Difficulty leasing mineral interests in 2-5n-3w in McClain County

My wife and I, along with her three siblings and their spouses, own 50 net mineral acres in the S/2 of 2-5n-3w. These minerals are currently not leased, and have not been for the past 30 years. We have been approached by several land men over the last two years, but each time they withdraw their offers because of concerns that these minerals are held by production related to the Flint Creek Unit that has been operating in this area since 1966. We have obtained copies of the unitization application and the subsequent ruling by the OCC to approve the creation of the unit. All of these documents clearly indicate that the land under which our minerals reside was not and has never been included in the Flint Creek Unit's boundaries. Our family has owned the land and minerals in question for 50 years, and have never received any royalty income from Flint Creek production. Some of the land men have indicated that leases that were in force back in the the late 1940's and 50's contained language which has created a "tie-in" between our part of section 2 and that part that is actually included in the Flint Creek Unit. Does anyone have any suggestions as to how to go about removing this barrier to leasing our mineral interests? Any and all help/suggestions would be deeply appreciated .

Hi Rick,

It seems like your land would have to be controlled by a lease which is currently getting paid by the Flint Creek Unit in order for adjacent production to be holding your non-producing minerals. That could certainly be the case if a lease was executed before the statutory Pugh clause took effect. First I think you need to get your hands on the actual document that made them nervous.

Perhaps one of your predecessors in title is getting paid on some portion of minerals that are in the unit and those funds are going to the State Treasurer? If the Operator of the unit has an HBP claim on your adjacent non-producing minerals because of a few lines of text in one lease from the 1940's, there is a decent chance, the Operator isn't even aware of this fact. So going to the Operator and asking for a signed release presents you with significant risk.

Your bringing this to their attention might result in the Operator going out and buying an expensive bottle of champagne to celebrate with as they write up an assignment of your acreage to sell to the closest horizontal operator. You need a release, but if they are legally controlling your minerals, I doubt they'll sign a release.

This looks like it has the right ingredients for a very expensive court fight, but who really would want to go through that?

Here's a simple idea you could easily try. Get a feel for what the market lease prices are and contact that Operator. Ask if they have any money in suspense for any of your family member's names or predecessors in title. Come up with a reasonable purpose that you need to talk with them. Present yourself like a guy who thinks he's smart but gives away tells he's actually dumb. You want to sound like a sucker. At the end of the conversation, as an after thought, I would mention you've been contacted by two different land men recently about leasing your acreage but confess your hesitancy to lease, despite strong offers, because they wouldn't reveal the name of their client, maybe the operator knows who they're leasing for?

If the Operator is not aware that they already control your property via HBP, there's a good chance he might try and jump at buying your lease from you with the goal of flipping it for an easy profit.

Yeah it's a stretch, but if the Operator hears you're getting approached by Landmen about leasing and says, "You can't lease those offset acres, we've go those HBP by our unit!" Then at least you know what you are up against.

On the other hand, if you could entice the Operator into purchasing a lease, I bet you could get some clean up language into the lease that would solve your problems for the future.

Is that too crazy of an idea for you?

Thanks Fred,

We will pursue this approach and see what happens. We deeply appreciate your input!

Rick Blackwell

Any news on what happened?