Industry sign banking north dakota lease template computer
good afternoon privilege for me to be here with you today our discussion so far today have focused on questions arek interest to our communities some of the challenges and some of the opportunities that we face collectively microphone come on help okay I will not ah again good afternoon is today our discussion so far have focused on the issue questions and challenges that are offered that our communities things and we see this mineral development occurring we're going to switch gears for just a few moments this afternoon and think more about what are some of the more individual questions that we might encounter so we're going to be talking about mineral Leasing and some of those questions already came up this forenoon and you do have index cards at the table and I would ask you to change your questions down as you go through the discussion I don't intend to take the full 45 minutes for presentation I hope to spend a few moments just introducing some topics and then we could spend remainder the time answering your questions so please don't hesitate to use the cards on the table write down some of your thoughts and your questions and we use that as part of our discussion our focus will be on mineral Leasing and to get going with our discussion just some very basic foundation or assumptions and we will be thinking about our agricultural land land that we use for crop production for livestock raising the mineral that we're talking about primarily is our crude oil there will be mineral developer and a pit bull owner and their initial relationship will be in the form of a mineral lease and we'll set some part time now this afternoon trying to answer questions that you might have opment releasing need to understand that mineral lease is negotiable mineral lease is a contract and like any contract it is entirely negotiable there is an assumption sometimes that there's a standard mineral lease and this is going to be the document that's offered to the mineral owner and the mineral owner really has simply the decision of do I accepted or do I reject it that's not a correct assumption there is no standard mineral lease contrary to what might be sometimes implied it is a contract it's entirely negotiable and now we need to be ready to enter into those negotiations with in your packet there are two documents one of them is several pages long it's just a brief overview of the topics up we're going to be thinking about for the next 45 minutes the second one is a printout of the Middle East that the state of North Dakota uses yes our state have one of our federal government old mineral interests and these mineral interests are being developed belong with the privately-owned mineral interest so North Dakota is no different than those of you sitting here in the room today with mineral interests you need to leave some out if you intend to have that development or at least you need to be somehow involved if your minerals are being developed I'm not saying that North Dakota mineral needs is the one that you should use I'm simply saying it is one that the state apparently uses it's available on the internet and it gives you some insight into some topics that I would urge you to think about if you are the mineral owner and you are entering into negotiations for been released so I offer you that just as some additional background information the mineral ranks as many of you already know may not be owned by the surface owner so we end up with multiple parties involved with this mineral development we have the surface owner we have the mineral owner we have the mineral developer we may have a tenant that is actually leasing the surface rights from the surface owner and this tenant is the one that's producing the crop or grazing livestock and there might be multiple oil companies or mineral developers involved because the company that first enters into that mineral lease with the mineral owner may not be the company that actually produces the minerals may not be the company that drills a well and then operates the well for the years into the future so there's multiple parties involved with mineral leasing just some of the terminology a lot of this is based on our North Dakota statues the minerals are really talking about oil and natural gas most of our focus will be on oil the mineral estate is that legal ownership right that legal interest in the minerals that are under the surface of our earth we have the mineral order the person who owns at mineral estate again these terms and this these definitions are drawn from the North Dakota statutes we have the mineral developer the person the oil company that acquires the right through a mineral lease to actually develop the minerals we have to serve a state that is the legal rights associated with the ownership of the surface of the land and then of course we have the individual that holds that surface a state that is the surface owner so those are some of the terms are going to be using this afternoon we sometimes use a slightly different terminology but it's at least gives us some common basis for our discussion even though general development is a private activity between individuals such as the mineral owner and the mineral developer there is still public oversight and in North Dakota there are four agencies that I want you to be aware of that have a role or responsibility in our oil and gas industry the major player is the North Dakota Industrial Commission and this has already been mentioned today that the Industrial Commission is responsible for the oversight of our oil industry it cracks permits for example to drill wells it is involved with the oversight of the operation the drilling operations it's responsible for oversight of the ongoing production of oil wastewater disposal that wastewater that's created during the oil production all of those type of issues are within the responsibility of the Industrial Commission the North Dakota State Water Commission's involved mineral development takes tremendous amount of water it takes water during the drilling it takes water for the fracking process which we'll talk about a few moments and I'm sure meeting you've heard about and it takes water during the ongoing production of the oil in order to have enough water to need a water permit and the North Dakota State Water Commission is