Deep Gas Wells

[JohnS]

I had a guy stop bye the place last night to get me to sign a gas lease. Apparently there was some siesmic study that was done a number of years back, that indicates a high likelyhood of natural gas. These wells will be about a mile deep! He threw out numbers like $100 an acre per month per a minimum producing well. He trys to sell it as a lottery ticket, where they pay for the ticket. While some people in the area are getting Jed Clampid fever, I prefer to be a bit careful.

The lease as written is certainly not OK. It would have to be marked-up and things clarified, to my approval. The rep was OK with that. The price they offer for the 5 year lease should be able to cover my lawyer costs, but with taxes, not much more than that.

Do any of you have a deep gas wells on your property? What kind of issues or problems did you have? Mainly concerned with any environmental issues, contamination of ground water, etc. What do they look like when the well is complete? What safety issues (explosions?) are there? I suspect the $ numbers are also double reality. Also, while its probably company specific, how did they treat and abide by your wishes for your property?

 

[TresCrows]

John, I worked for more than 10 years as a Petroleum Geologist, I have a MS plus 30 in Geology. First, a mile deep is not deep--15,000 feet or more is deep.
The likelyhood of a gas find in your area--well--where are you?? A 100 dollars an acre does not sound like very much to me so it must be that they are not terribly impressed with the prospects. The completed wells will probably be on 320 spacing and will not be terribly intrusive. The drilling operation itself will be. Wells are often directionally drilled, this allows the well to be located on the surface in an ideal spot yet still tap the resource. This is not a means of cheating a landowner by drilling under his properety, you must be compensated as the mineral rights owner for gas removed from your property whether the well is located on your property or 200 yards away on someone elses properety, Sometimes laymen become confused, faults, shale, and other natural limits to a reservoir make it entirely possible for your next door neighbor to have a productive acerage and for you to have squat.
J

 

[Muhammad]

John,

Yes, I have a natural gas lease... and happen to live not far from you. This area sits on one of the largest fields in North America, and in the past two years, companies have been starting to take advantage of that. Was it Belden & Blake that approached you?

So long as the lease states it, they can't do anything to your property... they won't put the well on your property, but rather just pay you a percentage of what is taken from the well, since your property sits on top of the field.

The drilling and construction of these wells is a huge project... each well will have several acres of cleared land around it, and take almost a year from start to finish to construct.

They will bring in earth moving equipment, trailers, trucks... you name it. The well sites look like mini cities, and they work day and night. The drilling looks much like an oil drilling rig.

A big drawback to the construction happening close to you is the damage that will be done to your road. Count on it being all but destroyed within a year of when they start construction. Also, if the well is going to be within a couple hundred yards of your house, there will be some noise and light at night.

They need 75% of the property owners to agree to the lease to be able to actually drill the well. Where I am, they certainly got it, since there are now 3 wells within a mile of each other, two still under construction.

The only fire we saw was the "pilot light" that was lit for maybe a week. Only this was a 20' ball of flame. /w3tcompact/icons/smile.gif

$100 per acre per month, unless put in writing, sounds a little high to me. I have no guarantees, and so far haven't seen anything but a $300 "signing bonus" and before they started this series of new wells, quarterly checks of 1 or 2 cents. They say, when the wells are being drawn from, they guess it might result in $200-$300 per month for my 5 acre piece. I'm just as concerned with the road being repaired, and heard that they would be repairing it after the project is done. /w3tcompact/icons/eyes.gif

If you want, I can give you the address of where this is going on so you can drive by and check it out. Regardless of whether or not you sign, you can probably count on it happening. And once it does, you'll get your money, however much (or little) it may be, regardless of whether you wanted to sign in the first place or not.

Hope this helps a bit. /w3tcompact/icons/smile.gif

 

[rdln]

I was also approached about 4 years ago for a lease....you are right to be careful!

I eventually said "not on my land"

There is an established area of wells to the SW of me and this company didn't own them but wanted to explore just outside this area.

The story was they drilled diagonal wells and had to obtain a certain percentage of leases from landowners (maybe all?) in each section before they could drill under that section. The lease wasn't that great from what I heard was a state average or going rate.

A group of three brothers I know had the same lease checked out by their lawyers and was told it was a standard lease with no negative aspects to the leasees. Two of the brothers each owned half a section and the other owned a whole complete section so they were very interested. The last I heard the whole section was leased and going to be tapped but nothing since then.

Anyways as far as environmental concerns just like everything else, stuff can happen but they have taken great strides in safety.

I was told a pit was dug where the drill rig enters the ground and is lined with a special tarp and all the drill spoils are hauled away in special truck containers.

The salesman explained how my lot was not a first choice for the actual drilling and well head but it was possible they would place it smack dab in the middle of property.

And, I was also able to get him to admit that if financially feasible (for gas company) to plow a path from well to transfer station through mine and my neighbors woods we couldn't do anything about it.

