I have questions about a number of the provisions in the proposed leasing contract. Here is one:
15 Easement. “For the same consideration stated above, Lessor further grants, sells, conveys and warrants to Lessee a subsurface right-of-way and easement in, through and under the leased premises for the purpose of drilling oil and/or gas wells to, and producing through said wells oil, gas or other minerals from lands other than the leased premises together with the right of ingress and egress to such wells.”
Does this mean that they can drill a well on my land, claim it is producing from a neighbor's land, and not pay any royalty to me? Is this standard? It would seem that adding language requiring pooling or unitization would protect the landowner? Am I correct?
As I understand it, Kansas does not have forced pooling. You would need to have an oil and gas attorney familiar with Kansas law give you a definitive answer as to whether you acreage could be required to be included in a drilling or production unit by pooling.
I am not an attorney but here are some ideas to think about. Based solely on the language you posted as item 15 above it appears that a company might be able to drill from your land, produce oil or gas from a neighbors land through that borehole and make no further payment to you during the primary term of the lease as long as none of the production came from your land. The situation would be similar to having a pipeline on your land; at least during the primary term of the lease.
Here is a link to a good online read about horizontal drilling and pooling issues, specifically the graphic and description beginning at page 7. http://tinyurl.com/7z59nem
Jim, thanks for the link to the Kramer document. It has a lot of information, most pertaining to situations where leases are held by different entities. In our case, we are dealing jointly as extended family with interests totaling 10 sections in Lane county. It is likely that whoever we lease to will end up having sole discretion over the areas underlying where they are likely to drill. However, that is not a given since the properties are not always contiguous.
Does anyone know of a lawyer who is experienced and knowledgeable about KS law as it relates to oil leases?
I work in Kansas quite a bit and two names come to mind in your part of the state. I would be glad to ask people I trust about them if you are interested.
We live in Harvey County, and have been approached by an Oil and Gas Company with a lease offer. Apparently, many people in the county are being approached. There is an "intent" to drill on a sector diagonal from us, so this may be what is motivating the offer. Our area is covered with old and abandoned wells, and with the new technology, it appears there is renewed interest. Also, we seem to sit on top of oil deposits.
Laurie, I don't know much about it. One thing: it may be a land play not a drilling play; i.e., they buy up leases and then flip them to another company at a big profit. IMO they earn what they get since nothing would be happening without their initiative. And who knows: someone may actually drill and find oil or gas :)
We are in a similar situation. We are insisting that the company pay the bonus at the time we sign the leases to keep the land from getting locked up and causing future problems.
Maybe someone more knowledgeable than I will attempt an answer.
As I understand it, Kansas does not have forced pooling. You would need to have an oil and gas attorney familiar with Kansas law give you a definitive answer as to whether you acreage could be required to be included in a drilling or production unit by pooling. I am not an attorney but here are some ideas to think about. Based solely on the language you posted as item 15 above it appears that a company might be able to drill from your land, produce oil or gas from a neighbors land through that borehole and make no further payment to you during the primary term of the lease as long as none of the production came from your land. The situation would be similar to having a pipeline on your land; at least during the primary term of the lease.
Jim, this has proven to be true. They won't budge on this provision in the lease. As long as none of the minerals came from under your property all you would get is the lease bonus.
The lease offered to us included a "pooling clause", allowing the lessee to pool and pay royalties within a certain radius...
Paul Mark said:
Jim Cooper said:
As I understand it, Kansas does not have forced pooling. You would need to have an oil and gas attorney familiar with Kansas law give you a definitive answer as to whether you acreage could be required to be included in a drilling or production unit by pooling.
I am not an attorney but here are some ideas to think about. Based solely on the language you posted as item 15 above it appears that a company might be able to drill from your land, produce oil or gas from a neighbors land through that borehole and make no further payment to you during the primary term of the lease as long as none of the production came from your land. The situation would be similar to having a pipeline on your land; at least during the primary term of the lease.
Jim, this has proven to be true. They won't budge on this provision in the lease. As long as none of the minerals came from under your property all you would get is the lease bonus.
But it still has to be from under your property. IOW they can drill on your land and not pay you royalties unless the oil they are accessing is from under your land.
Laurie E. Tietjen said:
The lease offered to us included a "pooling clause", allowing the lessee to pool and pay royalties within a certain radius...
Paul Mark said:
Jim Cooper said:
As I understand it, Kansas does not have forced pooling. You would need to have an oil and gas attorney familiar with Kansas law give you a definitive answer as to whether you acreage could be required to be included in a drilling or production unit by pooling.
I am not an attorney but here are some ideas to think about. Based solely on the language you posted as item 15 above it appears that a company might be able to drill from your land, produce oil or gas from a neighbors land through that borehole and make no further payment to you during the primary term of the lease as long as none of the production came from your land. The situation would be similar to having a pipeline on your land; at least during the primary term of the lease.
Jim, this has proven to be true. They won't budge on this provision in the lease. As long as none of the minerals came from under your property all you would get is the lease bonus.
The reason for this clause is in the event of an extended reach or horizontal well, there will be no need for a subsurface easement. A horizontal example is if the well is located even off your property and with an eco-pad (multiple wells from one location) and they need to pass under your subsurface.
This is a very common clause in the areas of extended reach and horizontal wells.
It would be my advice to reject the clause and tell them you will discuss it when and if they need your help.
Paul Mark said:
But it still has to be from under your property. IOW they can drill on your land and not pay you royalties unless the oil they are accessing is from under your land.
The reason for this clause is in the event of an extended reach or horizontal well, there will be no need for a subsurface easement. A horizontal example is if the well is located even off your property and with an eco-pad (multiple wells from one location) and they need to pass under your subsurface.
This is a very common clause in the areas of extended reach and horizontal wells.
It would be my advice to reject the clause and tell them you will discuss it when and if they need your help.
But it still has to be from under your property. IOW they can drill on your land and not pay you royalties unless the oil they are accessing is from under your land.
They are offering an excellent leasing bonus in any case. We are leaning toward accepting their offer just based on that. Although there were several clauses we would have liked to modify, it seems pretty standard.
Buddy Cotten said:
Dear Mr.Mark,
The reason for this clause is in the event of an extended reach or horizontal well, there will be no need for a subsurface easement. A horizontal example is if the well is located even off your property and with an eco-pad (multiple wells from one location) and they need to pass under your subsurface.
This is a very common clause in the areas of extended reach and horizontal wells.
It would be my advice to reject the clause and tell them you will discuss it when and if they need your help.
But it still has to be from under your property. IOW they can drill on your land and not pay you royalties unless the oil they are accessing is from under your land.
It is fairly common to drill the neighbors well form your land and vice versa when it comes to horizontals and will become increasingly more common as time goes on. The reason for this is for steering/economic purposes of the horizontal. It is less expensive, quicker, and you get more lateral length if you can drill from across the road as it doesn't take as much steering to turn the well horizontal. You lose lateral length because it takes somewhere around 800' laterally and 800' vertically to turn to horizontal which means you are already 800' away from the surface location and now just getting into the pay zone (actual turn radii vary). If you can drill from across the road you can be horizontal already as close to the legal distance to the section line as possible and get more lateral length. Overall it will make you more money in the long run if you can get past the idea of the neighbors well is how you get paid and the one on your property is what pays your neighbors. When it comes to infill drilling a lot of companies will prefer to go to these areas first where they can do this over where they can't all things being equal.