responsible for administering those prevents one thing that you need to take home with you day is all the water in North Dakota is owned by the state of North Dakota take watering your stock pop the water under your land the water in the rivers all the water North Dakota is owned by the state of North Dakota we can go to South Dakota you'll find a similar statute there all the water in South Dakota is owned by the state of South Dakota we only have permission to use our water you have permission to use a state-owned water that's in your stock pot you have permission to use from the state to have a well to draw water to the surface to use for your own purposes of domestic purposes for your livestock all the water is owned by us collectively distinct so I need a permit from the state to use water for an industrial purposes such as mineral development the State Water Commission is highly involved with that aspect of our energy industry the Department of Health is responsible for overseeing the disposal of waste water and we're all familiar with the Clean Water Act that comes from the federal government is actually administered by the state government however when it comes to mineral development much of the oversight of disposal of waste water has been sexually delegated to the Industrial Commission so we do have a combination of state agencies here at Industrial Commission and Department of Health involved with how do we handle the water that is now being disposed of after it's been used in energy development in oil well drilling for example the Department of Agriculture does not have any direct administrative responsibilities but into 2011 legislative session the legislature obligated the Department of Agriculture to provide mediation services to try to mediate disputes between a mineral developer and a surface owner this deviation service actually goes back into the 1980s and some of you might recall this at the time in the 1980s when there were some difficult financial times in agriculture and the legislature is obligated the Department of Agriculture to set up a program to help arbitrate or mediate disputes between lenders and farm borrowers well that service continues to be available through the Department of Agriculture and it was the 2011 legislature that expanded that responsibility that the department of egg also please be available to help mediate disputes between surface owners and mineral developers and the Department of Agriculture is working very aggressively at this time to try to make sure that it's ready to provide that service so these four agencies are involved with our energy industry just very briefly some technology that being used if you people are familiar with this more familiar perhaps than I am but the technology of horizontal drilling is opening some opportunities for our audible industry that wasn't available several decades ago and horizontal drilling a few people perhaps understand you start with your traditional very cold bore and we're drilling down about 10,000 feet in North Dakota and then we turn the drill and week or horizontally again oftentimes about another 10,000 feet so if you were to look at the map that the Industrial Commission continues to update as to the drilling that is occurring in North Dakota you can see little black dot for the older wells that represent the well just go straight down and then you're going to see a little black dot with a line drawn off of it on the board fired well-to-do or wells that represents here's where the hole is drilled and then here's where the horizontal boring has occurred and that hob the second URL that's listed on this slide is the actual website that has the map that the Industrial Commission is maintaining so public information as to where the oil wells are it shows all roughly twenty one thousand that have been permitted in North Dakota in the last 40 years 50 years against 60 years already and then of course the newest wells all have a little black line drawn out from the dot to indicate the horizontal drilling what's the significance of that well by the time you drill horizontally for roughly two miles you will slightly have encountered several mineral estates I own a small part of it noticeable part of it another neighborhoods small part of it and when the pump is then operated with the well is operated with oil being drawn to the surface the challenge becomes whose oil is it and the Industrial Commission now takes part of its responsibility to try to do its best to make sure that the oil being produced from this well being appropriately allocated above the mineral homers so as we use this technology we are perhaps making our lives are more complicated at the same time we're accomplishing more production of our minerals of our oil fracking repair this in the news again is a technology that's been around for several decades but it's being widely used now in order to code what's the purpose of it well we have rocks in North Dakota that don't let loose at their oil so we need to go down there we need to crack those rocks we need to fracture them in order for the oil to them flow to the actual well more so that the oil can be brought to the surface and again this is a process that requires tremendous amount of water and I'm swear a lot of these trucks around the road they're hauling the water to these well sites so that the well if you drill the well can be produced as well as that we can frack the geological strata below the surface so that we can remove the oil so fracking is another technology that I'm sure you're familiar with puli pulling goes back to this idea that there are likely several mineral owners represented in each of these wells that are being drilled and being and we're is occurring so the Industrial Commission working with mineral companies have the responsibility of trying to figure out to the best of everyone's ability who has which mineral rights within this area that being produced we pull it and then each mineral holder is entitled to their percent based on their mineral estate that's represented within this space that the well is drawing from and we refer to that as Puli unitization is again the idea of somehow trying to manage the wells collectively a unit is larger than your spacing unit that we have similar terminology here we have well spacing unit that deals with pooling and then we have the large