 Good afternoon. Privileged for me to be here with you today. Our discussion so far today have focused on questions that are of interest to our communities, and some of the challenges and some of the opportunities that we face collectively. Again, good afternoon. Today our discussion so far have focused on the issues and questions and challenges that our communities face as 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 for noon and you do have index cards at the table and I would ask you to write your questions down as we go through the discussion. I don't intend to take the full 45 minutes for a presentation. I hope to spend a few moments just introducing some topics and then we can spend the remainder of 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'll 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 grazing. The mineral that we're talking about primarily is our crude oil. There will be a mineral developer and a mineral owner and their initial relationship will be in the form of a mineral lease and we'll spend some of our time this afternoon trying to answer questions that you might have about mineral leasing. We 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 accept it 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. Within your packet there are two documents. One of them is several pages long. It's just a brief overview of the topics that we're going to be thinking about for the next 45 minutes. The second one is a printout of the mineral lease that the state of North Dakota uses. Yes, our state as well as our federal government own mineral interests and these mineral interests are being developed along with the privately owned mineral interests. So North Dakota is no different than those of you sitting here in the room today with mineral interests. You need to lease them out if you intend to have them develop or at least you need to be somehow involved if your minerals are being developed. I'm not saying that the North Dakota mineral lease is the one that you should use. I'm simply saying it is the 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 mineral lease. So I offer you that just as some additional background information. The mineral rights that 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 grading 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 the 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 that we're going to be 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 owner, the person who owns that mineral estate. Then these terms and these definitions are drawn from the North Dakota statues. 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 the surface estate, that is the legal rights associated with the ownership of the surface of the land and then of course we have the individual that owns that surface estate, that is the surface owner. So those are some of the terms that we're going to be using this afternoon. We sometimes use slightly different terminology but this at least gives us some common basis for our discussion. Even though mineral 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 grants permits for example to drill wells. It is involved with the oversight of the operations, 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 is 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 in a few moments but I'm sure many of you have heard about. And it takes water during the ongoing production of the oil. In order to have enough water, you need a water permit. And the North Dakota State Water Commission is responsible for administering those permits. One thing that you need to take home with you today is all the water in North Dakota is owned by the State of North Dakota. The water in your stockpile, the water under your land, the water in the rivers, all the water in North Dakota is owned by the State of North Dakota. And if you 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 the state-owned water that's in your stockpile. You have permission to use from the state to have a well to draw water to the surface to use for your home purposes, for domestic purposes, for your livestock. All the water is owned by us collectively, the state. So I need a permit from the state to use water for an industrial purpose such as mineral development. The Dakota State Water Commission is highly involved with that aspect of our energy industry. The Department of Health is responsible for overseeing the disposal of wastewater. We're all familiar with the Clean Water Act that comes from the federal government that is actually administered by the state government. However when it comes to mineral development, much of the oversight of disposal of wastewater has been essentially delegated to the Industrial Commission. So we do have a combination of state agencies here, the Industrial Commission and the 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 responsibility but in the 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 mediation 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 obligated the Department of Agriculture to set up a program to help arbitrate or mediate disputes between lenders and farm borrowers. That service continues to be available through the Department of Agriculture and it was in 2011 legislature that expanded that responsibility that the Department of Ag also pleased 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's being used and you people are familiar with this, and more familiar perhaps than I am, but the technology of horizontal drilling is opening some opportunities for our oil industry that wasn't available several decades ago and horizontal drilling as you people perhaps understand you start out with your traditional vertical bore and we're drilling down about 10,000 feet in North Dakota and then we turn the drill and we bore 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're going to see a little black dot for the older wells that represent the well just goes straight down and then you're going to see a little black dot with the line drawn off of it on the more modern wells, the newer wells that represents here's where the hole is drilled and then here's where the horizontal bore has occurred and that the second URL that's listed on this slide is the actual website that has the map that the industrial commission is maintaining so it's public information as to where the oil wells are it shows all roughly 21,000 that have been permitted in North Dakota the last 40 years, 50 years, maybe 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 drill what's the significance of that? Well by the time you drill horizontally for roughly 2 miles you most likely have encountered several mineral estates I own a small part of it, you own a small part of it another neighbor owns a small part of it and when the pump is then operated, when the well is operated the