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A Practitioner's View Of Subsurface Rights In The Appalachian Basin: I Know Where I Want To Go, But How Do I Get There If I Can't Call Uber--Drilling The City Of Pittsburgh

Donald T. Dulac, Jr., Oil & Gas Agreements: Surface Use in the 21st Century (May 2017)

This paper explores existing case law in the principal shale producing States of the Appalachian Basin - Ohio, Pennsylvania and West Virginia - with a brief discussion of emerging Texas law, concerning the scope of subsurface rights and the interrelationship between subsurface rights and the rights of surface owners and the owners or lessees of affected mineral estates, whether coal or oil and gas.1 In the not-so-distant early days of acquiring a resource play in the Appalachian Basin, a lessee-operator could acquire a significant acreage position comprised more or less of contiguous lands. While there was always some competition for leases, there was plenty of acreage available and an operator's exploration and production activities rarely impacted another operator. Wellbore lengths2 were significantly shorter than they are now, well pads only contained a couple of wells and an operator could conduct its activities with relative autonomy. But as oil and gas development in the Appalachian Basin, or at least in certain parts of the Appalachian Basin, has matured, operators are finding that parts of its oil and gas reserves are becoming inaccessible unless the operator can obtain access to those reserves through subsurface strata and mineral formations the operator does not own or lease.3 Not only does the operator not own or lease the third party property needed to access the operator's reserves, more likely than not the oil and gas underlying the third party property are leased to one or more other operators (who are competitors for leases). In many cases, drilling multiple laterals of significant length off of a single well pad forces the operator to start the next lateral in a direction that can be 180 degrees from the geographical location of the targeted reserves, in an effort to "go around" the existing laterals drilled off of the same well pad or to access more of the minerals comprising the targeted reserves. In going around these other laterals, the new lateral may need to penetrate and traverse subsurface strata the minerals underlying which are not included in the applicable production unit or subsurface strata that the operator neither owns nor leases. With the advent of producing some Upper Devonian shale zones of lesser depth than the Marcellus Shale, and the increasing practice of dividing and owning leases into different producing formations, an operator may find that it needs to penetrate all Upper Devonian formations and possibly the Marcellus, in order to reach its targeted Marcellus reserves. To make matters worse, in order to reach its targeted reserves, an operator may have to penetrate as many as five seams of mineable coal under the third party property. It's not unusual in Pennsylvania to find that each seam is owned or leased by a different coal operator. This paper is written from a practitioner's viewpoint.4 This paper will provide a brief survey of existing case law in Ohio, Pennsylvania and West Virginia on subsurface rights and the relationship between subsurface rights and the rights of surface, other mineral owners and other holders of subsurface rights. And the discussion will be brief - if only because of the dearth of case law on this subject matter. And because no paper discussing oil and gas rights would be