Leasing below the Madison Formation

North Dakota Mineral Rights Billings County, ND
1
Discussion by Jeff Myster on Wednesday

OXY wants to lease below the Madison Formation and understands that there is a horizontal leg of a productive well in the section of mineral rights that I own. I've never heard of this, is it even possible to consider?

I should add that this producing well is in township 143, but considered a horizontal well. I would think that a producing well includes the minerals below, no matter how far down.

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If the existing well is a short lateral, it may not hold the entire section or a 2 section spacing and you can have overlapping spacings.

3

Jeff, it also depends on the lease the operator of that horizontal well has with you. Many leases contain a "pugh " clause that states in effect: If after the primary term of the lease has expired, all non-producing formations are released and are available for a new lease.

Therefore, if OXY wants to lease a deeper non-producing formation and the primary term of the existing lease under which the current formation is being produced has expired, you are free to give another party a lease on your deeper minerals.

We have leased the surface down to the Heath formation (around 5,000') to one operator and the deeper intervals to a different operator on a few of our tracts.

4

Thank you for your insight Jerome. Sounds like a possibility, I better start negotiating and get a copy of the contract to review.

Jerome Anderson said:

Jeff, it also depends on the lease the operator of that horizontal well has with you. Many leases contain a "pugh " clause that states in effect: If after the primary term of the lease has expired, all non-producing formations are released and are available for a new lease.

Therefore, if OXY wants to lease a deeper non-producing formation and the primary term of the existing lease under which the current formation is being produced has expired, you are free to give another party a lease on your deeper minerals.

We have leased the surface down to the Heath formation (around 5,000') to one operator and the deeper intervals to a different operator on a few of our tracts.