oil is 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 is being appropriately allocated among the mineral owners so as we use this technology we are perhaps making our lives a little more complicated at the same time we're accomplishing more production of our minerals, of our oil fracking, if you hear this in the news again it's a technology that's been around for several decades but it's being widely used now in North Dakota what's the purpose of it? Well we have rocks in North Dakota that don't let loose of 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 then flow to the actual well bore so that the oil can be brought to the surface and again this is a process that requires tremendous amount of water and that's where a lot of these trucks around the road they're hauling the water to these well sites so that the well can be drilled, the oil 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 pooling pooling goes back to this idea that there are likely several mineral owners represented in each of these wells that are being drilled and where production 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's being produced we pool it and then each mineral owner 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 pooling 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 a well spacing unit that deals with pooling and then we have the larger geographic area where we try to unitize the management why do we do this? when you have several wells going down chasing to one another as you pump the oil out of one that affects how the 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 so that we're not losing the opportunity to harvest some of these minerals there are times we're not doing it much yet in 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 oil 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 is being pushed over to the second well and 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 management over this entire unit so that we can again increase, maintain the 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 types of over-sites of the production within our oil industry there are times when people are frustrated saying that golly can there be 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 is doing a pretty good job compared to some other states there are some other states where the 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 is not perfect but I think our state is doing a pretty good job of trying to address some of these issues ahead of time Wildcat in the past we didn't know for sure where the oil was so it wasn't an uncommon practice that you drill a 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 you move on to the next location in the past when we didn't know for sure where the oil was located I don't know, sometimes you maybe had about a 30% chance of hitting oil you might even have been less than that you're doing an awful lot of Wildcatting just drilling holes, trying to see what you hit well, the technology we have today the number I hear is about 97% of our wells are producing we know what's down there, we know where it's located and we're getting it so this idea of this higher risk of we're not sure what's under our surface that's been disappearing over the last couple of decades so this idea of Wildcat drilling it just doesn't happen quite as much anymore we have a pretty good sense of where this oil is located we heard earlier this morning that we have technology now that's allowing us to drill a well in less than a month and then we move on to the next spot about 97%, 98% of them in North Dakota are now hitting oil 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 know I'm going to drill a hole because I know once I drill a hole chances are I'm going to get oil so if you are holding on to mineral interest an oil company may not be interested in leasing your land until the oil company is ready to drill a well there's no reason to not like we had 30 years ago there's not much of a reason to lease land up ahead of time but that's open to debate as well so just some terminology and some thoughts so as we 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 mineral lease 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 minerals drill for minerals and if they hit oil they have the right to produce that oil if they hit oil 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 four years into that five years the mineral company drills the well it hits the oil it begins to produce the oil and as long as that oil continues to be produced I'm subject to that initial lease that might be another three years twenty years, thirty years into the future as you negotiate these leases yes you are going to think about the primary term oftentimes a few numbers of years three to five years again is maybe common but I would urge you to negotiate it as if it's a thirty year lease because good chances it will be the oil company is not going to lease it until they're ready to drill the well when they drill the well there's a ninety-seven percent chance they're going to hit the oil and that lease is going to continue as long as the oil is being pumped negotiate those mineral leases as if they're going to probably outlast me questions, comments as I'm entering into a lease with the mineral company and I'm waiting for them to come forward and explore and drill and begin production 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 oil company no longer is interested in my land but my land is still tied up my mineral 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 commitments from this company that it will pursue exploration and development of the mineral because as a mineral owner that's where my revenue comes in I don't get a heck of a lot of revenue waiting for the oil company to begin producing so there are implied covenants 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 lease agreement because I'm interested in having you see if you can get my minerals developed how much oil needs to be produced in order for this oil well to be considered in production 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 from North Dakota it's in commercial quantities or paying quantities there is no necessarily a specified number as to how much production has to be there why is this important? the mineral developer drills the hole they pull out a little bit of oil and they say well really it's not a very good well maybe we're pulling out a little bit of oil but we're not pulling out much oil so we're not going to continue to produce this particular well well I as the mineral owner say wait a minute if you're not pulling it out I'm not receiving any revenue from it are you sure that it's that poor of a well or is the well has been dug has been drilled the oil being produced and now we're 20 years down the road and now