I'm co-owner with my brother (joint tenants in common) of a 23 acre property in NE Bradford County PA , in one of the deepest deposit regions of the Marcellus. My brother and I were offered $5k per acre in Oct of 2010. My brother signed, and was paid but I did not. I assumed that they could not frack our land without my lease agreement, since I'm co-owner. I contacted the producer a few weeks ago and told them I was willing to lease, but they now reduced the offer to $1500 per acre. The company landman guy seems to think they can frack my brother's portion of our land. I don't see how that is possible. Can they?
Yes, they can.
I'm assuming they drilled on an adjacent property, and then pooled your brothers undivided mineral interest into the unit.
This falls into the category of pigs get fat and hogs get slaughtered. Pennsylvania has no Marcellus Shale Forced Pooling Statute. The current governor does not want one, either. And Jordan Murray is right. However, if your mineral interest is small enough, they could drill through your tract and frac under your tract as a co-owner.
You might want to get an attorney for some help.
Best
Buddy CottenThanks Jordan. They haven't drilled in that area yet, but the adjacent land has been leased to the same producer.
Jordan Murray said:
Yes, they can.
I'm assuming they drilled on an adjacent property, and then pooled your brothers undivided mineral interest into the unit.
Thanks Buddy. I appreciate your input. I thought I would ask the forum before contacting an attorney. I find it very odd that a commercial interest can simply take your minerals without first obtaining your agreement. If two people equally co-own a house or a boat, one party can't sell or lease their half of that property to a 3rd party without the agreement and consent of the other co-owner. Why should it be any different for mineral rights? If PA doesn't have a forced pooling statute, then how can I be "forced" to lose my minerals rights to a commercial interest without my consent? I don't have any experience in this arena, which is why I'm asking the forum, but common sense tells me that it's flat out theft of property. How is it NOT theft? And why wouldn't the producer be liable for civil and criminal consequences?
Buddy Cotten said:
This falls into the category of pigs get fat and hogs get slaughtered. Pennsylvania has no Marcellus Shale Forced Pooling Statute. The current governor does not want one, either. And Jordan Murray is right. However, if your mineral interest is small enough, they could drill through your tract and frac under your tract as a co-owner.
You might want to get an attorney for some help.
Best
You are a cotenant with your brother. Each cotenant has the right to develop the minerals (i.e, lease) without the joinder of the other. But the oil company has to account to you for profits. In other words, when the well has paid out, in all likelihood, you will be in a position of a working interest owner and will be entitled to 1/2 of the profits, after deducting operating costs.
Wow, Thanks Tim. You seem to have a lot of knowledge on this topic. According to the PA EPA map, our land is located on a deposit zone that in 225 - 250 feet thick. 50% royalty payout could mean substantially more payout than the original bonus offer + 12.5 %, perhaps by a very large number.
In case you know:
Any idea where I can find the state or Fed statues that covers this situation?
What steps would I have to take to protect myself and insure payment?
Would the state compel the producer to pay me 50% or do I have to take them to court myself?
Would I have to wait until the end of the well's production life before I could get them to pay or would they pay yearly (or quarterly, etc) as production rolls along?
How could one accurately audit production costs so the producer is less inclined to fudge the numbers in order to minimize the payout?
Thanks again for your expertise, Bob
tim dowd said:
You are a cotenant with your brother. Each cotenant has the right to develop the minerals (i.e, lease) without the joinder of the other. But the oil company has to account to you for profits. In other words, when the well has paid out, in all likelihood, you will be in a position of a working interest owner and will be entitled to 1/2 of the profits, after deducting operating costs.
You will need a PA atty to help you on this.
But, I will say it won't be the state that forces the producer to account for the production, it will have to be done voluntarily by them, or by the courts.
OK, thanks very much Tim.
tim dowd said:
You will need a PA atty to help you on this.
But, I will say it won't be the state that forces the producer to account for the production, it will have to be done voluntarily by them, or by the courts.
Robert B said:
Wow, ....50% royalty payout could mean substantially more payout than the original bonus offer + 12.5 %, perhaps by a very large number.
..
tim dowd said:....when the well has paid out...
Don't get too excited too quick - you don't seem to understand that you wouldn't get paid anything till AFTER the entire costs of drilling the well get paid out (costs of well = $6to$10 million; are paid off by oil produced) - at that point you then start to get your 'share' of the working interest; that would likely be 2 years down the road from the well producing, and by this point (as a shale well) probably 80% of the recoverable oil is already out.
You really go to know what you're doing to calculate if this will pay out; $1500/ac x 23 acres Lease$ plus maybe $25k to $50k royalties may be way more money ( if leased) , half of which you get up front, as opposed to 1/2 of 23/600 of 200 barrels/mo (possible flow rate AFTER the well has paid-out, IF it pays out . . . ).
Thanks Tim, I appreciate your thoughts on this
oldoak said:
Robert B said:Wow, ....50% royalty payout could mean substantially more payout than the original bonus offer + 12.5 %, perhaps by a very large number.
..
tim dowd said:....when the well has paid out...
Don't get too excited too quick - you don't seem to understand that you wouldn't get paid anything till AFTER the entire costs of drilling the well get paid out (costs of well = $6to$10 million; are paid off by oil produced) - at that point you then start to get your 'share' of the working interest; that would likely be 2 years down the road from the well producing, and by this point (as a shale well) probably 80% of the recoverable oil is already out.
You really go to know what you're doing to calculate if this will pay out; $1500/ac x 23 acres Lease$ plus maybe $25k to $50k royalties may be way more money ( if leased) , half of which you get up front, as opposed to 1/2 of 23/600 of 200 barrels/mo (possible flow rate AFTER the well has paid-out, IF it pays out . . . ).