geographic area who are we trying to unit eyes the management why do we do this while when you have several wells going down Jason to one another have you pump the oil how the one that affects how oil flows to the next well and can we manage the wells in such a way that we can reduce the number of wells that need to be drilled can we manage the wells in such a way that we can remove as much of the oil as possible also we're not losing the opportunity to harvest some of these minerals there are times we're not doing it much yet North Dakota but it might be coming where we're going to be pushing things down one well in order to create pressure underground to push the boil over to a second well where it can be drawn to the surface well if I am the mineral owner and things are being pushed down this well and this oil being pushed over this then pulled up over here and I'm not sharing in the production of this well that's a little frustrating so can we begin to think about a larger area in which we have some type of collaborative managing over this entire unit so that we can again increase maintain efficiencies of our production enhance the overall production and still keep the distribution equitable the Industrial Commission has this responsibility as well so the Industrial Commission is involved with these type of oversights of the production within our oil industry there are times and people are frustrated saying that golly can there need more oversight of the oil industry is North Dakota doing as much as it can I'm not going to get into a debate on that particular question but I will indicate that North Dakota's doing a pretty good job compared to some other states there are some other states where they oil industry was occurring several decades ago and the state didn't have a chance to really get out ahead of it yeah the world's not perfect but I think our state's do a pretty good job of trying to address some of these issues ahead of time wild captain in the past we didn't know for sure where the oil so it wasn't an uncommon practice that you drill well and see what you hit if you hit something great if you didn't you call it a dry hole you plug it and we move on to the next location in the past and we didn't know for sure where the oil is located I don't know times you may be had about a thirty percent chance of hitting oil you might even been less than that you're doing an awful lot of wild caddy just drilling holes trying to see what you hit well with the technology we have today the number i hear is about ninety seven percent of our wells are producing we know what's down there we know where it's located and forget it so this idea of this high-risk oh we're not sure what's up there are surface that's disappearing over the last couple of decades so this idea wildcat drilling it just doesn't happen quite as much anymore we have a pretty good sense of where this oil is ok we heard earlier this morning that we have technology now that's allowing us to drill a well and less than a month and then we move on to the next thought and they're about ninety-seven ninety-eight percent them in North Dakota are now hitting loyal we know where the oil is so that is again changing our industry that also begins to impact the mineral leasing and as we talk about leasing in a few moments if I'm the oil company I'm not going to enter into a lease until I go home to drill a hole because I know once I drill hole chances are remedy a boil so if you are holding on to mineral interests an oil company may not be intere
ted leasing your land until the oil companies ready to drill well there's no reason to not like we had 30 years ago there's not much a reason to lease land up ahead of time but that's open to debate as well so just some terminologies of thoughts so if you start talking about the mineral lease and here again we're talking about the relationship between the mineral developer and the mineral estate owner an important part of the Middle East is what is referred to as the primary term it's a period of time it's negotiable everything's negotiable but I'm going to say as a general rule it might be three to five years during these three to five years during this primary term the mineral developer is granted the right to explore for mineral drill for minerals and at the hip oil they have the right to produce the oil if they hit boil the lease is extended for as long as there is production and that brings us to this idea of an extended lease so I enter into a five-year lease for my mineral rights for years into that five years the mineral company drills oh well it hits the oil it begins to produce the oil and as long as that oil continues to be produced subject to that initial nice that might be another three years 20 years 30 years into the future as you negotiate these leases yes you are going to think about the primary Turner oftentimes of a few numbers of yours three to five years again is really common but I would urge you negotiate it as if it's a 30-year lease because the chances it will be the oil companies not going to lease it until they're ready to drill the well and when they drill the well there's a ninety-seven percent chance they're going to hit oil and that lease is going to continue as long as be not negotiate those been releases as if they're going to probably outlast you questions comments but as I can't read into of lease with the mineral company and I'm waiting for them to come forward and explore and drill and big introduction I want some type of a promise from them that they are actually going to do this I don't want to lease my land to an oil company and then that love company no longer is interested my land but my land is still tied up my mental interest is still tied up because it's subject to this lease for the next three to five years so I'm going to look for some commitment from this company that it will pursue exploration and development of the middle just hasn't been run over that's where my revenue comes in I don't get a heck of a lot of revenue waiting for the oil company to be introducing so there are implied covenant I want to have those specified in the lease agreement in terms of this is what I expect you to do oil company after I've entered into this Lisa treatment because I'm interested in having you see if we can get my minerals developed how much oil needs to be produced in order for this oil