After the time that has gone by I am wondering how the non-consent and force pooling has gone for RW and others with the forced pooling. Have some wells come to the paid for point? So now how does getting insurance happen, and at what cost? Does the LLC formed really protect you from losing your house and assets? Has the operator slammed anyone with the things Buddy Cotton said could happen? Again with nothing written and relying on the laws of the ND state commission, can they change the laws again to your disadvantage? This conversation from the past is still quite scary to a mineral interest owner considering non-consent and forced pooling in ND. And also what is happening with these wells that are being drilled in multiples on sections-how can anyone besides large companies afford to participate at all?
Mary Beth, I have at least one well that I believe is paid off having produced 314,596 barrels of oil since October 2011 and as of June. It's about time my brother and I audited the operator. I was advised that the longer you wait, the more you catch in the audit and you get more bang for your buck.
Doing research, I did find that I litterally could run down the street and get insurance for wells from the same company that insures my vehicle.
I have 7 more wells with the same operator, all doing well now, two of which had some problems, one a pinched liner and the well only had 6 frack stages and only produced 13k barrels in the first year. After repairs, the well produced 14,800 barrels in 15 days, 177,000 barrels as of June.
I had another well that had a serious problem and the operator plugged the low producing wellbore milled a hole on the casing and drilled a new wellbore and recompleted in another formation and it's a good well. I caught the operator with their hand in the cookie jar and my brother and I came to an agreement with the operator that we do not owe a risk penalty on that particular well because they plugged a producing wellbore without consulting us, even though they swore to the BIA that they had, and violated our correlative rights to obtain as much production as possible from the wellbore that they plugged. Had I not caught them, I probably would have been stuck at 16% royalty for the life of that well. But all is well.
Really I could not be more pleased, unless it would be that my operator was more tecnically competent. Much smaller operators do better than my operator when it comes to wells that need work. I'm not just talking about my wells, I made a large sample of wells my operator drilled and checked the rates of serious problems of wells drilled by other operators in the same area and found my operator has the same record wherever they operate. We do not get to choose the operator, a pity.
As to how anyone can participate in multiple wells, I certainly couldn't, at least not 100%. You do have the option of participating to the extent you like and being non-consent in the remainder.
As for being afraid, many landmen try to use fear of the unknown and some of them tell lies to make things sound worse than they are, like the risk penalty is 300% and you won't see a dime until the well cost and penalty are paid off, which simply is not true, in ND anyway. The only cure for fear is understanding and understanding come from education. If you want the fear to go away, you need to educate yourself. There is no business that I know of in which one can succeed without knowing a good deal about it, oil business is no different.
Mary Beth said:
After the time that has gone by I am wondering how the non-consent and force pooling has gone for RW and others with the forced pooling. Have some wells come to the paid for point? So now how does getting insurance happen, and at what cost? Does the LLC formed really protect you from losing your house and assets? Has the operator slammed anyone with the things Buddy Cotton said could happen? Again with nothing written and relying on the laws of the ND state commission, can they change the laws again to your disadvantage? This conversation from the past is still quite scary to a mineral interest owner considering non-consent and forced pooling in ND. And also what is happening with these wells that are being drilled in multiples on sections-how can anyone besides large companies afford to participate at all?
I have very little experience in North Dakota and it's a shame if Landman are stating things that are false, but I did want to mention or ask about enacting a force pooling penalty on a non-consenting LESSEE... I do believe the penalty is 300% in that case... not that it is relevant to RW Kennedy and his mineral interest...but it does shed light on why Landman go around stating 300% penalty. It's a statue, I believe for Lessees.
I am a mineral interest owner, a non-operated working interest owner, and an oil operator. I resent, deeply, posts like some of those on this particular thread that imply the oil industry cannot be trusted, that land men lie and intentionally try to frighten people into making bad decisions, that “audits” should be used as a means of resolving legal disputes and the longer a mineral interest owner waits to initiate an audit the more likely it is to “catch” an operator cooking the books. That is ludicrous. Those kinds of statements are divisive and do nothing but to create mistrust and discord between Lessor and Lessee.
