Replies to This Discussion

Permalink Reply by Brian Day on February 13, 2012 at 3:35am

If Pa. can't tax 'em because they are out of production, then they no longer meet the definition of Held By Production.  If they no longer are HPD, the leases are void at least by the end of the current term and can be up for a new lease.  Wahoo!  At least that is the way I think it aught to go, but I have this problem of being realatively honest and fair.

Permalink Reply by paleface on February 13, 2012 at 4:56am

 Brian could that fall under the shut in claus ? Don't know just asking.

Permalink Reply by Brian Day on February 13, 2012 at 5:24am

Oh I really don't know.  As far as I'm concerned, shut-in is non production.  But I'm really just stirring up discussion.  If what I said in the last post were to become fact, companies like Shell would have to decide to advance production on land held by non'producing vertical wells, especially those close to an impending pipeline in the next three or four years.  They could offer a better, but still economical lease to hold the land into the future - a lease in line with the current price of NG.  They could say the heck with all of it and devote their resources to Ohio oil.  I kind of doubt this last would happen because they have pads and infastructure already on the ground.  The Utica and probably some BRT lies beneath.  What gauls me in particular is the stupidity of the Pa. legislature for not enacting laws 2 or 3 years ago addressing HBP and unit size in a more direct, effective way.  This tax just seems like a backward engineered, grafted on method of retrieving public funds from an industry and natural resource that is now overshadowed and devalued by shale plays in other parts of the country and the world.  The tax may only serve to further delay developement in the state.  Also, as further real estate type taxes are levied against land made more valuable by the resources beneath, foreclosures may remove many people from their property.  And who will own that property then?  The gas companies will buy it or the state will confiscate it. 

Permalink Reply by paleface on February 13, 2012 at 6:29am

What I don't understand is the barrel price of cude oil,they find more oil pretty regularly but it doesn't effect the price? A glut of oil doesn't effect the price like it does for natural gas?

Permalink Reply by Ann Ticopa on February 13, 2012 at 6:40am

If the objective was to slow leasing/development and make PA less competative, then prohibiting HBP would be one way to do it.  

Permalink Reply by Brian Day on February 13, 2012 at 4:39pm

What is slowing the developement of PA. gas is oil in Ohio and North Dakota.  Also, if a GASCO has leased land dirt cheap and tied it up perpetually with minimal HPD, they can put PA on the back shelf for decades.  It is like that old adage, "Why buy the cow when you can get the milk for free (practically.)"  As things stand now, in most places there no longer is competition for leases, nor will there be in the future.  Limit unit size and define HBP more stingently and perpetual leases begin to desolve.  More money has to be put up to lease so return on the investment has to happen sooner, thus speedier drilling and pipelines.  If such legislative actions are even threatened in three or four years - even if it is only on the Utica and layers beneath it - companies might keep their rigs here and working, actually producing on those leases instead of mothballing them.  The Utica is beneath the Onendaga and within the DEPs current jurisdiction horizon on well spacing/ unit size.

Permalink Reply by Ann Ticopa on February 14, 2012 at 4:07am

What has slowed down dry gas development is too much gas and too few customers.  It's been eased back in NE TC for at least a year.  Afaik Range has not cut back on their wet gas production in SW PA.  Shell should soon announce their NGL cracker plat site decision.

Say your plan to dissolve leases and force production was legislated.  And, after years and years of litigation, the courts approved it.  What about the landowners who were satisfied with their leases and would have preferred to wait until the price went up to have their gas produced?  There is also the gothcha of what to do with the force-produced gas.  One function of shut-in wells is secondary storage.  Particularly in areas like TC, where the gas requires minimal treatment before it can go into the pipelines. 

Permalink Reply by Wayne D on February 14, 2012 at 4:48am

maybe I dont understand terms , but to drill a shallow vertical well , pool 640 acres , ( call the well shut in ? )  to hold the leases beyond term,  even if paying shut in rent does not seam right to me .  If a well is done horizonal  / fracked then shut in it to hold that acerage that seams like the proper way to hold a lease .  I guess  it depends on how the lease is worded .  I thought I heard of some companies doring only vertical wells ( in marcellus ) and pooling much smaller amounts of land .   

Permalink Reply by paleface on February 14, 2012 at 5:13am

 Wayne,I was told by a good source that a big oil and gas company in Tioga county found it was better to frack when the well is close to going into production,they found the flow back from the frack clogs the well up when you let it sit.Which causes poor flow and production numbers when you do put it into production.The shut in claus sounds like a good idea to get payed to store gas and its still there under your property till they decide to sell and hopefully the dry gas prices will be higher. 

Permalink Reply by Wayne D on February 14, 2012 at 6:46am

I understand your point , if people got a fair ( who really knows whats fair ) price . I just know to many people and hundreds of acres that were paid $10 or less for their lease and then stuck in pool on a shallow vertical well weeks or even days before it expired to have theri land held (forever ? ) untill the gas co finds it  best to produce royalties for the land owner .  If the gas co would say 20 yr lease or we only want this depth or formation   only in a lease  that might seam more aceptable .  A $5 an acre lease held like they do could then take utice shale and oil without any more bonus .    

Permalink Reply by Ann Ticopa on February 14, 2012 at 8:18am

Thanks for posting that.  There are several completed single-horizontal wells in my area that have been shut-in for around two years (no gathering lines).  I've wondered if they wouldn't start to close up or leak or somthing over time. 

Permalink Reply by Ann Ticopa on February 14, 2012 at 8:05am

Yup, it depends on what the lease says.  The DEP (wisely) wants nothing to do with it:

"What is the role of the commonwealth in resolving conflicts involving mineral owners or lessees and surface property owners?

DEP is the agency charged with hearing objections to well permit applications, based on location restrictions or conflicts with other resource interests (for example, coal owners). County courts hear suits for property damage or disputed lease matters, including royalty payments. Remember, a lease is a contract generally subject to contracts law, and not regulated by a government agency. ..."

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