well to be considered introduction well there is no specified quantity of so many barrels per day or so many barrels per month instead we use a very general terminology and you'll see this in the state lease for North Dakota it's in commercial quantities or paying qualities there is no necessarily specifying number as to how much production has to be there well why is this important though oil developer drills the hole they pull out a little hold up they say well we're really not a very good well maybe we're pulling out a little oil but we're not going out much oil so we're not going to continue to produce this particular well well is the mineral owners say wait a minute if you're not pulling it out I'm not receiving any revenue from it are you sure that is that portable valve or is the wealth been done has been drilled the oil being produced and now we're 20 years down the road and now not quite as much boiled being pulled out of this well as in the past but at what point do you shut down the well because remember when you shut down the well the lease ends and then I can go ahead and watch the lease dance i can go ahead and lease it out again to somebody else if somebody else is interested in trying to produce oil there the second coil company things i can produce oil that the first oil company wasn't able to produce so now we begin to think about what is this commercial quantity or paying quantity because it determines whether or not this lease is being extended into the future and even the state of North Dakota as you see with the sample lease in front of you doesn't specify its quantities in such as so many barrels per week it is just simply a term of commercial quantities so it's an uncertainty right if the shedding royalty you're going to see this mentioned on occasion is the idea that the oil well isn't producing as much as we'd like to have it produce so the oil company is not going to operate it at this time well if you're not operating it I want you to release me from my lease so that I can lease it to somebody else a lot of company goes wait a minute we don't want to release you maybe it will come back and look at later turn this well I'm gonna get well if you're going to shut the well off for a while and then turn it on again in the future I want to be compensated during this time that had shut off when you have shut in this well maybe some royalty in order to keep me interested in continuing the least to you even though you're not producing in the oil at this time so these are some of the ideas that begin to be negotiated between the mineral owners and the mineral developers in terms of witnesses least begin more importantly with us the least and we've already talked about pooling and unitization that's often mentioned in the leases sometimes the lease offered the lease agreement offered by the mineral developer essentially says that the mineral developer the oil company will make those decisions and alternative for the mineral owner is to strike out that type of language or to essentially say null will rely on the Industrial Commission to take care of those details for us instead of you the oil company taking care of those details and again the Industrial Commission in North Dakota is authorized to handle those issues and guster of commission in North Dakota is handling many of these issues with all within our own oil industry and so those are just some terms to be thinking about in the mineral lease I'm not going to go over all these today I have not yet begun to discuss the question of the relationship between the surface owner and the mineral developer I think I've given you enough time to start asking start formulating your questions so now let's spend some time answering your questions you have some questions written down or do you have some questions that you'd like both are directed to from the audience you guys have a question we have one right here okay how close are we to having oil production in this region nobody knows for sure yet is it coming while we've heard and suggested that it might look like a herd of buffalo coming at us is it going to be here in three years it can be here seven years I don't think anybody knows yet did we expect it to be rapidly occurring in Western North Dakota 10 years ago did we foresee it coming at that time probably not there may have been some that saw that it was coming and going to view that understood the industry bones off but in terms of be named say it's going to be here three years from now it's gonna be here six years from now I don't think anybody is in position to say where we're going to be invented but there are some people who are banking on it this question is how most people we were thinking about it could you address the issue of these companies were coming in attempting to a purchase mineral rights at low cost with the idea of speculating and making more money in the future and we have had a few those people in the area this forenoon as we talked about community issues there was a comment about sometimes we need to be patient and I would deliver the same message are the people who have mineral interests it's tempting to jump in quickly the money can be very attractive I would urge us to we heard the word read this morning you read this afternoon but be patient way to hear it's difficult at times to pass up that offer but if there are minerals to be produced the offers will be there again in the future and they'd probably be more attractive however if you have an offer and you carefully review it and you're confident with that you understand the offer and you are comfortable with the compensation being offered for you but i will say try to exercise a little patience you already expressed the bindles rights rubber gonna live is up if you had several severed mineral rights how can you recover them by the estate so the air is can happen North Dakota has a statute that talks about the severed mineral rights where they severed from the surface and North Dakota has a statute that the minerals have been inactive have not been used for the last 20 years the surface owner can begin a process of reclaiming or claiming the ownership of those mineral interests so you own the surface you don't own all the mineral rights nothing is occurring with respect to the mineral rights you don't think anything has occurred with respect to the mineral rights for