How deep an operator has to drill to reach the target zone of a formation can vary greatly from state to state. The Marcellus Shale is no exception. Operators are constantly working to determine exactly how deep they need to drill in order to reach their preferred zone for producing hydrocarbons. Operators may elect to only drill to a shallow zone due to the high costs associated with drilling deeper formations. The depths in the Marcellus Shale vary depending on the location and this could potentially have implications for mineral owners in these areas.
Marcellus Shale in Ohio
The Marcellus Shale in Ohio can be as shallow as just 1,800 feet in certain locations. Due to the shallow depths in Ohio, this means the cost for an operator to drill a well is significantly less than drilling to 10,000+ feet found in other states. The advantage of cheaper drilling costs for operators can be passed on to mineral owners by higher lease bonus rates and higher royalty percentages. The reason that operators can afford to do this is because there is significantly less risk involved when drilling a shallow well in an area that has knock production compared to an area that requires drilling to deeper depths. Mineral owners in Ohio should be aware of the shallow depth amounts and use this to their advantage when negotiating for a higher lease bonus and royalty percentage.
Marcellus Shale in New York
The Marcellus Shale in New York is similar to Ohio but there is one key difference. New York is facing increasing regulatory issues due to environmental concerns. The recent ban on fracking in New York has created an additional burden for operators in New York. Even though operators may be able to reach the Marcellus Shale at lower depths the added complications created by state agencies means that operators will have a constrained budget for lease bonuses. In addition, operators will likely pay a lower royalty due the increased risk associated with drilling in this area. Current conditions have prevented any drilling at all for certain counties which leads operators to be extremely cautious when leasing mineral rights that could become worthless in the future due to government regulation in the Marcellus Shale.
Marcellus Shale in Pennsylvania
In Pennsylvania, the Marcellus shale presents the great challenges in terms of drilling depths. Operators will often drill greater than 5,000 feet and may reach depths in excess of 7,000 feet in certain locations. Operators will incur significant costs to drill to these depths. However, the increased drilling depths are not necessarily bad news for Pennsylvania Mineral Owners in the Marcellus Shale. While the costs to reach these depths is high, going even deeper will take an operator to the Utica Shale. The Utica Shale has a mix of both Oil & Gas which is significantly more valuable than the dry gas found in the Marcellus Shale.
Mineral owners should take both formations into account when leasing their property. A single formation can be leased to one operator and a different formation leased to another. This means mineral owners have options when leasing their property. It’s important to understand what options are available so you can properly negotiate your lease to get the highest amount possible. Mineral owners who wish to learn more may get a free consultation with us so we can help you better understand the value of your property.
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