Although KCC regulations require 10 acres for a drilling unit and 330 feet between a well and a lease line, in Eastern Kansas we’ve been drilling on 2.5 acre spacing for decades. This was based on another KCC regulation that specified in this part of the state a well only had to be 165 feet from the lease line. If that’s the “radius” from the well bore, the diameter would be 330 feet and, if a square, 330′ x 330′ makes 2.5 acres. However, the same regulation did not go on to say that, although a well only had to be 165 feet from the line, wells could be drilled on 2.5 acre spacing. Now, suddenly, the KCC is starting to require operators to apply for “well location exceptions” if they want to drill on less than 10 acre spacing. The trouble is, Eastern Kansas is stripper well country and if you can only drill one well per 10 acres, you may not get enough oil to make “paying quantities” which is required to keep the lease alive (held by production). Even if an operator can get paying quantities, with production being cut 75%, who’s going to want to develop and operate in these parts? This suits a lot people fine because they don’t want oil wells around these parts, anyway. They aren’t thinking, of course, about all the tax revenues the counties get from that unwanted oil. Maybe without all those pumps clogging up the surface there’ll be more development of housing and commercial buildings that will generate more real estate taxes to make up for the loss of oil taxes. One thing seems certain, the landscape is in flux, and the future of oil in Eastern Kansas is uncertain.
Category Archives: General
Oil & Gas Leases
I’m getting more and more calls and emails from landowners wanting advice about a lease they’ve just received from a landman or oil producer wanting to develop their land for oil and/or gas production. These inquiries are a challenge because there are very few short answers. A proper “review and comment” on their lease would involve considerably more time than I can afford to contribute for free, which generally means more time than they want to pay for.
The best short answer may be to click on over to the National Association of Royalty Owners Store and order one or more of their publications. They’re a lot cheaper than an hour of my time. There are several excellent choices, from Look Before You Lease to NARO’s Great Texas Lease Mark-Up Handbook and even Oil and Gas Law in a Nutshell which I think I have on a bookshelf somewhere around here. And, of course, there are a few comments about leases in previous articles in my blog; search for “landowner” or “producer’s 88” or “landowner’s guide”. Finally, don’t forget your friends Google, Bing, Yahoo, etc. They’ll lead you to other websites and blogs with a wealth of information.
I just now deleted a paragraph that constituted my first attempt at this article. It was too vague and nobody would have got the point. I recently came across the website of the Kansas Historical Society, called Kansaspedia. Aside from sheer interest in finding a lot of things I didn’t know about, the site got me thinking about historical perspective. It seems to me it doesn’t much enter into our daily lives any more; our decisions rarely take it into account. Maybe we ought to try to do that more.