more than 20 years the north dakota statute says you can start a process can notify the mineral holders to the best of your ability of identifying them your best ability nullifying them you publish a public notice slightly in the county paper and you give the mineral owners an opportunity to come forward if the mineral owners aren't coming forward the next step in the process for the surface owner is to go to your local court and to initiate what is known as a quiet title action and in this part proceeding if the judge is convinced that these minerals have not been used in the past 20 years if the judge is convinced that theme you've made your efforts to notify the mineral owners you've had your public publication public notice in the paper the judge will then order that those mineral rights are yours as the surface longer North Dakota has a statute in place then in place for probably close to 20 years now I'm not sure how often it's being used I'm not sure how often surface owners are trying to use it more importantly it has not been litigated I won't guarantee that is constitutional and there's a number of people that say you know and this one gets into the courtroom it's dropping to be ruled unconstitutional we don't know that yet it has not been litigated i sold my labs to close ugly but i didn't have to give him my other mineralized only the clothes no nothing has been done for 20 years I don't suppose with them are they allowed to take the mineral rights anyhow even though they didn't take them from me okay what you need to do if you are the little older and you don't want to lose your mineral rights you need to show some type of use of those mineral interests if you would have leased the mineral interest to a mineral company clearly you're demonstrating that you're using it the provision that North Dakota law also provides is that the mineral owner can file a statement of claim you just file this one Pig statement of claim with your County Register of Deeds so it becomes a matter of public record I recognize and i'm the owner of these severed mineral rights and i intend to continue to act like the owner and this is my public notice to the whole world because it's public information that i have filed my claim that i will continue as to act as the oh these mineral rights so there is a statement of claim that is available and I would urge you if you are the mineral owner severed mineral rights and you have not had any other activity with respect to your mineral rights and you want to preserve your rental rights file this statement of claim with the County Register of Deeds other questions yes what's the time frame the mineral company is on this land because one of the other mineral owners threat to the lease that other lease would control the time period so if the 70 hold fifty percent of the severed mineral rights that's all they own they granted to lease to the wild company the other person has the surface rights and the remaining interest in the mineral rights and the first person has granted a lease to the mineral developer this is the only lease in effect and that is the lease that will then set the timeframe for the mineral developer so if this was a four-year lease the mineral developer has four years to drill it well other questions over here yes is there your vision within a lease that the mineral developer has permission to online drill within certain geological formations you can negotiate that into your we have some oil at 10,000 feet and we have some oil at 13,000 feet and who knows what we have below it and I move I own the mineral rights from the surface of the earth to the center of the earth and I'm enter into a lease agreement but mineral developer I'm gonna give you privilege of drilling and searching the first 11,000 feet and if you want to go below 11,000 feet you don't have permission to do that if you want to go below 11,000 feet I'm going to require you to come and get a second lease to go from 11,000 feet down to 17,000 feet is that legal yes is it something to think about yes is a widely happening the north I don't think so I would urge mineral owners to begin thinking about how far down are you granting the leases the lease agreements generally just imply that's going to go all the way to the center of the earth but with what we're learning about our geology here in Western North Dakota i would say guess what this mineral lease i'll give you the first 11,000 feet if you want to go below 11,000 feet come on back and talk to me a second time I brought that question up to the Industrial Commission last week when I had a phone conversation with one of their staff members just to make sure that I was understanding going on in North Dakota mentioned that particular topic and he said well that's really not happening yet that doesn't mean it can't happen you can go ahead and lease your minerals in stress other questions hey when you have multi owners of the lease kent one owner wants to lease it out can the other stopping know if several of us call home the mineral interests any one of us to go ahead and lease our minerals are portion of the minerals let's say i have thirty three percent of the interest of the minerals itunes least by thirty three percent to mineral developer the mineral developer can come on to the surface land and explore and develop the minerals and if the minerals are struck in the oil is being produced i release my interest again by one third of what the middle owners are title tube and the other juicers of what the mineral owners aren't imma tube will still be paid to the other two-thirds that habit lessor mineral rights they are entitled to their share of the compensation but they cannot stop me from leasing out my one-third cannot stop the mineral company from developing it already yes that is their share the same the answer is not necessarily baba giving you a more complete answer I'd encourage you to take a look at the handout that I have 28 pages and let me see if I can turn you to the page that you're asking about middle page five and then on to the top of page six under the sub topic of does a middle of owner have to a 3-2 mineral development the amount of royalty that the non leasing mineral holders will be C will reflect the Royal team that was agreed to in the mineral leases accept a cap be less than sixteen percent according to our North Dakota legislature so if the minimal arm who lease their portion lease it for a twelve percent royalty interest the North Dakota law would say the non lessee mineral owners are too a minimum of sixteen percent if the mineral owner who leaves their portion for twenty percent the North Dakota statute would essentially say use that twenty percent it's never simple it's never simple yes so the Nandi sympathy can't negotiate their own B's did certainly can they can go ahead and negotiate another lease for themselves if they want to you can always go ahead and negotiate your own lease for your interest yes and if you want the surface owner an
