There seems to be a burgeoning trend on leases in Weld County where the interest is already subject to a forced pooling order in Weld County. If this is an issue facing you, share your comments here!
While it is first unusual for an interest to go all the way to a forced pooling order, it does happen, especially where drilling occurs for the first time. In these instances, many oil, gas, and mineral owners may not even know that they own an interest until after the order was already entered and there are in many instances existing wells already in place. Nonetheless, it may still make sense for both parties to pursue a lease for various reasons in these instances rather than just proceeding under the forced pooling order.
However, there seems to be an increasing trend in those lease offers to split the interest in a way. An offer is made to lease along with a bonus payment and generally a royalty rate that is higher than the standard 1/8 under the non-consenting order; however, the kicker seems to be that the higher royalty only comes into play either (a) after the well has reached payout, or (b) for new wells that are drilled. Interesting concept. Anyone out there taking this option? Seems there may be more cons than pros on it, but maybe some others have some thoughts on this too. A little creative on the operator side it would seem.
Jenna H. Keller provides legal services to farmers, ranchers, rural property owners, and severed mineral interest owners in the areas of estate planning, natural resources (oil, gas, wind), real estate, and water in Nebraska and Colorado.
The information is for general information purposes only. This should not be substituted for legal advice and should not be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or reading does not constitute, an attorney-client relationship. You are encouraged to contact an attorney for legal advice concerning the information provided.
I was sent a forced pooled letter from Mineral Resources recently with the lease to sign with them. Things I don't see correct with this Lease are:
1. From the first attempt, where it said $200/acre with 14% royalty to this last with a pooling order threat. The Lease are all the same $100 /net acre, there is an incongruity between the lease and the offer.
2. The lease does not state how often the royalties are going to be paid.
3. The Lease does not state how Will I recover in case of accidents or property damage, caused by the well.
4. With the pool order threat, I was sent a list of all the other non-consent owners, something that I see as a privacy issue.
5. With this pool notice I got sent someone Else's lease contract, to me it means they don't want me to sign.
I'm not sure if contacting them to see if they arrange the lease the way I want it or just sign it the way it is or protest (My property is not very significant 0.1781) but the list of non-consent is quite long.
Here are a few thoughts. First, certain procedural requirements must be met for a forced pooling order to be issued. If there are inconsistencies or lack of proper documents, then there may be a procedural defense to the application, which should in effect, mean they need to go back and meet the procedural obligations before they can proceed. Next, where items are omitted or excluded from the lease, then consider countering to have them added, or consider how they will be handled under state law, but always remember that state law can change from time to time. Finally, it may be common practice to include all other owners, but of course that does raise privacy issues as you have mentioned. If you're not happy with the offered terms, then you can of course go non-consenting, but remember the part at risk is the bonus money offered. 14% isn't that far off from the 1/8 under penalty so that may make some sense for you. There are pros/cons to any situation. Mineral Resources had been making offers for purchase as well which may make more sense for some folks.
The information is for general information purposes only. This should not be substituted for legal advice and should not be taken as legal advice for any individual case or situation. This information is not intended to create, and receipt or reading does not constitute, an attorney-client relationship. You are encouraged to contact an attorney for legal advice concerning the information provided.