We signed a lease contract for 3/16th interest for our mineral rights in Grady 18-4-5. The Oklahoma Corporation Commission (OKCC) just rendered an order pooling and unitizing this section at 640 acres and 1/8 interest.
Does this OKCC ruling over ride our 3/16th interest that was negotiated in our lease contract?
Why would the OKCC render that many clauses in contracts null and void and how is this not screwing the mineral owners and favoring the oil companies?
I'm sure I'm overlooking something or just not knowledgeable enough to see how this may be in the interest of the mineral owner.
I greatly appreciate everyone sharing their expertise.
Thanks.
M. D. Wood
Ms. Wood
The pooling order only applies to those who did not sign a lease. It is also known as "forced pooling", it is the process used to round up the stragglers, so to speak.
M D,
OCC can over ride your lease on pooling, but you still should get the 3/16 like you lease states. Sounds like they were doing a spacing order for a H. well on 640 and they didn't have everyone lease.
M.D.
you asked 1 of my primary questions exactly. Thanx, and thanx to those who answered as well.
Great site ya'll - been looking for it a long time, w/o knowing what to look for.
Larry, Actually I believe Virginia gave the better answer. After a closer look the wording does appear to be from a spacing order, however I'm not so sure about OCC overriding a legally executed lease.
thank you Michael for responding.
My question is based on a spacing order. I'm new to the landowners/property rights aspects of drilling. If you don't mind another question - Why is that significant? Is there other OCC documents I'm not aware of yet that may affect the difference between the lease and spacing order percentages?
This is my 1st experience in all this and have no family elders to ask what to expect.
Michael Hutchison said:
Larry, Actually I believe Virginia gave the better answer. After a closer look the wording does appear to be from a spacing order, however I'm not so sure about OCC overriding a legally executed lease.
Larry, The Order to Establish Drilling and Spacing Units is usually the first of several judicial orders that must be obtained prior to a drilling permit application. The Spacing order defines the size in acres, usually 640 and the formations that it applies to. It also gives the set back distances from unit lines for well location which is usually dead center in the unit. In many, probably most cases that will be changed later by way of an Order for Location exception. The 1/8 royalty mentioned is a minimum set by the state. Usually other options will be offered by the lessee accompanied by various lease bonus amounts. The final step in the judicial process is usually the Pooling Order (see my previous post). It takes several months to get to this point. The drilling permit is probably the quickest part of the process. I follow the progress of the various applications in order to estimate a timeline and to get an idea of how serious an operator is about drilling. I am not an oil and gas professional so just consider this a rough guideline. Most of what I have said applies to horizontal drilling.
Michael,
Thank you for outline the details for all the newer mineral owners, great job. The reason I said that OCC can over rule your lease is because of what happened to me.
1. I had a lease that said "NO POOLING". They wanted to water flood, OCC over ruled my lease.
2. My lease had a 1 year shut in clauses. OCC made a new rule giving oil/gas companies 2 years on shut in, again I was over ruled.
But, I have always got the % that I signed the lease for.
My suggestion for some of the newer mineral owners who are leasing. Make sure you understand what the lease you are signing saids. Have a good Oil/Gas attorney look it over. Cost less in the long run and a lot less crying over spilled milk later.
When you get any papers from OCC, look at them and understand what it is. You have the right to go to the hearing and voice your opinion. But, please know what you are talking about before you sign up to speak.
After you receive the spacing ruling, file all these papers so you know what has taking place. This will give you information about what sand/shade is spaced and how many acres. This will effect your check later on if a well starts producing.
If you are the surface/mineral owners, work with the oil companies. Most of these people are great to work with as they will be your partner for a long time if the well comes in.
If you have question, call OCC and ask, Donna or Junior. Our tax dollars are paying for OCC, so get the information you need. Also, OCC usually has a class once a year on understand the rules, etc. I think it's in the SW part of the country later this year.
thank you too Virginia for the help in understanding. I have plenty of rookie question but will take you and Michael have provided and scan the site for a while to see what I can learn now that you and Michael have helped me get past 'go'.
Larry
Virginia Pflum said:
Michael,
Thank you for outline the details for all the newer mineral owners, great job. The reason I said that OCC can over rule your lease is because of what happened to me.
1. I had a lease that said "NO POOLING". They wanted to water flood, OCC over ruled my lease.
2. My lease had a 1 year shut in clauses. OCC made a new rule giving oil/gas companies 2 years on shut in, again I was over ruled.
But, I have always got the % that I signed the lease for.
My suggestion for some of the newer mineral owners who are leasing. Make sure you understand what the lease you are signing saids. Have a good Oil/Gas attorney look it over. Cost less in the long run and a lot less crying over spilled milk later.
When you get any papers from OCC, look at them and understand what it is. You have the right to go to the hearing and voice your opinion. But, please know what you are talking about before you sign up to speak.
After you receive the spacing ruling, file all these papers so you know what has taking place. This will give you information about what sand/shade is spaced and how many acres. This will effect your check later on if a well starts producing.
If you are the surface/mineral owners, work with the oil companies. Most of these people are great to work with as they will be your partner for a long time if the well comes in.
If you have question, call OCC and ask, Donna or Junior. Our tax dollars are paying for OCC, so get the information you need. Also, OCC usually has a class once a year on understand the rules, etc. I think it's in the SW part of the country later this year.
Thanx again Michael, very helpful and appreciated. I had figured out most of what the spacing order said but had no clue what the process includes.
Larry
Michael Hutchison said:
Larry, The Order to Establish Drilling and Spacing Units is usually the first of several judicial orders that must be obtained prior to a drilling permit application. The Spacing order defines the size in acres, usually 640 and the formations that it applies to. It also gives the set back distances from unit lines for well location which is usually dead center in the unit. In many, probably most cases that will be changed later by way of an Order for Location exception. The 1/8 royalty mentioned is a minimum set by the state. Usually other options will be offered by the lessee accompanied by various lease bonus amounts. The final step in the judicial process is usually the Pooling Order (see my previous post). It takes several months to get to this point. The drilling permit is probably the quickest part of the process. I follow the progress of the various applications in order to estimate a timeline and to get an idea of how serious an operator is about drilling. I am not an oil and gas professional so just consider this a rough guideline. Most of what I have said applies to horizontal drilling.
Thank you all for your input. It is greatly appreciated.
M. D. Wood