How does a mineral interest owner know that their mineral interests are protected? How do we know the pool isn’t under our property? How does the operator know where the hydrocarbons are located in the subsurface?
Before drilling operations commence, an operator will normally perform a seismic survey to investigate the geologic conditions in the subsurface which may potentially hold hydrocarbon deposits. The data is then analyzed to assess the possible location and depth of the hydrocarbons.
The state of Idaho has requirements in Idaho Code and Administrative Rule for setbacks from the unit boundaries. If there is a question regarding a proposed well and the possibility that the hydrocarbon deposits being tested by the well fall outside the unit boundaries, the department can deny the requested permit, ask the operator to re-position the well, or request that the operator to submit an application to modify the size or shape of the unit to encompass the limits of the pool.
How are the lease terms determined for an oil and gas integration?
During the Evidentiary Hearing for an integration request, and as required in statute, the operator submits a proposed form of lease which includes the lease terms. At the hearing, other mineral interest owners within the unit who are to be integrated may submit alternative lease terms, along with evidence to support the reason the alternative terms should be considered for integrated mineral interest owners.
The 2023 changes to the statute have codified the types of terms that will be considered in an integration and sets minimum requirements for those terms. This means that as a result of information presented at the Evidentiary Hearing, it is possible that greater terms could be determined as more appropriate. But the changes cannot be less than those provided for in statute.
Can an integrated mineral interest owner who also has a surface interest have a facility such as a pipeline riser placed on their property?
Yes, but the 2023 changes to Idaho Code have added language that the operator shall avoid, to the maximum extent possible, all surface occupation on an integrated mineral interest owner. Previously, other than existing setbacks from occupied structures, highways, and surface water there were no limits on placement of surface facilities.
How much does Payette County and the City of Fruitland receive in oil and gas royalty payments?
Idaho Department of lands does not track royalty payments made to cities and counties from oil and gas sales. That information can be obtained by contacting the city or county directly.
Per Idaho Code, a 2.5% severance tax of the gross income received by a producer on the sale of hydrocarbons produced in the state is to be paid. 44% of the 2.5% is to be paid to the country from which the production occurred, 28% of the 2.5% is to be paid to the cities within the county. According to reports published on the Idaho State Tax Commission website, $88,558.92 was distributed in severance tax payments to cities and counties in Fiscal Year 2022 (July 1, 2021 to June 30, 2022).
If only one well can be drilled to a pool, why are there three wells in the Barlow Unit?
As a result of analyzing the seismic information and geologic data from new wells drilled in the area, the operator has determined that three separate pools, or hydrocarbon deposits occur within the 640 acres of the Barlow Unit. The best location for producing each of the deposits is positioned such that one well is not able to drill to each one of the pools. State statute allows for only one well to be drilled and capable of producing from each pool. Thus, the operator requested to drill one well to each separate pool within the unit.
With modern drilling techniques an operator has the ability to directionally drill a well from one surface location to different pools, but at an added cost versus drilling a straight or vertical well. Drilling from one location, or well pad, is desirable because it minimizes the surface disturbance associated with drilling and production operations.
Are there different lease terms for an exploration well versus a production well? Can a mineral interest owner re-negotiate those terms after an exploration well is drilled?
When proposing a well, an operator hopes that producible hydrocarbons will be discovered regardless of whether or not the well is deemed an exploration well or production well. As such, the lease terms will be negotiated before the well is drilled under the assumption that the well will produce, and royalties will be paid to mineral interest owners as a result. It is not common that lease terms will be re-negotiated after a well is drilled.
How do the statute changes as a result of HB0120 affect a property owner’s ability to seek damages as a result of oil and gas activities?
The 2023 changes in Idaho Code state that an integration order does not inhibit the right of mineral interest owners to pursue claims against an operator for damages to person, property or water rights.