Frack and Re-Frack

I’ve wondered at times whether or not these horizontal wells would be re-fracked at some point in the future.  Looks like they will be.  At least, the companies are thinking up ways to do it.  This one involves pumping “diverting agents” into the old cracks at high speeds.  Subsequent fracking would open up new cracks.  Pretty doggone cool.

I bet there are other ways to re-frack, too.  Shoot, it seems to me that you should be able to pump some kind of cement that would dry to be as hard or harder than the rock formation into the horizontal part of the drill bore, let it harden, and drill a completely new horizontal in a slightly different place.  You could use the old vertical part of the well, so you don’t have the expense of a new pad and vertical portion of the well.  That’s just one thought off the top of my head.  It’s a freebie for any gas company that wants to use it.  You’re welcome, guys.

Creative Surface Owner Dealing with Developers

There’s a guy up in Canada who came up with a novel way of creating negotiating leverage with the oil and gas companies.  Back in the early 2000’s he was having difficult with landmen and company reps coming to his door and taking up his time.  He wanted to protect his property from pipeline development.  So he turned his property into a work of art, and got it copyrighted. Now he charges the companies $500/hr to discuss use of his property, and only talks to company presidents.  I’m not sure that would work here in the US, but I don’t know the first thing about copyright law, so maybe somebody else could weigh in and let me know if it might work.  You can read more about it here.

The takeaway from this story, I think, is that knowledge really is power.

Economic Effect of Fracking

Here’s a link to an article from the Wall Street Journal (link goes to a Google search page, as that’s a simple way to get around WSJs paywall) about the infrastructure that is being put in place to handle some of the gas that the United States is producing.  This piece deals with what’s going on in Louisiana.  But large projects are needed in other locations as well.  Putting something as large as a 7000 acre plant in West Virginia would be a challenge due to the hilly nature of our state, but smaller projects could be and are being undertaken.  This is the kind of thing West Virginia could really benefit from.  A large percentage of the minerals under West Virginia topsoil are held by out-of-state owners, meaning that royalty payments won’t be paid to West Virginians in a lot of cases.  We need to make up for that missing royalty money from surface rights, oilfield and service industry jobs, taxes, and industrial development.

Top Leases

I’ve heard that there’s a good bit of top leasing going on in certain parts of West Virginia right now.  So I thought a short post about top leases would be appropriate.

A top lease is a lease that is taken while there is a lease already in place.  A company will top lease when they think that the company that already has the lease isn’t going to do anything with the property.

Probably the best example of this situation in West Virginia right now is all the Chesapeake leases that were taken back in about 2007-2010.  CHK didn’t do anything with a lot of them, and they’ve either assigned them to other companies or are just holding on to them.  Some of those properties they’re holding on to are getting top leases.

There are sometimes prohibitions on top leasing in existing leases; Antero calls it a Right of First Refusal, for example.  It gives them the right to accept any lease that is negotiated on the property while their lease is in place.  They can refuse if they want, of course.  They like to stay in control.  I like to negotiate those out of my clients’ leases whenever possible.

Signing a top lease is a good opportunity for a mineral owner to get some security.  You’ll get a new bonus before the old lease runs out, and get a chance to talk with a company that is interested in developing the property.   For a lot of my clients, their previous lease was the first time they delved into oil and gas law.  The second time around will, hopefully, be a better experience for them.  At very least, it will be more lucrative.