the mineral rights are sold what are your rights and how do you enforce them now we're on page galaxy now we're on page six towards a lot of compensation for surface it's helpful to think back on the historical perspective of how this question has been answered in the past the mineral s taken dominates over the surface estate that principle has been in our legal system for perhaps several centuries perhaps even extending back into our past in England and Europe and in Europe as those legal concepts came across the Atlantic Ocean as the Europeans began to move these North America what does that mean surface owners you cannot stop the middle owner from coming onto your land to develop their minerals mineral homers Pavley right and drops of the land to develop their props rights which are the minerals historically as to the question are the surface owners to be compensated the answer was only if the mineral development cause unreasonable damage if the mineral developer came on to the little surface lands and we're just reckless and how the minerals were being developed that are reasonable damage to the surface is all that the surface owner would be compensated the surface owner would not be compensated for reasonable activities North Dakota select nature's trying to change that North Dakota's legislature has enacted statutes that says surface owners you are entitled to be compensated for all damages to the surface and that is what is explained beginning on page six North Dakota's legislature has at this time not expect this statute is going to be tweaked in 2013 who knows for how many sessions into the future but as of today the North Dakota statutes specify two types of damages the legislature is defined with the call damages and disruption and those are to compensate the surface owner for lost land value lost use of and access to the surface owners land lost value of improvements caught by drilling operations the second category is loss of production loss of production is intended to compensate the surface owner for loss agricultural production and lost income caused by oil and gas production and completion operation completion operations is with the well is no longer producing then the well site is being teed up the loss of production is to be paid annually unless the surface owner agrees to something different so we have these two broad categories and definitions are no the language is not without dispute terms of what all the definitions mean well how is this enforced the legislature requires that the mineral developer provide at least a 20 day notice to the surface owner and within this notice that within 20 days come onto your land within this notice the mineral developer is to offer compensation there's to be an offer of settlement the surface owner then has the right to decide whether or not to accept that offer and if the mineral owner excuse me if the surface owner does not accept that offer of compensation well I believe the statue gotta say it but i believe the mineral development go ahead after 20 days i'll give you a 20 day notice i'll give you an offer you don't agree to it I'm going to come onto your land after 20 days anyway the statute then goes on to say if there is no agreement between the mineral developer of the surface owner surface owner you're free to commence a lawsuit well we know how expensive it is to resolve things through litigation it was at this point in the thought process that the North Dakota legislature said can we find a inexpensive way to mediate some settlements between the mineral developers and the surface owners and Department of Agriculture guess what you got saddled with that test questions yes if we go well stay on this poor girl am and yes any of the surrounding the border that fool words it just where they drove to yell are the only ones that get okay you got two questions there welcome down and it's generally not going two miles so if we think about this track land being a wild wide in two miles long we have 1280 figures we have two sections the standard practice right now is at all 1,280 acres go into the spacing unit to be pooled okay so what we see in Western North Dakota right now there's an awful lot of wealth being drilled roughly one for every mine and the purpose that is as soon as you're drilling and producing you've tied up all 1,280 acres okay how many times are we going to have to drill horizontally to drain this 1,280 acres the best of my understanding is you've come on down and you go horizontal and you frak it and you start pulling the oil out you're copping to pull oil for about 300 feet on each side of the line so one more is going to be good for about 660 feet so in order to drain this full mile wide area we're going to need eight horizontal or eventually this is my non-scientific guess nobody's given me a firm answer but legally absolutely come on down and you go once we've tied up all 12 13 okay that was your first question your second question then is the first half mile all these two miles is owned by person a the next half miles on my person be that second mile is earned by owned by person see a has entered into a lease but the well is drilled is drawing from a B and C that's when we go back into the puli and we figure out that this well withdrawing from all 1,280 acres see you're entitled to half of the royalty be because you own one mile on that two mile area B you are entitled to twenty five percent of it because you own half a mile out of that two mile area and a you're entitled to your twenty-five percent for your half mile out of that two mile area as well that answer your question very simple explanation that I overlooked awful lot of exceptions every good general rule as many exceptions I just gave you a very general rule
