If I leased Marcellus only…can they drill Utica and pay royalties to other lease holders who perhaps leased all strata? Would I be just left out because I didn’t designate more formations?
Alice15, You have a depth clause in your lease and if you’re pooled in a producing Marcellus unit collecting royalties and the operator decides to drill Utica depth in the same designed unit, they will need to present you with a new lease for Utica depth once the original lease date expires. Note: The lease only expires for the depth of Utica, not Marcellus. The lease is still held by production for the Marcellus depth. If for example, Tug Hill is permitting for Utica leg, that’s not going to be producing for 3 to 4 years or more depending on economy or gas prices. They can permit and drill but don’t have to produce it. The operator will present you with a top lease before your original lease expires if the lease doesn’t expire by the time they want to open the utica well up to market.
Thank you Nick…I appreciate your advise. That is what I hope will happen. I am thinking I have a producing well that has Marcellus, but have seen some on that same well that say Utica. I will have to look at it again to be sure.
Nick is mostly right, but I have seen a lot of producers (especially Marshall County) that have separate units for Marcellus and Utica or Point Pleasant. It is very important to watch for what formation is developed for each well and unit in your area. If they drill a well into the Utica and you only have a lease for the Marcellus, that would warrant a theft claim and that brings SIGNIFICANT damages. I am happy to help further if you have additional questions.
Hope this helps!