A lot of this occured while my father was still alive so I had no participation but just want to run a scenario by the learned readers. In 1991 a well begins producing, and continues to produce a little today. The actual well is not on our acres but pools 1/4 section and that 1/4 section is what is used in our royalty calculation. A lease was in effect at that time which had, regretfully, no pough clause (5 years 88 to 93) encompassing that 1/4 and approximatley 250 more acres outside of the pooling and was held by the company drilling the well.

Following my father's passing I signed a three year lease in 98 with a pough clause governing the same acres as the above lease, with the company producing the well at that time. I think the producer has changed twice since it's inception. I thought at the time I had to sign this lease as I was a new mineral holder through inheritance and this lease recognized that. So I have since 98 thought that a pough clause allowed me to lease the acres in that lease outside of the pooling.

My brother and I have minerals not contained in either lease that were unleased until Bakken brought new interest. We leased all leaseable acres 2008 for 5 years. This lease when signed assumed the only HBP acres were the ones pooled by the producer so we went ahead as if the pough was in effect and given a bonus for all excluding those pooled. Since then the 2008 leaseholder found the 1988 lease and believes it takes precident therefore no pough clause. So now I am not really sure why the 1998 lease came to be but I did sign it. An attorney has given an opinion that the original 88 lease is likely the governing document but a case could be made both ways. He feels taking that proceeding with legal action with the oil company would only result in years of delays which this oil company has a reputation of doing.

The 2008 leaser wants some bonus money back, but realy can't get it because we had an attorney review the lease prior to signing and removed any language that might have allowed them to change the bonus amount post signing. There is one year left on that lease and people around us are getting top leased as leases from the late 90s begin to expire and being in NE Montana actual drilling is happening at slower pace than our ND neighbors. So I am trying to be prepared for top lease offers or even seeing the current lease expire and beginning negotions all over again. I am not sure how to approach the HBP issue. I dont think the producer of the existing well is even aware of my quandry. I am thinking about writing to the producer and just asking the basic question "what document is used to validate the pooling of our 1/4 section. We are small potatoes to them and am not sure it is in my interest to get their curiosity up and dig deeper into the paperwork trail. At $500 to $1000 dollars an acre the HBP issue on 250 acres could be a significant issue to this poor ex-farm boy.

Any suggestions?

Steve, I think the first lease probably takes precedence because a lease is usually good for as long as the minerals are produced, and it was there first, but I'm not a lawyer. Then again, sometimes, I want to ask my lawyer if he is actually hearing the words that are coming out of his mouth.

Thanks Cliff, Any idea how long a contest to a marginal well might take? When you get the plog together could you respond here so I can check it out. We need more Lawdawgs, thanks.

Cliff Williams said:

I dislike attorneys that do not return phone calls and do not listen to the people talking to them. It is a sad business. Perhaps the 1988 lease was still valid when you signed but the courts have made a bit of a turn in the last 30 years to allow a mineral owner to challenge the lease that holds extended acreage with a marginal well. I'll look up the information and cases and see if I can put a blog post together on that issue. (thanks)

Some here have been under the impression that it is easy to get the money back from mineral owners but the fact is that quite a few mineral owners are what we attorneys call "judgement proof" - they don't have the money now, and may not ever, to pay back the bonus that has been paid.

Besides most courts consider that unless the mineral owner has used fraud that it is the big businessman's problem and he should have conducted his due diligence more thoroughly. Courts and legislatures may seem to go for the oil company but leases in most states are "strictly construed" against the side of the contract that drafted the document...in oil lease cases that would be the oil company.

Lawdawg - Cliff Williams