Expert: David Traugott - 10/2/2009

Question
I have a 500+ acre tract in Kansas that is farmed by a tenant & have been approached by a land man whose operator will drill horizontal wells.  He says the horizontal drilling does not interfere with the farming operation and, among other benefits, I get veto power over the location of the surface equipment. I asked about salt water disposal & he said they'd need on, either a new one or use an existing capped well -- should that be a separate negotiation, with compensation in addition to the mineral lease payments? Do horizontal drilling operations present any special problems or offer any special benefits compared to traditional drilling?  Any other things I might consider?  Thanks.


Answer
I would use the form at the link below to negotiate the mineral lease; with 500+ acres you have some pretty strong negotiating power.

http://www.tlma.org/oilgasleasechecklist.pdf

Keep in mind that you can solicit lease offers from additional oil companies; don't rush into this...wait for the best offer.

Also, I would negotiate the disposal well seperately; you can find out what the going rates are for disposal in your area and then go from there.

In Horizontal drilling, the rig does not have to be located directly above the reservoir and this provides some flexibility as to where the well pad can be located.  Also, if the reservoir is running in the horizontal plane, this type of drilling allows for a larger surface area to be exposed in the well bore.  Horizontal drilling usually costs more than vertical drilling; however, the rewards typically outweigh the additional costs involved.