Produced Water Transfer Tanks

Surface Owner Issues
1

Meeting with a group soon that wants to place some tanks on the property for what I can only imaging is a skimming site and a transfer site, as they have no intention on using the existing SWD or creating one from one of the old wells. Anyone have any experience with this? If so what is normal agreement?

1. How much per barrel

2. What % of skim?

3. How long of lease?

4. Can you add that upon termination all equipment stays on property?

Any help is greatly appreciated.

2

County, state, and what is surface worth?

3

Tom Green, Tx. $500,000

4

For the land loss, I would ask for double the University Lands schedule with strong indemnity and cleanup language. As for keeping the equipment, this is usually pretty tough to get, and you may not want a bunch of rusty, contaminated equipment. You could ask for an option to buy the equipment for a fixed price. Would need more,info on the other issues.

5

Had initial meeting with oil company. Here are some facts and the discussion we had:

  1. SWD in operation for 20 years
  2. Pumps 5200 barrels/day
  3. Capacity is 15000 bbl/day
  4. Oil company says high volume wells will NOT get paid by the barrel, only flat rate
  5. Most if not all water is coming from off property
  6. Oil company says it costs them $55 to make a barrel of oil
  7. Initial offer was $20k/year! Old contract is 10K/year signed 20 years ago.
  8. Said he would ask for $50k-$60k/year if we agreed
  9. We are in Tom Green County, Texas
  10. They cannot truck it.
  11. Old contract runs out in 9 months.

My questions, how valid is his statement that high volume wells are not paid by barrel, if valid, what threshold is a high volume well?

What would be a good price if it were flat rate? .15/barrel would be around $275,000/yr.

I’m thinking counter offer of: 5-year contract No less than .05/barrel $1500 land lease per month 3% skim Escalation clause based on COPAS Overhead Adjustment Factor STRONG indemnity clause