The presence of the pad will limit the value of adjoining land and will limit what you can expect to do with that land.

There are some questions that you should ask yourself:

Where will the pad be located on your farm?

How will it affect your ability to enjoy your property?

What will it take away (visual appeal, etc.)?

Is it in a forested area (loss of timber)?

If in a tilled area, loss of future crops?

If in a tilled area, will its presence interfere with adjacent farming activity?

What does Farm land sell for /acre in your area?

What is the development potential of your farm?

Will you have a royalty interest in the wells drilled from this pad?

(The greater your financial interest in completed wells, the more generous you might feel you should be in hosting the pad. If you have no royalty interest, I would expect greater compensation. if you have a crappy old Held by Production lease, I would expect greater compensation.If you have only a small interest in the pool/unit, I would expect greater compensation.)

 

Fang brought up the important subject of access road.

They will be moving large equipment, equipment that requires a wide road right of way (easement).

So, how long and how wide will the road right of way be?

All of the questions/statement above for the well pad apply to the road.

 

In my opinion, $2000/acre is too low; depending upon the circumstances.

My personal opinion is that a 5 acre pad should be compensated at no less than $40,000.

With additional (and appropriate) compensation for the Road Easement.

The costs of drilling and completing four Marcellus/Utica horizontal wells will be of the order of $24 -$32 million dollars (depending upon depth and how far the horizontal leg is). To the operator, the payment to a Landowner for a pad is inconsequential "noise". In all likelihood, you will be "hosting" the pad for the benefit of neighboring properties, another reason to assure that you recieve generous compensation.

 

If you (as you are entitlled) ignore all of my opinions stated above, please do not ignore one last bit of advise:

Please do not agree to or sign anything without first consulting an Attorney who has experience in O&G leases and easements. You are dealing with a company (CHK) that has in their employ hundreds of Lawyers and thousands of Landmen ... you need the advise of a qualified Attorney to protect your interests. You are dealing with a company (CHK) that has a (well earned) reputation for bamboozeling and short-changing Landowners.

 

After shaking hands with a Landman, be sure to count the number of your fingers (to make sure they are all still there). And always remember; when dealing with a Landman, (unlike a real cowboy) the BS is on the inside of those fancy boots.

 

Good luck (and let us know how it turns out).

 

All IMHO,

                  JS

 

 

 

Permalink Reply by Nette H. on November 23, 2012 at 5:52am

Hear, hear JS... well stated!

Permalink Reply by mark o on November 23, 2012 at 6:14am

i have a pad on my property.  think long and hard before you do this!   unless you really need the money it is not worth it!!!!!........the only upside...most or all of yr property will be in the unit!....forgot....everyone will come to you to borrow money because they will think you are now rich because you have the well!!!...lol

Permalink Reply by Phil Regas on November 23, 2012 at 6:14am
I got 5k when negotiated 5yrs ago
Permalink Reply by Tim Tarr on November 23, 2012 at 9:48am

At the very least get a clause that they shall pay any additional taxes. You never know what State, County or Local goverment will come up with for "revenue enhancements" or impact fees. I put that in our ROW agreement just to be covered.

Permalink Reply by kdj on November 23, 2012 at 12:16pm

wow lots of good replies.

I have a couple of neighbors with pads, might be old leases  so I don't know how much negotiating room they had. I can have mine arbitrated all the way to a judge. I don't think that will be necessary however.

Good point about the property tax assessment I am sure they are salivating.

The disturbed acre stipulation invoves the road and fill areas I assume, Haven't seen it yet.

An attorney will see everything we sign.

Permalink Reply by kdj on November 24, 2012 at 1:00am

we have a current lease, one of the first of the newer, better leases (drawn up by landowner's lawyer instead of gas co lawyer)

Permalink Reply by kdj on November 24, 2012 at 5:21am

Yes the lease allows the price to be negotiated, through an arbitrator or even a judge, if necessary.
I am awaiting the final acreage to be utilized and also the unit drawings which will affect my decision on the amount I feel is fair. And fair is fine with me

Permalink Reply by Suzan on November 27, 2012 at 7:09am

I am sure it all depends on where you are located and who is building the wellpad, but our experience so far with CHK and our wellpad has been very professional. The communication and quality of work have met our expectations.  

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