Some oil folks, like many folks in other walks of life, intentionally try to take advantage of interpretive provisions in the law. Oil companies, particularly public companies, do not willfully break statutory law that is rooted in precedence within the court system that might subject themselves to law suits. Law suits are costly to defend and the probability of any oil company prevailing over a mineral owner in today’s world is slim to none. Lawsuits harm the reputation of the company in the community they are trying to operate in. It prevents them from re-leasing, or negotiating surface use agreements, raises bonus rates, it harms their ability to function under the regulatory guidance of the applicable state, all kinds of things. Anyone that believes otherwise, and offers advice accordingly, is not helping people.
Electing to become a working interest owner in lieu of being pooled, then going non-consent on successive wells within the unit, is indeed an adversarial matter with an operator. It plumb pisses them off and if you can look at it objectively, you might be able to understand why. Being pissed off, however, does not mean they automatically act illegally. Where non consent penalties are statutory (they are not in Texas) a mineral owner wanting to run with the big dogs should know exactly what it is getting into. It is unlikely they are going to be able to wiggle out of it later, either. For instance, when it comes time to re-frac that well, or plug and decommission that location, you better have your check book ready. By the way, operators, particularly public companies, are not afraid of audits; they happen routinely.
Check your emotions at the door before deciding to become a working interest owner when instead you can get a free ride. On 12 million dollar wells that hopefully will only make 85% internal rate of return over 20 years, I take the latter every time, thank you. And I will do so gratefully knowing full well that I cannot afford to drill 12 million dollar wells, for 6% per year annual rates of return, and without a company who can... my minerals stay in the ground. I'd rather see the nasty stuff in stock tanks, myself.
To be precise, it is not a 300% penalty, it's a recovery of 100% of actual cost of drilling and completing just as if the lessee had participated and a 200% penalty. Nowhere does it say 300% penalty. I believe I read that there can be a 300% penalty in Wyoming but it's been awhile and I won't swear to it.
Johnny Beecherl said:
I have very little experience in North Dakota and it's a shame if Landman are stating things that are false, but I did want to mention or ask about enacting a force pooling penalty on a non-consenting LESSEE... I do believe the penalty is 300% in that case... not that it is relevant to RW Kennedy and his mineral interest...but it does shed light on why Landman go around stating 300% penalty. It's a statue, I believe for Lessees.
@Mike....your interests are opposed to "mineral owners"....your opinion is bias and should be viewed by all with that caveat.....check your emotions at the door.
I am a mineral interest owner, Mr. Babcock; my interests are aligned with truth and facts, not innuendo and creating mistrust and ill will between operators and mineral interest ownership. Being in the oil business does not make me the enemy, sir.
As to working interest participation in lieu of forced pooling, I rendered an opinion on the risk of that based on a half century of working interest ownership. How's that for a caveat?
I did catch my operator with his hand in the cookie jar. My operator plugged a producing wellbore, milled a hole in the casing at a different elevation, drilled a new horizontal well bore without consulting either my brother or I. The Bureau of Indian Affairs required a sworn notarized affidavit that all parties concerned be notified so they would be able to exercise their right to protest the plugging of the producing wellbore. Neither my brother or I had been notified. I did not check to see if any of the other non-operating interests had been notified, but that would have been high on my list of things to do if my discussion with the operator did not go to my satisfaction. Lying to the federal government is a serious offence. I negotiated a deal whereby my brother and I did not owe a risk penalty on that particular well. There was no grey area at all, either what they swore to in the affidavit was true or it was a lie. It was a lie and it cost them. There was no "interpretation" as Mike would like to suggest. It was criminal.
This is not the only time I have caught this operator in wrongdoing and I have not even audited them yet.
Of course the operator does not fear audits, audits are just to return the money that was rightfully yours to begin with if discrepancies are found.
What Mike says about an adversarial relationship sounds correct. The thing in my case was that I could well have given my ok to just plug that poor producing wellbore so I could gain more production from the new wellbore. Point being, they committed a criminal act, without even knowing they needed to do so. Of course they probably never expected to be caught.
I disagree with Mike that an oil company has difficulty in prevailing. From personal experience a lawsuit against an oil company can be a long drawn out expensive undertaking but I would do it again.
...just like Fox is "fair and balanced"
"Mineral Interest Owner" vs "Mineral Owner"....you most likely paid for your minerals, or are a lessee.
You naturally resent those that have inherited, or live on their minerals and didn't spend a dime. You have taken risk where they have taken none. It is the American way to cry foul. The operators want these people to sell them 80% of their minerals and then go away, that is what I would want if I were an operator.
