What is shale gas and hydraulic fracture?
SIMPLY put - hydraulic fracturing or 'fracking' is the injection of a fluid medium (usually water, sand, and chemicals) into the deep layers of porous rock that force said layer to 'fracture' and release trapped gas. These depths can range from a few hundred feet and extend upwards of four miles deep. The technology has been around since 1947, but has only recently become economically viable in 1998. Conventionally, drilling was performed straight down in the ground, or vertically. With the advent of horizontal drilling, energy producers can explore for and harvest of vast amounts of gas, and in turn, supply cheaper energy and generate astonomical revenues by doing so.
THE SIGNIFIANCE TO YOU, YOU ASK? Want enough money to pay off all your bills & live comfortably? Don't want to slave away at some life-draining 9 to 5 job for it? I thought so! Read on, young grasshopper...
As a landowner, you have the rights to this if you own your land fee simple, meaning you own the surface and minerals underneath. True in fact, you may only own the surface . A title search can reveal this form of ownership if you're unsure. Depending on the state, what may qualify as minerals may not qualify in another. For example, in Pennsylvania, oil and gas are not considered minerals. Unless sepecifically reserved, they cede with the fee owner. Assuming all these variables are in your favor, don't be surprised if you receive an offer to purchase or lease your mineral interests from an energy company or a landman (independent contractor who writes leases and resells them to energy companies).
NOTE: Even if you do not own land, you can buy it cheaply (for pennies on the dollar). You too can be part of this boom. Just scoll over to the 'Land deals & steals' portion of this site. This is where you can become familiar with buying property for its defaulted tax value, thus saving you tens if not hundreds of thousandds of dollards right off the bat!
There are many specifics to an oil and gas lease:
- The term of the lease - negotiable, but many run anywhere between one and five years.
- Questions surrounding how long it should be before work commences should be addressed here.
- A provision should be included for lease termination if work does not begin by 'X' date.
- Keep mindful for language that silently and automatically extends the primary term into a secondary term. For example "Lessor agrees to extend this agreement for an addition period of (10) years if equipment is merely placed on subject property."
- The amount of the upfront signing bonus - This is how much the energy company will pay you for simply signing the lease. These amounts vary for a wide variety of factors, such as nearby current production, data supporting an upcoming boom in a particular location, negotiating ability of the parties, etc. The amounts can range from a few hundred dollars per acre to a staggering FEW THOUSAND dollars per acre.
- Royalties - As the lessor of the mineral lease, you are entitled to a percentage of the monies produced by the extraction of minerals on your land. Some states like Pennsylvania set the minimum royalty rate at 1/8 or 12.5%. This can often amount to FAR more over time than the amount of the signing bonus. Negotiate royalty amounts judiciously - even if it means a lower signing bonus.
- Provisions for pollution control - should an environmental catastrophe take place during any course of operations, who will be responsible for cleanup? Contemplation of the 'what if' is crucial before signing away. Equally important, restrictions surrounding use of fresh water should be addressed here.
- Title warranty clauses - (as in me, myself, and I) I would not warrant anything...PERIOD, and would simply delete the clause. In fact, I won't even warrant that I created this site, or the fact that you're reading it - so there! All jokes aside - I cannot stress enough, check with your attorney first. You can always ask the energy company to verify title and provide a copy of the report BEFORE signing any type of paperwork.
While this list is just a general example of key privisions contained in many standard oil and gas/mineral leases, it is by no means all inclusive, and nothing here should EVER - and I repeat EVER be taken for legal advice, gang! I'll be happy to provide you the links to official resources that you can research for your own interest(s). Should you have any questions about your land or leasing, I ask you to seek the competence of a qualified attorney in your subject property's state. Now that all the legal mumbo-jumbo's been addressed, we can say "okgreatthanxbye", and keep it movin'. Onward!
FORMATION LOCATIONS & INFORMATION.
Antrim Shale - Michigan; located in the northern section of the Michigan Basin.
Barnett Shale - Texas.
Caney Shale - Oklahoma; located in the Arkoma Basin.
Conesauga Shale - Northern Alabama.
Fayetville Shale - Arkansas; Arkoma basin.
Floyd Shale - Northern Alabama in the Black Warrior Basin.
Gothic Shale - Colorado; Montezuma County.
Haynesville Shale - Northwest Louisiana.
Collingwood-Utica Shale - Michigan.
New Albany Shale - Illinois.
Pearsall Shale - Maverick Basin, South Texas.
Chattanooga and Ohio Shales - Kentucky, Virginia, West Virginia, Ohio, and into Pennsylvania (Lake Erie panhandle).
Marcellus Shale - West Virginia, New York, Pennsylvania.
Utica Shale - New York.
Woodland Shale - Oklahoma.
Who are the major energy companies involved with this type of exploration/production?
Below is a list of major players in the field. Click a link to learn more about each company.
Cabot Oil & Gas.
Capital City Energy Group
Carrizo Oil & Gas
Chief Oil & Gas
Dominion Exploration & Production
Northeast Natural Energy
Penn Virginia Corporation
Samson Investment Co
West Bay Exploration
Williams Production Appalachia
OKAY, SOUNDS GOOD, BUT WHO KEEPS TRACK OF ALL THIS STUFF?
Well, lots of entities, of course. First of all, the producers of extractables are required by state and federal law to keep numerous meticulous records. They do so for many purposes. Those purposes range from the calculation of production itself, revenues, profits, royalty payments, and taxes, to the collection of environmental data, legal enforcement, and 'guesstimation' of commercially viable areas to explore in the future.
A great resource to check out is the Inerstate Oil & Gas Commission at
http://www.iogcc.state.ok.us/member-states . This resource allows you to visit and contact the agencies in each producing state. There is a wealth of information about production/environmental records, and legislation in each state.
My thoughts on shale gas...
Through the development of this crucial technology, we have enjoyed (and have yet to further enjoy) the increase in resource availability - which will help to contain energy costs, if not lower them. Furthermore, shale gas provides a great platform for job creation - something we cannot afford to do without in this dismal economic state. Additionally, the benefit to those landowners whose financial lives have completely 'about-faced' due to the wealth generation from oil & gas sales and leasing can only be compared to few other experiences in life, oftentimes unfathomable. Cheaper energy? Jobs? AND MONEY??? "DRILL ON!"
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