Why would an offer be made to me for only the "Shallow Rights" $2oo/acre
David, the top of the Lodgepole can be called a common source of supply with the Bakken so basically they can drill a shallow well and hold deeper rights and never mind a depth severance clause because declaring all of it a common source of supply means they have already tapped all of it with one well. If you wonder how hard it is for an operator to get the commission to declare however many formations a common source of supply, basically all they have to do is ask and say that it prevents waste and protects correlative rights and have a staff engineer say "yup, that's the way it is". If it's unopposed, the commission probably wouldn't even ask for testimony.
If you want to test this, I would insert a clause that the operator could not drill deeper than the top of Lodgepole whether the commission declared it a common source of supply with a deeper formation or not.
If they really mean that the top of the Lodgepole and up is all they want, it shouldn't be a problem. If it's an end run to get the Bakken also, by decree, it really will be a problem. A verticle pugh clause/depth severance clause means very little in ND anymore. On the other hand, the operator agreeing in the lease to not go after the deeper formations without your permission, no matter what the commission says should work because like you, they can agree to anything and be bound by it. You might include $1,000 per day liquidated damages if they violate that clause because a clause is useless if you can't afford to sue them over it. Have your lawyer type it up nice
Thank You RWKennedy for your insite!
r w kennedy said:
David, the top of the Lodgepole can be called a common source of supply with the Bakken so basically they can drill a shallow well and hold deeper rights and never mind a depth severance clause because declaring all of it a common source of supply means they have already tapped all of it with one well. If you wonder how hard it is for an operator to get the commission to declare however many formations a common source of supply, basically all they have to do is ask and say that it prevents waste and protects correlative rights and have a staff engineer say "yup, that's the way it is". If it's unopposed, the commission probably wouldn't even ask for testimony.
If you want to test this, I would insert a clause that the operator could not drill deeper than the top of Lodgepole whether the commission declared it a common source of supply with a deeper formation or not.
If they really mean that the top of the Lodgepole and up is all they want, it shouldn't be a problem. If it's an end run to get the Bakken also, by decree, it really will be a problem. A verticle pugh clause/depth severance clause means very little in ND anymore. On the other hand, the operator agreeing in the lease to not go after the deeper formations without your permission, no matter what the commission says should work because like you, they can agree to anything and be bound by it. You might include $1,000 per day liquidated damages if they violate that clause because a clause is useless if you can't afford to sue them over it. Have your lawyer type it up nice