You are entitled to your opinion, it adds to the depth of the topic. I am just making sure the new here understand that you are not representing an unbiased opinion.
However... you jumped the shark when you claim to represent "truth and facts," much like Fox News I guess.
...I'm not willing to share my personal experience dealing with the operators on a public forum, and frankly I couldn't add much more damning anecdotal evidence than Mr. Kennedy already did.
LOL...I just went on a rant of my experiences, right after I said I wouldn't....obviously all deleted.
Suffice it to say......everyone has heard of the stereotypical stories of big bad corporations against the little guys.....there is a reason those stories are so ubiquitous....
I for one agree with Andrew and RW. I have a couple issues with oil companies and they both happen to be public companies. I will NEVER lease and have instructed my wife and kids to do the same if I were to pass.
@ Andrew
I also wrote out my experiences and deleted them as well. I do think members should +1 on the thread if they have had unethical dealings as well.
Mr. Babcock, your little play on words is wrong. I am a mineral owner under land I bought myself and have toiled over for many, many years with hard, physical labor. 100 years from now somebody else will own that land and the oil under it. That makes me a renter, little else. I cannot drill deep, expensive wells so I need the financial ability of companies that can. I need those companies and as painful as is clearly is for some people to admit, they need them as well, If on the other hand you, for instance, have the ability to steer a bottom hole assembly within an 80 foot section of dense shale a mile and half out, and 12 million dollars to do so, my apologies. You are in a position to get "your" oil out of the ground, congratulations.
I try to be smarter than an oil company when, and if, I get to a point of negotiation about a lease or other related matter, but I don't whine and complain after the fact if I am not. If I have a bad experience in any dealings in life, be it a mechanic at the local garage or with a neighbor who will not fix a fence, I don't generalize and pass judgment on all mechanics and all neighbors. I don't go to the local feed store and say bad things about those people just for spite or to prove to other people I know everything about pickup trucks are barbwire.
It is the height of hypocrisy to be openly hostile against an entire industry (based on a few years of so called, "experience") that will risk enormous sums of money, in LTO plays anyway, for very little return on their money. If I can benefit from that as a royalty owner, that makes me a very lucky man. Owning minerals, to me, is not an entitlement, it is a privilege. This is the only country in the world where I am granted that privilege. And by the way, all the crooks and thieves that you and others imply are unethically producing this oil, are really, really important to the energy future of our county. When this little LTO bubble is over the world is going to be in deep doo doo with regards to oil supplies.
My political idealism has nothing to do with this debate. Good grief. But, its a mineral interest forum, you are correct. Here, it seems, anyone having anything to do with the oil and gas industry, who does not go with the anti-oil flow, is the enemy, and not welcome. What you don't know about the oil and gas business can be learned on the internet, I am sure.
Lets leave it at that. Adios.
Mike makes a few observations that just don't fit the facts.
I did not ask for my oil to be produced, I did not NEED the operator.
I am not a RENTER a renter can not sell the property he rents. This brings back the obvious point that Mike being the industry side believes as I have said before, the oil companies do not believe that you own the oil, that really you have no right to it, were just sitting atop it when they happened by and decided to produce it, that the mineral OWNER is sticking it to THEM.
I affirm that if I am just a renter of my oil and it can be taken without my permission, then Mike's house doesn't really belong to him and I should be able to walk up and sell it, give him 20% plus $100 bonus and keep the remainder.
The oil has been in my family longer than the oil company that produces it has been around, who is the johnny come lately? And no, I did not inherit all of my minerals, I bought some property with minerals with my own hard earned money.
I wish Mike would post more so you can really see how the industry thinks.
Maybe he was trying to be philosophical or analogous. There is that old saying that no one owns. Everyone just rents or leases. Meaning, I think, that if you owned, you would live forever.
It is a bad analogy as applies to mineral rights, in that it is a property right, and your own flesh and blood could still own it 100 years from now, just like the guy who sells beef to his H.E.B. The ranch has been in his family since 1882.
The State of Texas will also issue what is called a Centennial plaque of ownership to land owners whose land has been in the same family for a century of continual ownership. If they own it that long, they still may have the minerals as well.
O.O Owning property is a, "privilege"!? That is how much of the oil industry feels isn't it?
Your political idealism has a lot to do with people's understanding of your opinion and where you are coming from.