not quite as much oil being pulled out of this well as in the past well 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 once the lease ends I can go ahead and lease it out again somebody else if somebody else is interested in trying to produce oil there the second oil company thinks 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 again such as so many barrels per week it is just simply a term of commercial quantities so it's an uncertainty what is the shut-in 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 and the oil company goes wait a minute we don't want to release you maybe we'll come back a little bit later and turn this well on again 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 pay me some royalty in order to keep me interested in continuing the lease to you even though you're not producing any 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 when does this lease begin more importantly when does the lease end we've already talked about pooling and unitization that's often mentioned and 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 an alternative for the mineral owner is to strike out that type of language or to essentially say no we'll 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 the industrial commission in North Dakota is handling many of these issues within our oil industry so those are just some terms to be thinking about in the mineral lease I'm not going to go over all of these today I have not yet begun to discuss the question of the relationship between the surface owner and the mineral developer but I think I've given you enough time to start firmly in your questions so now let's spend some time answering your questions do you have some questions written down or do you have some questions that you'd like to pose directly to from the audience anybody have a question we have one right here ok how close are we to having oil production in this region nobody knows for sure yet is it coming well we've heard it suggested that it might look like a herd of buffalo coming at us is it going to be here in three years it's going to be here in seven years I don't think anybody knows yet did we expect it to be rapidly occurring in western north Dakota ten years ago did we foresee it coming at that time probably not there may have been some that saw that it was coming maybe a few that understood the industry well enough but in terms of being able to say it's going to be here three years from now or it's going to be here six years from now I don't think anybody is in position to say where we're going to be in that time but there are some people who are banking on it and this question is of those people who are thinking about it could you address the issue of these companies and attempting to purchase mineral rights at low cost with the idea of speculating and making more money in the future and we have had a few of those people in the area for noon as we talked about community issues there was a comment about sometimes we need to be patient and I would deliver the same message for 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 greed this morning not to use greed this afternoon but be patient way to your 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 probably will be more attractive however if you have an offer and you carefully review it and you're confident that you understand the offer and you are comfortable with the compensation being offered go for it but I would say try to exercise a little patience you've already expressed that minerals rights probably will not live if you have severed mineral rights how can you recover them by these states so that the errors can happen it has a statute that talks about the severed mineral rights where they've been severed from the surface and North Dakota has a statute that says if the minerals have been inactive have not been used for the last 20 years the surface owner can begin a process of reclaiming or of claiming the ownership of those mineral interests so you own the surface you don't own all of 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 you notify the mineral owners to the best of your ability of identifying them your best ability to notify them you publish a public notice most likely 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 court proceeding if the judge is convinced that these minerals have not been used in the past 20 years if the judge is convinced that you've made your efforts to notify the mineral owners you've had your publication, public notice in the paper the judge will then order that those mineral rights are yours as the surface owner North Dakota has this statute in place it's been 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 it's constitutional and there's a number of people that say you know when this one gets into the courtroom it's probably going to be ruled unconstitutional we don't know that yet it has not been litigated sir I sold my land to the close up but I didn't have to give them my oil or other mineral rights only the coal ones now nothing has been done for 20 years I don't suppose listen, 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 mineral owner 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 page statement of claim with your county registered 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 to act as the owner of these mineral rights so there is a statement of claim that is available and I would urge you if you are the mineral owner of severed mineral rights and you've not had any other activity with respect to your mineral rights and you want to preserve your mineral rights file this statement of claim with the county registered deeds other questions yes the time frame before things happen something needs to be drilled something needs to be explained the mineral company is on this land because one of the other mineral owners granted a lease that other lease would control the time period so if the somebody owns 50% of the severed mineral rights that's all they own and they granted the lease to the oil 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 time frame for the mineral developer so if this was a four year lease the mineral developer has four years to drill that well other questions over here yes is there a provision within a lease that the mineral developer has permission to only drill within certain geological formations you can negotiate that into your lease agreement 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 own the mineral rights from the surface of the earth to the center of the earth and I'm going to enter into a lease agreement but mineral developer I'm going to 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 it widely happening in North Dakota? 