I am the lone hold-out in my development in North Richland Hills, TX; I would not lease my mineral rights to Chesapeake. Now they are planning to put a horizontal line 116’ from my property. They have requested an exception with the RRC, and I have filed a protest. I understand they have the right to develop their leases, but does that give them the right to drain from my property without permission? I don’t have any experience with this. Do I have a chance of fighting the exception? What happens to my mineral rights if Chesapeake gets permission to proceed? Any advice would be appreciated.
Thanks. Allan Ohman
NOT LEGAL ADVICE
Dear Mr. Ohman,
As I have stated elsewhere, I do not have much experience with subdivision leasing, so you will have to confirm what I state here with somebody else. But my belief is that if Chesapeake can obtain leases covering 80% of the acreage in their proposed drilling unit, then they can proceed with the drilling without your permission. Yes, once they meet this threshold, which I believe is 80%, then can proceed and “drain” from your property. And it is my additional belief that if their well is successful, you will be treated as a “working interest” owner, like a joint venturer, and you will get paid 100% of your royalties instead of 22% or 25% or whatever they were offering you. HOWEVER, you will have to wait until the well is paid for before you get any royalties at all, which could take a few months or a few years depending upon a host of variables impossible to predict.
Nothing happens to your mineral rights. Nobody can take those away from you without your consent, well absent a divorce case, foreclosure, or other court proceeding. Good luck.
Sincerely,
Philip Wynne
Dear Mr. Ohman,
Any particular reason why you would not want to lease your property and get a few dollars bonus and royalty?
There is a MIPA case in the Barnett Shale (Finley Resources RRC Docket No. 09-0252375) that expanded the use of the MIPA to include forcing holdouts in the well.
What was interesting about the Finley case was that the subdivision in question was a lower income development. From what I hear there were illegals, etc. who did not want to sign anything, along with missing lot owners. Rather than using the statute for receivership leases to bring them under lease, Finley used the MIPA action. When I asked a RRC Commissioner why the RRC did not send Finley back to the Receivership Statute, she (that should narrow it down) told me that nobody brought it up.
Now that one of the lot owners is an attorney, MIPA may be viewed much differently.
Peter Moorman said:
Mr. Wynne,
There is no 80% threshold in Texas. That is a Louisiana Mineral Code requirement for co-tenancy drilling - not anything to do with pooled units…
Philip Wynne said:
NOT LEGAL ADVICE
Dear Mr. Ohman,
As I have stated elsewhere, I do not have much experience with subdivision leasing, so you will have to confirm what I state here with somebody else. But my belief is that if Chesapeake can obtain leases covering 80% of the acreage in their proposed drilling unit, then they can proceed with the drilling without your permission. Yes, once they meet this threshold, which I believe is 80%, then can proceed and “drain” from your property. And it is my additional belief that if their well is successful, you will be treated as a “working interest” owner, like a joint venturer, and you will get paid 100% of your royalties instead of 22% or 25% or whatever they were offering you. HOWEVER, you will have to wait until the well is paid for before you get any royalties at all, which could take a few months or a few years depending upon a host of variables impossible to predict.
Nothing happens to your mineral rights. Nobody can take those away from you without your consent, well absent a divorce case, foreclosure, or other court proceeding. Good luck.
Sincerely,
Philip Wynne
Dear Mr. Cotten,
I notice that in one or two places my 80% figure has been cited as “dogma,” even though I very clearly stated that I was not sure what the rule was and advised readers to confirm my statement with another source. I was just relying on what a landman for Chesapeake told me about leasing rooftops in my own neighborhood. I guess he was wrong.
So if the 80% figure is not correct, then in Texas what IS the correct MINIMUM percentage that a producer must have leased within a proposed drilling unit before they can proceed with filing for permits, creating unit designations, and investing in the well?
Sincerely,
Philip Wynne
Buddy Cotten said:
Mr. Wynne,
There is no 80% threshold in Texas. That is a Louisiana Mineral Code requirement for co-tenancy drilling - not anything to do with pooled units…
Regards,
Buddy Cotten
www.cottenoilproperties.comPhilip Wynne said:
NOT LEGAL ADVICE
Dear Mr. Ohman,
As I have stated elsewhere, I do not have much experience with subdivision leasing, so you will have to confirm what I state here with somebody else. But my belief is that if Chesapeake can obtain leases covering 80% of the acreage in their proposed drilling unit, then they can proceed with the drilling without your permission. Yes, once they meet this threshold, which I believe is 80%, then can proceed and “drain” from your property. And it is my additional belief that if their well is successful, you will be treated as a “working interest” owner, like a joint venturer, and you will get paid 100% of your royalties instead of 22% or 25% or whatever they were offering you. HOWEVER, you will have to wait until the well is paid for before you get any royalties at all, which could take a few months or a few years depending upon a host of variables impossible to predict.
Nothing happens to your mineral rights. Nobody can take those away from you without your consent, well absent a divorce case, foreclosure, or other court proceeding. Good luck.
Sincerely,
Philip Wynne
Dear Mr. Wynn,
There is no minimum percentage in Texas.
Perhaps you were thinking of the 85%/65% rule for fieldwide unitization.
If you have any percentage in a drillsite, you can drill your well, subject to the accounting to co-tenants. One of our lessors just drilled a well on a tract that we own a 1/2 interest and the other 1/2 interest was in a pooled (non-drillsite) unit, that tract being under lease to another operator.
To further complicate matters, it is easy to run afoul of the Voluntary Subdivision Rule, which provides that a subdivision made voluntarily after the attachment of Rule 37 (1919) will not be considered for the purposes of determining whether an application to drill must be granted in order to prevent confiscation. However, this has to do with regulatory issues and not pooling issues, although they are clearly related.
Philip Wynne said:
Dear Mr. Cotten,
I notice that in one or two places my 80% figure has been cited as “dogma,” even though I very clearly stated that I was not sure what the rule was and advised readers to confirm my statement with another source. I was just relying on what a landman for Chesapeake told me about leasing rooftops in my own neighborhood. I guess he was wrong. So if the 80% figure is not correct, then in Texas what IS the correct MINIMUM percentage that a producer must have leased within a proposed drilling unit before they can proceed with filing for permits, creating unit designations, and investing in the well?
Sincerely,
Philip Wynne
Buddy Cotten said:
Mr. Wynne,
There is no 80% threshold in Texas. That is a Louisiana Mineral Code requirement for co-tenancy drilling - not anything to do with pooled units…
Regards,
Buddy Cotten
www.cottenoilproperties.comPhilip Wynne said:
NOT LEGAL ADVICE
Dear Mr. Ohman,
As I have stated elsewhere, I do not have much experience with subdivision leasing, so you will have to confirm what I state here with somebody else. But my belief is that if Chesapeake can obtain leases covering 80% of the acreage in their proposed drilling unit, then they can proceed with the drilling without your permission. Yes, once they meet this threshold, which I believe is 80%, then can proceed and “drain” from your property. And it is my additional belief that if their well is successful, you will be treated as a “working interest” owner, like a joint venturer, and you will get paid 100% of your royalties instead of 22% or 25% or whatever they were offering you. HOWEVER, you will have to wait until the well is paid for before you get any royalties at all, which could take a few months or a few years depending upon a host of variables impossible to predict.
Nothing happens to your mineral rights. Nobody can take those away from you without your consent, well absent a divorce case, foreclosure, or other court proceeding. Good luck.
Sincerely,
Philip Wynne