We have received letters notifying us of plans to drill on our acreage, with an AFE and the choice to become a WI owner in the new well or convert to a royalty with an up-front bonus. I have heard that in some cases owners choose to not respond to these letters and wait for the OCC to force pooling, but I don't understand the decision process behind that. Do the terms become more/less favorable under forced pooling? Can you be made to either participate as a WI owner or lose your rights entirely? And lastly, when your NRI is less than the NRI proposed in the royalty conversion choices, can you still convert to a royalty? I know lots of questions here but if someone could even point me to an online resource to read up on this that would be very helpful.
Thanks,
John Mark
John,
You have a lot of questions that cover some broad topics. To answer each fully would be beyond the scope of a single post. A resource you could look into would be “How to survive Force Pooling in Oklahoma” a publication provided by the National Association of Mineral Owners. You’ll need to navigate to their online store to purchase a copy.
An online resource would be:
http://www.mineralhub.com/2010/09/oil-and-gas-leasing-tips-part-one/
Scroll down to ““FORCING” YOU TO LEASE”.
In order to best answer your specific concerns, could you tell us a specific S-T-R that we can look at? Also, what is the nature of your mineral ownership? Mineral acreage, Leasehold, or Overriding Royalty Interests?
John Mark, since you say you have received more than one letter and that at least one includes an AFE and a choice, time may be very important to you. A couple of questions - Did these letters come from a law firm? and did they contain documents filed with the OK Corporation Commission, the first an Application for Pooling, and the next a Final Order of Pooling? If you have received either of these, please send the Cause CD # for further advice.
If not, landmen representing a company have been known to allege that a pooling is pending in order to get you to agree to terms quickly. Regardless, the advice offered by R Story is excellent and should be followed. While you on the NARO website, take a look at the Oklahoma Chapter page where you can find the last several chapter newsletters, as well as more good info. If we can help further, there are lots of knowledgeable folk here.
John Mark:
1 Unless you are in the business, you really do not want to have a working interest. OF THIS I AM SURE!!!
2. Forced pooling generally offers the best (or more) than has been paid in the area.
This both in $$$ and royalty interest---experts will testify as to the most paid in the area.
Your last question pertaining to royalty, my answer is: in 95%+ cases this would not pertain. see #2
I agree R. Story has a great answer: also, you have the right to have an expert witness testify, this may cost a little and I personally do not believe necessary unless you suspect the company is not reputable. this with 40 years in the business.
http://www.occeweb.com/og/PubAsst/WebRoyaltyOwnersHandbook3-2015.pdf
This link will show you the booklet available from the Oklahoma Corporation Commission that may answer many of your questions.