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 it'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 you 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 what's going on in North Dakota I 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 Stratus other questions? Dave, when you have multi-owners of a lease can one owner wants to lease it out can the other stop you? no if several of us co-own the mineral interest any one of us can go ahead and lease our minerals our portion of the minerals let's say I have 33% of the interest of the minerals I can lease my 33% 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 and the oil is being produced I can lease my interest I'll give my one third of what the mineral owners are entitled to and the other two thirds of what the mineral owners are entitled to will still be paying to the other two thirds that haven't leased their mineral rights they are entitled to their share of the compensation but they cannot stop me from leasing out my one third you cannot stop the mineral company from developing the mineral rights yes is their share the same as the two thirds? will they get the same dollar amount royalty? the answer is not necessarily but while I'm giving you a more complete answer I'd encourage you to take a look at the handout that I have the eight 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 subtopic of does the mineral owner have to agree to mineral development the amount of royalty that the non-leasing mineral owners will receive will reflect the royalty that was agreed to in the mineral leases except it can't be less than 16% according to our North Dakota legislature so if the mineral owner who leased their portion leased it for a 12% royalty interest the North Dakota law would say the non-leasing mineral owners are entitled to a minimum of 16% if the mineral owner who leased their portion for 20% the North Dakota statute would essentially say use that 20% it's never simple it's never simple yes so the non-leasing entities can't negotiate their own lease they 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 are the surface owner and the mineral rights are sold what are your rights and how do you enforce them now we're on page now let's see now we're on page 6 towards the bottom compensation for surface owners is helpful to think back on the historical perspective of how this question has been answered in the past the mineral estate 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 as those legal concepts came across the Atlantic Ocean as the Europeans began to move into North America what does that mean surface owners you cannot stop the mineral owner from coming on to your land to develop their minerals mineral owners have the right to enter on to the land to develop their proper rights which are the minerals historically the answer to the question of are the surface owners to be compensated the answer was only if the mineral development caused unreasonable damage if the mineral developer came on to the surface lands and were just reckless in how the minerals were being developed that unreasonable 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's legislature is 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 6 North Dakota's legislature has at this time I expect this statutes going to be tweaked in 2013 who knows for how many sessions into the future but as of today North Dakota statutes specify two types of damages the legislature has defined what they call damages and disruption and those are to compensate the surface owner for lost land value and access to the surface owner's land lost value of improvements caused by drilling operations the second category is loss of production loss of production is intended to compensate the surface owner for lost agricultural production and lost income caused by oil and gas production and completion operations completion operations is when the well is no longer producing and the well site is being cleaned 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 the definitions are the language is not without dispute in 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 I'm going to come out to your land within this notice the mineral developer is to offer compensation there's to be an offer settlement the surface owner then has the right to decide whether or not to accept that offer and if the surface owner does not accept that offer compensation well I believe the statute doesn't say it but I believe the mineral developer can go ahead after 20 days I'll give you a 20 day notice I'll give you an offer if you don't agree to it I'm going to come out to your land after 20 days anyway the statute then goes on to say if there is no agreement between the mineral developer and 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 an 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 task questions and the only legal order is almost maybe the full miss order any of the surrounding the plan is that going to that pool or is it just where they drill the well are they the only ones that get money out of what the college does work okay you guys two questions there the well comes down and it's generally not going two miles so if we think about this track of land being a mile wide and two miles long we have 1280 acres we have two sections the standard practice right now is that all 1280 acres go into the spacing unit to be pooled what we see in western North Dakota right now there's an awful lot of wells being drilled roughly one for every mile and the purpose of doing that is as soon as you're drilling and producing you've tied up all 1280 acres okay how many times are we going to have to drill horizontally to drain this 1280 acres the best of my understanding is when you come on down and you go horizontal and you frack it and you start pulling the oil out you're probably going to pull the oil for about 300 feet on each side of the line so one bore is going to be good for about 660 feet so in order to drain this full mile wide area we're going to need 8 horizontal bores eventually this is my non-scientific guess nobody's giving me a firm answer yet but legally as soon as you come on down and you go once we've tied up all 1280 acres 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 mile is owned by person B that second mile is owned by person C A has entered into a lease but the well is drawing from A, B and C and that's when we go back into the pooling and we figure out that this well is drawing from all 1280 acres C, you're entitled to half of the royalty B, because you own one mile out of that two mile area B, you are entitled to 25% of it because you own half a mile out of that two mile area and A, you're entitled to your 25% for your half a mile out of that two mile area as well does that answer your question? pretty simple explanation and I've overlooked an awful lot of exceptions every good general rule has many exceptions I just gave you a very general rule