Regarding a lease on 80 acres in Live Oak County, Texas, the lessee wants to delete the following paragraph:
Pooling: In the event Lessee elects to pool or unitize the above described land with other land or leases for the production of oil or gas and related hydrocarbons, then all of said acreage contained herein must be included in any pooling unit or units so formed.
They say that this is so that the property can be split if necessary to allow for two wells. Is my signing off on this advisable?
Leave it in. You can get paid for two wells. If you strike that clause they may only incorporate 5 of your acres or less, and who’s to say they aren’t draining the other 75 ? The burden of proof would be on you to prove they were draining your unincorporated minerals. Do not sign off on that.
Appreciate the response. Is there any possibility of an up side to signing?
r w kennedy said:
Leave it in. You can get paid for two wells. If you strike that clause they may only incorporate 5 of your acres or less, and who's to say they aren't draining the other 75 ? The burden of proof would be on you to prove they were draining your unincorporated minerals. Do not sign off on that.
Consider something different. First, if the well is on you, all lands in an unit. If the wells is off you, at least 1/2 your lands go in the unit. Then a horizontal and vertical pugh clause. If a well drills through the end of the primary term, continuous drilling to maintain. At that point you will be better protected.
Not to removing that pooling clause. If they gave you a hard time about it you could always tell them it can be amended later, if necessary. I think you should seek other offers, if you haven’t already. If they want your acres at all they will accept a lease with the pooling clause intact.
Much would depend upon the specifics of your acreage and Buddy has a good counter-proposal detailed above.
For one of our parcels (a very long and skinny 130+ acre plot of land, that runs at a 90 degree angle to the O&G's lateral bores) it is not really feasible for all of the acreage to be included in just one unit.
The compromise wording that we eventually agreed upon was:
a. No less than 50% of our acreage was to be included in the first unit pooled
b. Any additional unit would then be required to include 100% of the remaining acreage that had not already been pooled by the first unit.
This was a reasonable manner in which to assure that we did not end up with any orphaned minerals/acreage.
And, yes, Buddy is 100% correct to emphasize the inclusion of the Continous Production/Drilling clause. Far too many folks leave out that one and then leave themselves vulnerable to having all of their acreage HBP'd for decades with only one well and no in-fill production.
Sounds fair to me Mr. Cotten; but Mr. Foreman says they want to delete the paragraph, not to modify it. The fact that they want to delete it raises my suspicions.
Buddy Cotten said:
Consider something different. First, if the well is on you, all lands in an unit. If the wells is off you, at least 1/2 your lands go in the unit. Then a horizontal and vertical pugh clause. If a well drills through the end of the primary term, continuous drilling to maintain. At that point you will be better protected.
If you read the title, that is what it says. If you read the body of the post, it is a deletion of one sentence, which I feel certain is contained on an addendum to his lease.
r w kennedy said:
Sounds fair to me Mr. Cotten; but Mr. Foreman says they want to delete the paragraph, not to modify it. The fact that they want to delete it raises my suspicions.
Buddy Cotten said:
Consider something different. First, if the well is on you, all lands in an unit. If the wells is off you, at least 1/2 your lands go in the unit. Then a horizontal and vertical pugh clause. If a well drills through the end of the primary term, continuous drilling to maintain. At that point you will be better protected.
I did see that Buddy. I was just concerned that instead of modification they went straight to the kill, deletion. I think with the deletion of that one sentence, the remainder of pooling clause paragraph would not serve to protect Mr. Foreman. I may be jumping to conclusions, but Mr. Foreman didn’t say the lessee was adding any language to replace what they wanted deleted.