Replies to This Discussion

Permalink Reply by Steven Gardner on October 2, 2011 at 1:23am

1509.24 Minimum acreage requirements for drilling units and minimum distances for wells.

(A) The chief of the division of oil and gas resources management, with the approval of the technical advisory council on oil and gas created in section 1509.38 of the Revised Code, may adopt, amend, or rescind rules relative to minimum acreage requirements for drilling units and minimum distances from which a new well may be drilled or an existing well deepened, plugged back, or reopened to a source of supply different from the existing pool from boundaries of tracts, drilling units, and other wells for the purpose of conserving oil and gas reserves. The rules relative to minimum acreage requirements for drilling units shall require a drilling unit to be compact and composed of contiguous land.

This is all I could find in ORC about this... I added the bold highlight

Permalink Reply by AT on October 2, 2011 at 5:11am

Steve,

1509.01(G) “Drilling unit” means the minimum acreage on which one well may be drilled...[Emphasis added]

 

1509.01(A) “Well” means any borehole, whether drilled or bored, within the state for production, extraction, or injection of any gas or liquid mineral, excluding potable water to be used as such, but including natural or artificial brines and oil field waters. [Emphasis added]

 

There is nothing in the XTO lease that protects the landowner who signs that lease from having their acreage pooled into a drilling unit for a well being drilled somewhere outside of the state. I asked about the lack of the word "contiguous" in the pooling clause and could not get a straight answer. I suggested adding the word "contiguous" and they wouldn't even entertain it. They know exactly what they are doing.

 

 

Permalink Reply by Finnbear on October 2, 2011 at 8:13am

Doesn't ORC 1509.24 above cover that? A lease can say anything, but state law trumps that.

Permalink Reply by AT on October 2, 2011 at 8:38am

Finnbear,

   If the well is drilled within the state of Ohio, you are correct. ORC 1509.24 only governs drilling units when a well is drilled within the state. ORC 1509.24 does not govern drilling units when a well is drilled outside the state. There is nothing in the XTO lease nor its addendums that prohibits XTO from adding your Ohio land into a drilling unit for a well being drilled outside of the state to hold you by production.

Permalink Reply by psychosid on October 2, 2011 at 1:24pm

How can acreage in Ohio be unitized with acreage in another state?  Are you ABSOLUTELY SURE  this can happen?  It doesn't sound legal and it seems that the ORC will have a section that covers it.  Are you saying that leases need to have the state listed in the unit section? 

Permalink Reply by AT on October 2, 2011 at 1:56pm

psychosid,

   Simply having the word "contiguous" in front of the word acres in the pooling/unitization clause of the lease would resolve it and close the loophole.

Permalink Reply by Steven Gardner on October 2, 2011 at 1:44pm

I guess anything is possible but does anybody know of this happening?

I think I would be on DNR and the AG real fast if this happens.. this has too many other implications .. I don't think they would let it stand.

Permalink Reply by AT on October 2, 2011 at 2:05pm

Steve,

   I don't know of this happening and would hope for those who jumped on the XTO deal that it never becomes an issue, but yes, the possibility appears to exists which is one of the reasons I felt the overwhelming need to run from the XTO deal.

Permalink Reply by DG Paris Twp on October 2, 2011 at 2:21pm

The below explaination of pooling and Unitization may be helpful in this didcussion. I plucked this from http://oilandgas.uslegal.com/pooling-unitization-and-joint-leases/  . I have never heard of pooling with non-contiguous acreage.

The term “pooling” refers to “the bringing together of small tracts of land for the granting of a well permit within an established drilling unit.” The primary legal consequence of pooling oil and gas leases is that production and operations anywhere on the pooled unit are considered as if they have taken place on each tract within the unit.

Pooling can be done voluntary or through regulation by a statutory authority. Voluntary pooling agreements are binding only upon the persons who execute them, or their heirs, successors, assigns, and legal representatives and the holders of mineral or royalty interests in the field may refuse to sign the agreement.

In the absence of a voluntary pooling agreement, the Oil and Gas Conservation Commission is authorized to issue a compulsory pooling order. In such a case, each pooling order has to be made after notice and hearing and must be upon just and reasonable terms. Compulsory pooling and unitization statutes have to be within the police power and should not violate due process requirements.

Operations incident to the drilling of a well upon any portion of a unit covered by a pooling order is deemed to be the conduct of such operations upon each separately owned tract in the unit by the several owners thereof[i]. Although frequently used interchangeably, the terms “pooling” and “unitization” refer to separate procedures. While pooling involves the combination of several small tracts of land to meet the spacing requirements for a single well, unitization refers to field-wide or partial field-wide operation of a producing reservoir involving multiple adjoining land tracts.

Permalink Reply by time will tell on October 2, 2011 at 12:59pm

vary good point AT thanks for sharing it .

Permalink Reply by Janice Lanphere Hancharick on October 1, 2011 at 5:54am

PA people who fell into such "rush job deals" from '04-'08 were quickly sorry when they got around to read the fine print later on.  Let's see. Are you being exposed to scare tactics like everyone else is leased and your parcel will be left out ... not needed?  Companies will run out of $$$ to take on more AC?  This "NEED" to lease by Nov. is created by those wishing to grab up AC and tie it up for a long time.  Does the lease provide a time frame for payment, for production, for lease negation if contractual promises aren't met.  Do you see words like "intent", and "capable of" in a Held By Production clause? Hope not!  What type of vertical and horizontal Pugh clauses are there for your protection?  What specific reclamation clauses exist that address individual needs.  A Group lease does not mean one size fits all!  Where is there room for  addendums to protect stands of timber, specific croplands, a sugarbush, etc.?  Net royalties means the companies subtract their expenses before cutting you a royalty check.  ARE  YOU CRAZY?  Looking at a force majeure that lasts over a year? You shouldn't be.  If things are that bad, that lease should expire immediately.  There is so much more to consider before a lease signing happens.  If there is any portion of this response you don't understand, then invest time and effort and learn.  Common sense and logic belong in leasing decisions, not scare tactics.  Offering a lease by the end of this year is like offering a toddler to choose ... a nickel or a dime, knowing the nickel will get picked because it's bigger.

What you have (wonderful shale) is VALUABLE.  Compare it to having a brand new fully loaded Cadillac.  What's being offered to you is not much more than a rusty WWII Army Surplus jeep that's been in service since the 1940's.  It's simply been given a wonderful paint job.  Which would you rather drive to your daugther's wedding?

Please think long and hard.  I'm not offering you anything but food for thought, because I've heard enough sad stories across PA and NY's Southern Tier to last a lifetime.  Try not to become one of them.

JLHancharick   E-mail: jlhanch@nc.rr.com

Permalink Reply by Mickgyver on October 1, 2011 at 7:13am

That is why I responded as I did I don't know if the main start here is an advertisement to lure people into signing quickly for the immediate profit for that group or what , but there is a lot of money to be gotten if it is a for profit group, I am fairly well versed on a lot of what is required to manage a and develop a group but I wouldn't even have attempted it since I did not have someone else to help with the mass amount of time that is truly needed to commit to acquiring a decent deal for those people in the group depending on you. Even at a "small" fee of 2% with 10,000 acres in a group at $5000 this is not merely chump change but a nice round figure of 1 million bucks for the group leader . This is a nice christmas present for someone if they push a lease through quick now especially because they will ride in on the coat tails of the groups that already made the path

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