Expiration of Lease BEFORE drilling commences


#1

I have a situation where a pooling order has come and gone a couple of months ago, but now my lease has officially expired, without renewal, and there is no evidence that drilling has yet started. An intent to drill has not yet been filed. Am I allowed to make an election under the pooling order, even though the 20-day window has passed? The Lessee did make an election under the pooling order, and the lease was still valid at that time.

Under the terms of the lease, it seems to me that it is expired, regardless of the election the Lessee made under the pooling order. Correct?


#2

My logic would be the same as yours. No spud by end of lease should mean that you are open, but not to the pooling. However, double check your lease because mine says a drilling rig has to be on location and drilling as “commencement of drilling”. Some leases have a much less rigid clause such as moving dirt around. Also check and see if there will be a surface location not in your section as any activity on that section may constitute “operations”.


#3

JW- Where you named as a respondent under the pooling order? As you spell it out, the lease would expire if no commencement of operations have begun, regardless of any election made by the Lessee. However, if you were named as a respondent and the pooling order is still in effect, usually 180 days or one year from the date of the order, you are in a special place that I can’t answer.

Todd M. Baker


#4

Todd & others: Actually, I am not mentioned on the pooling order; only the Lessee is mentioned. I think I’m in the “Twilight Zone”… I have sometimes seen “followup” pooling orders for respondents that were “omitted”. My guess is, that if I pushed it, they would have to issue one. I’d also suspect, that if I say nothing, they might proceed and act as if they lease is valid. I also suspect that proving that “no commencement of operations have begun” might actually require physically driving around that property (& adjoining properties from which the well might be drilled).
With all the activity in the area, surely this has happened many times in the past…comments?


#5

JW: Interesting situation. I understand NO drilling has yet started but might.

Can’t say definitively but , this situation appears to parallel one I experienced in '85. Drilling had started and they were down to ~ 9,400 feet and discovered not every one was Leased!! They offered a lease : and, I had two (2) Choices. Sign the lease or don’t sign the lease. If the lease was signed I would receive the Bonus & Royalty; If I didn’t sign the lease then I could Participate in the Well.

If the Well was Dry, I did not get the Bonus. If the Well was productive then My portion of the Costs would be Deducted as Oil/ Gas came out of the ground; and, I would receive some income.

Maybe worth while to visit with an Attorney. John Morgan


#6

What is the legal description & I will do a little detective work to see if I can help further.

Todd M. Baker