A notice with a date on it
A company sent you a document about a unit. Here is what it is.
Horizontal wells drain several tracts at once, so before drilling, an operator gathers the tracts into a unit and writes to every owner in it. The letters look alike and all have dates. They are five different documents, and what signing or ignoring each one does is different. Find yours below.
- First
- Work out which of the five documents you are holding. The heading usually says.
- Second
- Confirm you own what it says you own. A notice is addressed to the records, not to the truth.
- Third
- Answer by the date if it is an election or a Commission notice. Those change what you get, not whether the well is drilled.
The five documents
A lease offer for your tract in the unit
You are unleased and the operator wants a lease before it drills. This is a normal lease and the lease walk-through applies. The deadline is the operator’s. Ignoring it does not stop the well; it means the next document you get may be a cotenancy or Commission notice instead.
A pooling or unit ratification
You are already leased, but your lease does not clearly allow the operator to pool your tract into a unit, so it asks you to sign a ratification or amendment. Signing lets the unit include your tract and you are paid on your share of it. Ask what you are given in return and whether the amendment changes anything else in the lease. Have it read before signing.
A cotenancy election
Your tract has several co-owners, and the owners of three quarters of it have agreed to a lease. Under a 2018 West Virginia law the operator can proceed, and you choose: take a bonus and royalty on the same average terms the others accepted, or share in the well’s costs and profits as a working interest owner, which few owners should do. Not answering usually means being treated as taking the first option, with the money held for you.
A unitization notice from the state
Under a 2022 West Virginia law, an operator can ask the Oil and Gas Conservation Commission to add unleased or unwilling tracts to a horizontal well unit once owners of three quarters of the unit’s acres have agreed. You receive notice of the application and a chance to be heard. If the unit is approved, you are paid a bonus and royalty at the unit’s average terms. The notice has a response date; this is the one to take to an attorney promptly.
A division order
The well is drilled and producing, and the operator states your decimal share of it for your signature. Check the decimal against your net acres and the unit’s size before signing. Getting paid explains how.
Before you answer any of them
Questions owners ask
Does a unit notice mean they are drilling under my tract?
It means your tract is inside the unit the well will drain. The well itself may sit on a neighbor’s land; you are paid on your share of the unit’s acres, not on where the wellhead is.
Can I refuse to be in the unit?
You can object, and a Commission notice gives you a hearing. But once the three-quarter thresholds are met, the law allows the well to go ahead. Refusing changes what you receive and how, not whether the well is drilled.
Should I elect to participate as a working interest owner?
It means paying your share of a well that costs millions, in exchange for a share of the revenue instead of a royalty. For nearly every individual owner the answer is no. Ask an attorney before choosing it.
Is a ratification the same as a new lease?
No. It amends an existing lease to allow pooling. But amendments sometimes carry other changes. Read the whole document, and compare the royalty and deductions language with your original lease.
Would you buy my interest now that a unit is forming?
A tract in a forming unit is one we can research and make a written offer on, with the unit terms as one of the stated assumptions. The screening comes first either way, and you are never asked to decide by the operator’s date.