I was going to adios from this thread myself but what I haven't seen mentioned, (I could have missed it) is that everyone that doesn't lease, that is forced pooled, that has their oil produced, WILL become a Working Interest Owner like yourself. They will have to pay monthly JIBs. They will have to be concerned with the Black Swans.
If a person has no money and owns 100 net mineral acres, that they didn't lease, and is producing, they are going to need professional help somewhere down the road.....
I really love Mr. Kennedy's, "Mike's house" example. That is the truth of it. The oil underneath us is "real property" and the courts, probate courts for certain, treat it that way for taxes and ownership. Let's say my oil, "my house" is worth $5 million. I can't afford the property taxes on my $5 million house. I guess I have to...sell it, rent it out, squat in it....The Oil Industry (Operators/Landman) know my financial situation and with the help of the government can legally offer me $100 and let me keep 20% of the home....Mike is cool with that since owning anything is a privilege and not a right to him.......I'm not going to start rambling on about the Commerce Clause and how the courts have dealt with "unfair dealings" by Big Business over the course of our Country, but gone are the Railroad, Steel, and Land Barrons of yesteryear....can't say that about oil...oh, there isn't a human "face" anymore...it has been replaced with symbols on Wall Street and Corporate names...but for some reason the Supreme Court has legally personified them none the less.
Sooooooooo..........You want to defend the Operators? Why are they ripping people off with low bonuses (divide any bonus amount per well, per spacing) it is crap. 20% royalty is crap for a partnership. "Mr. Operator, thank you for helping me get my oil out of the ground, I will give you 50% and share in the cost but I have no money, so can you borrow me? Can you take my share out of my cut of the oil? Can you do a damn thing to help me? NO? So you are going to take my oil and force me to be your partner anyway? But then you won't get any cut of my oil? are you a dumb greedy sob? How do you have enough money to be drilling all these wells? Not your own money? What do you mean, look at the tax code? Well, I think I will just deal with another operator then if you won't work with me...what?...what do you mean I don't have a choice? but you have a crappy history and your wells cost too much and you sell your oil $20 a barrel less than the guy next door. What are talking about Risk Penalty? Risk of what? Have you seen the success rate for wells in ND? What do you mean it doesn't matter? Oh, the risk penalty is used post boom now instead of a baseball bat to make people submit to your extortion....must still be some due process before assessing that? I mean you must request in writing to the State before assessing that? Oh, it saves time just skipping all that because nobody ever prevails against the operator...but I read some where that mineral owners have the operators by the shorts....stop laughing....( I could go on and on with this...)
To be "fair and balanced" and to the other readers: If you have EOG as an operator consider yourself blessed. These guys do sell their oil way higher..consistently...every single month over the past two years...than my other operators...they have a great owners relations site to look at your statements and is fantastic for end of the year tax stuff, and direct deposit for the checks. They have lower costs, probably due to their trains. They are the operator you want. I have nothing bad to say about them other than I wish my main minerals were with them rather than the other operators I have....but like I said...you have no choice.
!!!! remember you non-leasers.....if your oil produces, you will one day be a working interest owner and have all the benefits and stresses that go along with it....which also includes bailing out at any time...you still can lease, sell and have a ton of options....#1 rule and advice, no let's make it a Commandment...You have to seek professional advice/help from an oil and gas attorney as well as oil and gas CPA before you become "a forced working interest owner"....notice I said "forced working interest owner" I don't need somebody dragging me back into this thread to defend a misunderstanding. Those of you that chose to participate have your own source of education and knew what you were doing or not....I'm just saying that for the people that didn't lease, didn't know they didn't lease, or thought if they were forced never had to worry about being responsible for anything to do with the oil....they need the professionals before that day arrives...NO just reading this site does not satisfy that requirement..........
What I think people don't really understand is that "educating oneself" is not a substitute for professional advice.........they think they can save the money by doing all the research on the internet.....Let me give you one example before I go rush to my tee time......Even if you had a 200 IQ, read and memorized the Constitution of the United States, it means very little in Court. The Supreme Court decides what the Constitution means, not anyone else......You could know all oil and gas laws and regulations but only someone that works in, with, against, for, the industry knows how things work. There is "industry practice" that can really only be understood by those that "practice in the industry".........Don't be one of those people that say, "I know my rights" what good is knowing your rights if they aren't protected, enforced, or even acknowledged by the courts......just take the abortion issue if anyone is still confused......good luck all and godspeed...Adios to you Mike too.