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Keith Brock, Anderson & Byrd, LLP
2023 1st Quarter Newsletter

In Kansas, oil and gas wells cannot be drilled nearer than 330 feet from any lease or unit boundary line. In many Eastern Kansas counties, the well set back restriction is reduced to 165 feet for oil wells drilled to a depth of less than 2,000 feet (2,500 feet in Chautauqua County). Currently, no setback restriction applies to injection or disposal wells. 

Various situations create the need to drill closer than the proscribed distance from a lease or unit boundary. One common example is a lease that excludes a small home site. In these situations, an operator can apply to the Kansas Corporation Commission for a “well location exception” and go through the process of obtaining authority to drill closer to the leased boundary. In order to receive a well location exception the operator must demonstrate that the exception is necessary to prevent waste or protect correlative rights. In addition, the application and regulatory process involved in obtaining a well location exception can be expensive and time-consuming. 

However, an alternative exists which can eliminate the need for a well location exception in many instances. The alternative is rather simple, i.e., just move the lease boundary so that the desired drilling location is no longer too close. While this may not seem simple, it certainly can be if the neighboring mineral interest owner is cooperative. The strategy is to approach the neighboring mineral interest owner and request a lease covering the necessary perimeter segment of their property while also protecting their acreage with a surface use restriction prohibiting the lessee from ever entering upon their property at all. The adjoining mineral interest owner may agree simply as an accommodation to their neighbor since the lease doesn’t allow anyone to ever set foot upon their property. Other times a lump sum cash payment or a small royalty is required in order to obtain their cooperation. Once the neighboring mineral interest owner agrees to cooperate the lease or unit boundary line can be effectively moved further onto their property by either 1) amending the existing lease to include a portion of the neighboring property and create the promised surface use restrictions; or 2) take a new lease upon the necessary portion of the neighboring property which incorporates the promised surface use restrictions and then pool or unitize it with the existing lease. Either of these two approaches will effectively move the lease or unit boundary line so that the proposed drilling location no longer requires a well location exception. 

One caveat to this strategy is that the drafting necessary to accomplish this is somewhat nuanced, so you should engage an experienced oil and gas attorney to assist in drafting the requisite documents. However, even after engaging an attorney to draft the requisite documents, the cost and time involved in proceeding in this manner will undoubtedly be less than pursuing a formal well location exception through the Kansas Corporation Commission. In addition, this approach removes the uncertainty that is inherent in any well location exception docket. 

DISCLAIMER: This article does not constitute legal advice, and no attorney-client relationship is intended or implied. 

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