And after well is dug and doesn't produce enough if any gas they would just cap it and you will still have a big white elephant in your neighborhood or they use it as an underground storage field or its a great producer but market isn't worth pumping, they plug it.

Anyway if any of those variables aren't met, they are not pumping so you don't get any royalties.

with diagonal boring royalties are paid based upon percentage of land owned in the section. If I owned a quarter section I would have diff attitude about it.

 

[MarkV]

It always amazes what I learn on this site. Do any of you know of any landowners that make any real money from one of these leases? Sounds a bit like the carrot is dangled with ($) and it ends up where most people lose a lot of control over there own land.

MarkV

 

[JohnS]

Thanks for responses,

Muhammed:
I would be very interested in seeing these wells. You can email location and directions, would be fine. Can't remember the name of the rep or company but it is for Phillips, who will do the drilling. Your description of the drilling is allot different than what I was told. He said they would be on a 30-day drilling schedule! Indicated just a small cement pad and pump, when complete. Our road would not survive such pounding. It has a hard enough time each spring with local traffic and the once a day milk tanker.

TresCrows:
From my understanding of the conversation, the $100 per month per acre, was my 1/8 royaltee, for a well that was producing the minimum amount to make it worthwhile to keep it open. Anything less and they will cap it. I have asked for clarification on the calculation and for $ used for the fair market sell price. He mentioned using $5, but do't know the units, cubic ft?

rdln:
One of the items I plan to delete from the lease, is the storage clause. That sounds like all risk and no possible payoff. Also, considering a non-drilling lease, where they would pay for the gas drawn from under my property, but no drilling on it. I have no idea on how acuratly they can calculate such things.

 

[Buck]

Johns,

Trescows was a geologist and I was a geophysicist. I worked for one of the largest domestic oil exploration companies. I explored for gas in West Texas and Southern New Mexico. We'd normally drill 20,000 to 25,000 feet and spend 20 million dollars doing so for a prospect that would hopefully yield 80- 100 million dollars over its lifetime.

I know there are numerous gas wells in NY, but to my knowelge they are relatively small producers.

When we'd get permission to explore or drill we'd never use our own company name. We'd always hire it out so we looked like small timers. If people knew who we were, they'd expect way too much (in our minds).

You might want to make some calls to different local exploration companies and talk to the geologists. Or call Cornell University's geology department. My guess is that they will know what is going on in your area and be able to give you an informed view.

Buck

 

[Robert_in_NY]

Definitly have a lawyer look at it. We had Verizon want to put a cell tower on our land and told us they would give us $20k for a half acre of land. I didn't care for the idea but my father who owned the land considered it and when they sent the contract it was written to protect them. Only thing promised was the money. It was written that when we signed the contract they could build it 1 day from now or 100 years from now so we put a 6 month stipulation in the contract, also it stated that the $20k was for whatever amount of land the town said they needed so if we were to sign it and our town, which has been making it difficult for cell companies to install towers here, said they needed 20 acres for the tower we lose 20 acres of land instead of a half acre and we wouldn't be able to do anything about it. Finally dropped the idea and they put the tower down the road on a different neighbors property that was in desperate need of money to pay his taxes. Utility companies are out to protect themselves and you have to be careful before you sign anything. Good luck and let us know how things turn out.

 

[Egon]

John:
Can't comment on intricacies of the US hydrocarbon exploration policies as the Canadian system will probably be different.
Drilling for a 5200 ft. hole should take several weeks. There is noise but the worst will be when they are pulling pipe or fracing. Site preparation should involve removal of all top soil and leveling the area and installing berms to contain any unexpected fluids from a mishap. There have been cases of contaminated ground water but this is the result of improper cementing procedures. The onsite liquids should all be contained in tanks or plastic lined holding ponds. At competeion this should all be trucked away. Over the years regulations have been fine tuned to protect the environment.
You could also expect service rigs on the hole during the life of the well. These probably present the worst case senario for an unexpected release of gas. If it is H2S it can be exspecially hazardous.
And yes, the roads will get beat up, but the Exploration company should be required to fix them. At times they have to upgrade just to get their equipment in.
Another thing to consider is where the processing plant will be if one is required.
Egon

 

[JohnS]

My water well and that of my neighbors are relatively shallow. Only 60-80' down. But, we have plenty of supply, even in drought years. Contamination is a big concern of mine. Even though they say they will take care of it, if it happens, I need more specifics. I can see issues of having to prove that the well caused the problem. Taking care of it, mean find a deeper water supply with a non-permible layer between the two? or bottled water for life?

I also find it interesting in the lease, that it offers "free" gas supply, if you pay to hook into the system. Another small carrot. Now, I can get a large gas generator and start an electric co-op /w3tcompact/icons/wink.gif.