My family owns 3.33 acres in in the SE4 of Section 136, Block 13.
We have received a couple offers by landman but have yet to sign any leases. I was told that BPP Acquisition LLC., is already drilling our minerals.
This doesn't seem ethical or legal for that matter.
Please advise.
Thank You,
Sharon Rutan
Hi Sharon -
The short answer is yes. You can be pooled with other lands even 'tho your lands are not leased.
It sounds to me, however, like you have an undivided 3.33 net mineral acres in a larger tract. If any of the other owners of undivided interest in the subject lands have leased, the company has the right to develop their interests.
It could also be that you do not own the Executive Rights to your interests. That you have a Non-Participating Mineral or Royalty Interest.
Ask the Landman for a copy of your Source Deed - the documentation creating your interest. That should help you understand the nature of your ownership.
Charles Emery Tooke III
Certified Professional Landman
Fort Worth, Texas
Charles,
If it is not the case for a Non-Participating Mineral or Royalty Interest (standard ownership of lease), what is the rule about forced pooling.
I received a letter about a small interest (1 nma) telling me that if I didn't sign a lease with the operator, I would have a working interest once the operator earned back its expenses. Is that how it's normally done in Texas?
MA,
Assuming that your 1 nma is in the tract where the well will be drilled, then you'd be an "unleased cotenant" in a drill site tract. You wouldn't have a working interest in the well, necessarily, because you're not personally responsible for any of the costs. You would not get any monies (bonus or royalties) until the well "paid out" - when the operator had recouped its drilling and completion costs from the production (if that actually happens). If the well never pays out, then you'd never get any money. If the well does pay out, then from that point forward, you'd get your full share of the O&G produced from the well (minus monthly operating expenses). So, for example, if your 1 nma was in a 40 acre drill site tract, then after pay out you'd get 2.5% (1/40) of the production minus monthly operating expenses going forward. Texas does not assess a "risk penalty" on unleased cotenant mineral owners in drill site tracts.
Eric Camp
Texas doesn't actually have Forced Pooling like you find in other States, but the end results are the same pretty much the same.
Google "Unleased Co-Tenancy in Texas" and you'll find plenty to read on the subject (I just tried it and got 61K hits).
Eric Camp says that there is no penalty for being an unleased Co-Tenant, that once "Payout" (100%) has been reached you will begin receiving regular checks and invoices. There are a few circumstances where the State can impose additional penalties, but I don't think you're in that situation.
When a Working Interest Partner chooses to go "Non-Consent" (not putting up his share of the expenses of drilling or completing a well) the terms of the Operating Agreement dictate what penalties are assessed (they can be 300 or even 400%). But, as an unleased Co-Tenant, you are not subject to the Operating Agreement.
One thing you should be concerned about is if they can gerrymander your lands our of the unit because of your being unleased.
Don't you think it would be a whole lot simpler if you would just lease your interests?
Thank You!
Eric, Charles:
Thanks. I did ultimately sign the lease, but I was curious what the comparable economics would be if I hadn't.
Very useful info. Thanks
Sharon,
There is a current permit for Primexx Operating Corporation's Red Unit 136-137E No. 10H which covers the E/2 of Section 136, Block 13.
Have you signed a lease yet?