My lease states:
“Lessee agrees that is a well or wells producing oil and/or gas in paying quantities should be completed on adjacent lands within 467 feet of the leased premises and deemed to be draining the leased premises, Lessee shall drill such offset wells as a reasonably prudent operator would drill under the same or similar circumstances.”
I just discovered that there is a new permit, approved on 10/02/2019, from Tall City Operations III LLC to drill the Conger 185-184 Unit D 24H just to the west of the lease line. According to the RRC GIS measurement, this well will be 396 feet from the lease line. Perhaps the RRC’s GIS measurements aren’t precise? Or maybe the operator needs to drill a well close to our side of the lease line?
Everything depends on all the language in your lease. You can ask your operator to drill a well close to the lease line. However, the operator could claim that it is not something a “reasonably prudent operator” would do “under the same or similar circumstances.” The lease language seems to place the burden on you to prove that drilling new well close to the lease line is what a “reasonably prudent operator” would do. Also, is the quoted language exact? There are 2 verbs (agrees and is) and also it may not absolutely state that the offset well is “deemed to be draining”, but rather that it may be deemed to be draining. In that case you may have to prove it is draining. Does the lease set out the exact location of an offset well? Murphy v Adams case, the Texas Supreme Court ruled that the operator was free to place an offset well anywhere on the acreage because the lease did not specify how far it had to be from the lease line. See McFarland’s Oil & Gas Lawyer Blog for more explanation.
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That is the exact language in my lease.
Is there a way to prove that an off-set well that is too close to the lease line is draining the reserves?
There must be something that can be done. I emailed the operator but didn’t receive a response. They normally email be back the same day.
Unless you are an expert, proving draining will require hiring professional engineers and geologists as consultants. And the operator will have its own experts. You should consult your attorney who prepared this lease and get advice based on 100% of the lease terms. There may be other language which also affects this issue.
