Replies to This Discussion

Permalink Reply by Finnbear on March 14, 2013 at 2:45am

I have a relative involved with the Enterprise ATEX (Appalachia to TEXas) pipeline that is currently under construction and you wouldn't believe what is required by the govt for that project.

Permalink Reply by Joseph-Ohio on March 14, 2013 at 3:05am

I'm a believer Finnbear.

Seems to me all of these goings on are also rife with rules, legislation and paperwork.

I think alot of it to be over the top and does nothing more than stand in the way of expediting development which in itself demands very complex methods and procedures.

I think enforcement of existing rules and laws are more in order than the creation of new ones.

I guess something I would compare it all to would be tripping over one's own feet as well as everyone elses.

 

 

Permalink Reply by Julie Harchalk on March 13, 2013 at 3:12am

Dear Joe,

your post is right on! I remember talking with a land leasing company in Jefferson about what they were doing and walking away thinking "what are these people doing? They're just throwing darts against a board and putting a monkey wrench in the whole process of getting this right." I , like you, have contacted the E & P companies directly and agree with you that is the way to go as a landowner, but the need is to group together to attain about 640 acres contiguous if you don't have that much individual acreage. Thanks for allowing me to input here.

 

Julie Harchalk

Permalink Reply by Joseph-Ohio on March 13, 2013 at 4:35am

Ms. Harchalk,

To illustrate our points regarding details and complexities encountered in these complicated matters, we've done a little homework pertaining to a hypothetical / theoretical drilling unit including 100% of our acreage and we see no harm but in fact find the illustration very helpful and have decided to post the results here to make our point.

Considering the following parameters:

1) A 500' setback from wellhead to the back of the theoretical drilling unit.

2) A min. 500' radius from vertical to three parallel horizontal laterals spaced 1000' apart with each lateral 5500' long

3) A 500' setback from the terminus of each lateral.

4) A 31.5 degree Southeast to Northwest bearing / heading for the three (3) horizontal laterals considered.

All of the above rendering a 413.22314 drilling unit consisting of three horizontal laterals measuring 3000' wide by 7000' long.

Key here was including our total acreage within the theoretical Drilling Unit.

Based on all of the above, our Acreage would represent about 12.5% of the total Drilling Unit Acreage, so our proportional share of the production royalty would equate to .125 x whatever the contract stipulated as the landowners share.  Say it was 20% then our share of the production would be .125 x .20 = .025 or otherwise 2.5% of the total production.

If there were another set of identical laterals going in the opposite direction our proportional share of the production would be half of what it is with only the three (3) horizontal laterals contemplated above, or 6.25% of the total Drilling Unit Acreage and rendering only 1.25% of the value of the total production - but there should be more production involved.  Better or worse ?  It all depends doesn't it ?

Also larger Drilling Units would include more landowners to co-ordinate with.  Not a good thing in our opinion as we see that things are pretty complicated just the way they are.

We see larger Drilling Units as creating more startup and management hurdles.

In our specific case a 413 Acre Drilling Unit would seem most manageable as we look at it.

All in our humble opinion

Permalink Reply by Joseph-Ohio on March 13, 2013 at 11:46am

I'm just now also seeing how adjacent properties HBP seriously hamper development of Drilling Units.

It looks like it really behooves adjacent landowners to organize and work together toward development.

A seriously tangled web exists out there.

Quite a mess to straighten out.

Negative legislation also in a great degree to blame.

Interested landowners need to reach out to their neighbors and E and P entities.

Interested E and P entities need to reach out to landowners.

Wow - what a mess.  

Permalink Reply by Julie Harchalk on March 13, 2013 at 1:00pm

Dear Joseph,

You certainly have put a lot of thought and research into this industry. I'd like to keep in touch over the next months to compare notes on what we each are learning and doing.

Julie Harchalk

 

Permalink Reply by Joseph-Ohio on March 13, 2013 at 1:10pm

Keep posting / send messages any time Ms. Harchalk.

Any suggestions are welcome.

Regards,

Joseph-Ohio

 

Permalink Reply by Depolarized Farmer on March 15, 2013 at 12:06pm

J-O, you need to realize that many E&P's will ignore geographic areas where they can only acquire leases to a few 400-acre pockets (which means you don't have the competition you need to drive up prices).  E&P's need critical mass to justify their investment.  They simply are not going to spend millions of dollars to build a pipeline gathering system and related infrastructure for a few scattered units here and there.  BP only came to Trumbull County because ALOV presented them with the opportunity to instantly gain a very large footprint.  If someone out there wants to make the argument that Trumbull folks could have got more bonus $ by waiting and forming a bunch of little 400-500 acre units, I'm not going to argue, but I can assure you that 1) most groups would fail to get that much contiguous acreage without holes;  2) the vast majority of landowners would probably be waiting for at least a couple of years for a lease;  3) many landowners would have been left out completely;  and  4) those who would get a lease have no guarantee of getting a lease anywhere as good as ALOV's.  I dare say that all but a few of the best attorneys out there have fallen short of getting the terms ALOV got.

I believe that what Bob Rea / Buckeye Mineral is doing in Ashtabula by forming township-sized groups is the right balance between having too-large County groups versus do-it-yourselfers like yourself that are not attractive to many drillers and/or are in over their heads despite the over-confidence that comes from their GMS self-education (as valuable as that may be).

I say the following as a friend who wishes you the best possible outcome:  Your impatience is evident to all who visit this site, and will certainly undermine your success if you attempt to personally negotiate with a landman.  They are trained to read you like a book.  You will do well to hire representation for your land, whether that is BMD or your own attorney.  Please realize that landmen read these threads, and they perceive you as a pushover who is needing some cash in a bad way.

Please take no offense...  I'm trying to offer you some objective advice.  If you are truly anxious to sign a lease, I believe the best way to expedite that is to join a township sized group.  Even then, you may have to simply wait until some of the HBP acreage in your area is sold to a horizontal E&P, which will then trigger their need to lease surrounding acreage.  One day at a time, my friend.

Permalink Reply by Julie Harchalk on March 15, 2013 at 12:24pm

Dear DePolarized Farmer,

you give alot of sound advice, I have met Bob Rae of Buckeye Mineral, I view him as a legitimate businessman and capable of putting together very large groups. I think your idea that small groups alignng to negotiate the best terms between them and the energy companies may not work everywhere, but it can work in some instances, Supposedly this shale play in Ohio has the capacity to last for between 50 and 100 years. I hope we do it right!

Julie Harchalk

Permalink Reply by Joseph-Ohio on March 15, 2013 at 12:56pm

Thanks for your objective advice D F.

We pay attention to and try to learn from all advice.

As pushovers however, we don't believe we qualify.  We invite any  professional or organization to present us earnest money, a written land / landowner cognizant leasehold agreement with a fair signing bonus in step with the Utica Point Pleasant Gas / Oil Development Market.  We will let them know if we have a chance at making a deal as soon as we digest what they've presented and weighed our options.

No offense taken D F.

One day at a time is good advice my friend - we just don't want to hold ourselves up / trip over our own feet.

There's plenty of hurdles out there just the way it is.

 

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