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For a friend.....Anyone have good information and/or links for answers to questions related to lease issues, horizontal drilling adjacent to your land?, Do you get paid?? How, Who, any information or suggestions would be appreciated. Anyone w/ experience dealing w/ leasing their land....would love to hear tips, or best case scenario suggestions. Thanks All
I don't have any links that would be helpful, but I do have experience in the area of leasing and royalty payments (I do mineral/working interest appraisals for an engineering firm).
What exactly is in question? Are there some minerals owned and a well is being drilled in a neighboring Section? Are the owned minerals leased? or is the owner looking to lease their minerals?
Most wells being drilled in the Williston Basin are spaced in 2 Sections (normally 1280 Acres). If you own any minerals in those 2 Sections, you will receive royalty payments on them. It doesn't matter where they are located in the 2 Sections, right on top of the horizontal wellbore or on the other side of the Section. You will be payed the same regardless of the location in the spacing unit.
Likewise, if your minerals are located just outside of those 2 Sections, you will receive nothing. Even if your minerals are only 1000' feet from the well, if you are not in the Section spacing unit, you will receive no royalties.
Leasing is a whole ballgame in itself. The best advice that I can give is to NOT take the first lease offer that shows up in your mailbox. There is big money in lease bonus payments (in some cases it's more than all the royalties that a well will produce!).
If the person has a significant number of minerals that they are going to lease, I suggest that they contact someone to help them get the best lease offer. Many mineral owners have left a lot of money on the table. Once a well is drilled, there is no going back to renegotiate a lease.
Bob...Here's the Question: if wells are situated on an adjacent section, and run horizontally under land where we have mineral rights... do we get royalties? Do we have to approach the company? Any info would be very helpful...the land in question is in Montrail County
Let’s say for example that a well is spaced in Sections 22 and 27 of a township. Any number of wellbores can be drilled in Section 22 and 27 as long as they maintain certain setbacks from the edges of the Sections. If the operator accidentally drills horizontally outside those two Sections or gets too close to the edge, he is required to plug the part of the hole in violation.
In some cases, usually pad locations with multiple wellbores, the surface location for the well will be drilled outside the permitted spacing unit. For instance, a company may have only 1 surface location in the Section 15. This surface location can have 2 wells, one drilled horizontally in Section 22 and 27 and another drilled horizontally in Sections 10 and 15. If you own minerals in Section 15, you will only get paid for the one well spaced in Sections 10 and 15, even though you might have 2 wells on top of your minerals.
If you know where you own minerals, you can look what wells are permitted there. The path of the horizontal wellbore doesn’t matter; it’s how the ND Industrial Commission spaces the well. If the well’s spacing contains your minerals, you get royalties. If it doesn’t, you don’t. There aren’t many exceptions (Units being one of them).
Do you have the legal description of the minerals in question? If you have that, I could tell you what well(s) are spaced there and should be paying royalties.
Generally, you don’t ever have to contact companies about royalties. Before wells are drilled, exploration companies spend a lot of time and money determining who the mineral owners are. These title opinions can be hundreds of pages long. Sometimes the owner of certain minerals is not clear. If this is the case, you may receive correspondence from the people doing the title opinion. You may receive a stipulation that they want you to sign. Read it over very carefully and understand exactly what it is saying. Don’t sign it unless you agree with the stipulation.
Before any royalties are paid by the oil company, they need to fix all of the problems found in the title opinion. Only after all the mineral owner disputes are settled and everything is recorded will the company begin to pay mineral owners. Often, because the issues can be complex, this can take a long time. Mineral owners may not see any royalty checks for months (or in some cases more than a year) after the well is completed.
You can look at this and see how and where wells have been drilled. Zoom in and you'll be able to see a lot of these go right to a section line and stop.
To find the spacing of most of the wells using that tool, check the "Drilling / Spacing" Box on the right
This will work for 95%+ of Bakken wells. There are some weird spacings on some Bakken wells though that don't show up. To find those, you need to look at the individual well file.
Bob, you are obviously very good at your profession, thanks for a great descriptive explanation. So complicated.
So, essentially, someone may contact you if they are over your mineral rights.....But, couldn't hurt to know all you can about your mineral rights. If it were my own mineral rights, I'd want a good attorney. Or Bob.....would that be something a person would contact your agency for?? Or do you work for the oil companies??
Now I understand more about an article I recently read about the spacing issues...and that some companies are intending to put from 6-12 wells on a pad...I see a bit more about the why now.
Elk, thanks you for the link....appreciate it.
Bob, you are obviously very good at your profession, thanks for a great descriptive explanation. So complicated.
So, essentially, someone may contact you if they are over your mineral rights.....But, couldn't hurt to know all you can about your mineral rights. If it were my own mineral rights, I'd want a good attorney. Or Bob.....would that be something a person would contact your agency for?? Or do you work for the oil companies??
Now I understand more about an article I recently read about the spacing issues...and that some companies are intending to put from 6-12 wells on a pad...I see a bit more about the why now.
Elk, thanks you for the link....appreciate it.
I profusely urge anyone who thinks they may own minerals to research and find out for sure. Contacts any relatives in area and go to court house if your familiar with it enough to look up more info on it. I am with you Jan and urge people to get a good attorney also! Minerals are leased from any owners before the land is drilled on so everyone should be contacted before that happens, but sometimes it's hard to trace ownership. I just hate anyone to get screwed from what they could have or should have had.
My firm does not do title check. We do mineral appraisals, working interest appraisals, well production and economic analysis, etc. We do not buy, sell, or lease minerals (avoid all conflicts of interest).
Most mineral owners lease their minerals, but some people choose not to lease them and rather participate in the well (become a working interest owner). This can be quite risky but also potentially be a lot more lucrative than leasing the minerals. Of course, you have to have the funds to participate in the well. This is typically $9,000 - $14,000 per net mineral acre (including contingency plans).
If you have decided not to lease your minerals, and a well is being drilled on some of your minerals, and you chose participate, then you pay 100% of the expenses and receive 100% of the income for your minerals. If you owned 20 net mineral acres in a 1280 acre spacing unit, you would then have a 0.015625 (20 / 1280) interest in the well. Compare this to if you leased at a 3/16th royalty. If that was the case, you would have a 0.002929685 (0.1875 * 20 /1280) interest in the well. Clearly there is a lot more potential if you participate. However, if you lease the money is free and clear; there is no risk at all.
If you chose not to lease your minerals and also chose not to participate in a well, then you are classified as a non-participating owner. This doesn't happen very often, and it rarely works out in the best interest of the mineral owner (see I-12 in https://www.dmr.nd.gov/oilgas/rules/rulebook.pdf for more information). I don't think I'd reccomend this to anyone.
Like Broncogirl says, if you are comfortable with it, you can do the title research on your own. However, many people find this difficult and need help. A good landman can go through the records and tell you what you own.
How much research you want to do (or pay someone to do) likely depends on how many net mineral acres you think you own. If it's just a couple fractured minerals, it's probably not worth paying someone to do it. If it's hundreds though, it is a worthwhile investment. This is especially true if you are thinking about setting up a trust.
Wow..........Thank goodness we don't practice that type law where I work. Bob, you are a wealth of information. I know that you have provided enough for folks to be able to approach this subject w/ some knowledge and understanding. I really appreciate your input. Thank you.
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