I finally found some hard information on the sale of 3 SWD wells in South Texas. Two were last year and one just closed.
The collective sales price was $9.5MM.
Now the question. What is the real value of a SWD well to the landowner? There is essentially no risk to the wastewater company, other than normal business risk that is insurable.
The problem with assessing value is the market for SWD sites. I would have to think that many large tracts in the country would love to have a SWD well on its property.
I have my ideas on a reasonable landowner share for a commercial site. However, that is just me. What do you think?
Buddy Cotten
Buddy,
I believe this is a topic that has been largely neglected, but very valuable like you mentioned. Do you think this is a matter of including specific clauses in a lease to provide for reimbursement based on volume of liquids disposed on a SWD that is located on your lease, should SWD wells be drilled or located there? Or maybe including language in the oil and gas lease that specifically requires a separate lease be taken out for any SWD well to be drilled?
EXCELLENT THOUGHT PROCESS.
Kitchen,
Thanks for your thoughts. The more sophisticated lease forms, where the mineral owner and the surface owner are one and the same, will deal with the issue of using a wellbore or a SWD well to dispose of fluids. Most just prohibit it. The time to negotiate surface use agreements is prior to leasing.
If the mineral owner and the surface owner are not the same, the lessee has the absolute right to dispose of the SW produced from wells on that lease. But not from other leases. There is a RRC process to receive a commercial permit to dispose of salt water. Naturally, I am only talking Texas laws right here.
The issue is that the formations injected into by the salt water belongs to the surface owner. The oil company has the implied right to use as much of the surface as is reasonably practical, including the disposal of salt water from that well.
The last commercial SWD agreement that I negotiated was a disposal rate payable to the landowner of $0.25 per barrel. It was quite a windfall to him. At that time, the operator was paying $1.75 per barrel to have the salt water disposed.
On the commercial side, you have water producers (the oil company), water haulers (transporting produced water off lease to a disposal site), then the wastewater company who disposes the wastewater downhole.
Sometimes the water haulers and the disposers are the same company. As we have discussed in other threads, there is something called skim oil, which generates income as well.
Best
Buddy Cotten
Buddy,
Two questions. 1 - Your statement about water disposed underground belongs to the surface owner. Is that applicable on a state-by-state basis due to different water laws / water rights? 2 - Is skimming only done on the lease, before the water is taken offsite to a SWD? Could situations exist where SW is transported offsite before being skimmed, or a SWD operation with (commercial scale) skimming capabilities?
There was a class action suit in Kansas a few years ago over skimming. They found that water separation being done on gas leases was producing some skim oil. But in that case I don't believe water was being transported offsite and disposed of. It was being skimmed and disposed of within each lease. I don't remember if they were reporting the oil to the state or not (although I believe they are now). They were not paying royalties to the lessors and that's why they got sued. http://fleeson.com/case-profiles/spieker-profile/
I believe ya'll are right about the surface owner having the underground disposal rights. I have heard it called "porosity rights" and that they are separate from mineral rights.
In Texas you can reserve water rights just like mineral rights though. It is becoming more commonplace. So how does that factor into SWD wells?