On horizontal well location plats that I have seen, there is always a "surface location", a "penetration point" and a "bottom hole" shown on the plat.
To your knowledge, is there any instance where the persons owning the minerals at the "surface location" or any of the three (3) areas on the well plat, have been left out of the pooled unit receiving royalties on a producing well?
Yes it does happen. Let's say you are a mineral owner under Section 6.
The well is located in Section 6, along the southern section line, with the horizontal leg going under Section 7.
The well's surface location is in 6, but the production is coming from 7. As a mineral owner in Section 6 you would not participate in that well's production. I'm sure there are other examples, but that is the most obvious one.
Captain,
If the "penetration" point or "bottom Hole" locations are in a unit where you have mineral rights, you should be in the unit. The "surface" location as Eastern MT points out, may be out of the unit and therefore not be an indication of unit mineral control.
Thanks for your responses. You have both confirmed what I suspected.
Are you saying that even though a well has been drilled on one's land, that owner will not receive royalties if the actual production is from another owner's land?
Gary L. Hutchinson said:
Captain,
If the "penetration" point or "bottom Hole" locations are in a unit where you have mineral rights, you should be in the unit. The "surface" location as Eastern MT points out, may be out of the unit and therefore not be an indication of unit mineral control.
Gary L Hutchinson
Minerals Management
Yes. I don't believe you are required to allow a pad to be placed on your surface to produce someone elses minerals though. If you are approached to negotiate for a pad on your surface, it might be prudent to ask whose minerals are going to be produced as they may not mention that it won't be your minerals and if you didn't ask, I don't think you would get far objecting later on.
M Baxter said:
Are you saying that even though a well has been drilled on one's land, that owner will not receive royalties if the actual production is from another owner's land?
Gary L. Hutchinson said:Captain,
If the "penetration" point or "bottom Hole" locations are in a unit where you have mineral rights, you should be in the unit. The "surface" location as Eastern MT points out, may be out of the unit and therefore not be an indication of unit mineral control.
Gary L Hutchinson
Minerals Management
No I'm not. Production rights come from permitted units. If you are in a unit, you share in production regardless of where the well is spudded. Surface location is an entirely different subject. Most states require permission to access the land to be disturbed regardless of where the well goes subsurface.
Gary L Hutchinson
M Baxter said:
Are you saying that even though a well has been drilled on one's land, that owner will not receive royalties if the actual production is from another owner's land?
Gary L. Hutchinson said:Captain,
If the "penetration" point or "bottom Hole" locations are in a unit where you have mineral rights, you should be in the unit. The "surface" location as Eastern MT points out, may be out of the unit and therefore not be an indication of unit mineral control.
Thanks, its yes and no.
"BUT" if you have already signed a lease agreement and several months later they advise they are drilling a well and wish to put the "surface location" on your property but not the "penetration point" nor "bottom hole" then you will more than likely not be in the unit receiving royalty payments when the well begins production. The most you would receive would be money from surface damages, assuming of course, you negotiated that in the original lease agreement, right?
Anybody have a way of keeping that from happening such as a well written clause?
Yes,
When issuing a mineral lease as a surface owner, strike out all of the references to use of surface, use of water, etc. and make it a deal on the minerals only. That is what I do for my clients. The lessee favored lease forms we see to day ask for everything whether it is owned or not. SELLER/LESSOR BEWARE!! It is up to the owner to lease only what they want to lease. If the lessee wants the surface rights, make a deal on the surface rights. When in doubt get some experienced advice before being wowed by your ability to get a higher bonus. The leasing agents know what they are doing.
Gary L Hutchinson
Captain Skittles said:
"BUT" if you have already signed a lease agreement and several months later they advise they are drilling a well and wish to put the "surface location" on your property but not the "penetration point" nor "bottom hole" then you will more than likely not be in the unit receiving royalty payments when the well begins production. The most you would receive would be money from surface damages, assuming of course, you negotiated that in the original lease agreement, right?
Anybody have a way of keeping that from happening such as a well written clause?
I'm currently negotiating an oil & gas lease and am willing to lease surface rights and minerals; however, I have been hearing more and more instances of people who did the same in my area only to have the "surface locations" of the well placed on their land but their minerals do not get pooled hence they will not be receiving any royalties, just surface damages. If that happened, I would be "chapped".
We have gone so far as to place a clause with a minimum pooling requirement in the event they use our land but to be honest I do not think it would even apply in a situation described above which makes me think I need to get back with my attorney.
Cap't,
Be careful what you agree to for surface use if you have leased your surface and/or water for agricultural purposes.
Try to limit the use of your surface to the "minimum amount required by regulatory agency for exploration and production facilities necessary to explore and exploit the mineral rights described herein." but get your attorney to use his or her words to make things track with your concerns and the rest of the lease provisions. This a complicated business.
Gary Hutchinson
Captain Skittles said:
I'm currently negotiating an oil & gas lease and am willing to lease surface rights and minerals; however, I have been hearing more and more instances of people who did the same in my area only to have the "surface locations" of the well placed on their land but their minerals do not get pooled hence they will not be receiving any royalties, just surface damages. If that happened, I would be "chapped".
We have gone so far as to place a clause with a minimum pooling requirement in the event they use our land but to be honest I do not think it would even apply in a situation described above which makes me think I need to get back with my attorney.
I think Mr. Hutchinson is giving very good advice here. If you want to lease your oil and gas, then agree to an oil and gas lease, not an oil, gas, water, surface, pipeline right of way, deer, quail lease. Just because you didn't agree to all of those in the initial lease does not mean you can't strike a deal later on. Why throw them all in for free? The water alone may be worth more than the well will ever pay you. I've even heard of leases here on the forum where if a dry well is drilled the operator gets to keep it as a salt water disposal well, no payment was mentioned. Presumably the water would come from the operators other wells, but how would you know what well the water came from unless you followed the trucks?