How does one persuede the lessee to record a release at the expiration of a lease?

I believe the title says most of it. If the lessee will not record a release, what are your options ? What if the lessee knows the lease has ended but doesn't want to record a release, because they are still trying to lease you again themselves, and other companies who might otherwise be interested in leasing from you, require that a release be filed before they will lease from you ? One final twist is that it's possible that a well could commence drilling in the next 2 months. This is all occouring in North Dakota. My best thought to date has been to request either a release from the previous lessee, or the reason why the lease has not terminated, through a letter from a lawyer and if the previous lessee is unresponsive to file a statement of fact that the lease has terminated, that the former lessee given the chance to explain why the lease was still in effect, has failed to do so, and append the letter to the statement of fact. All suggestions would be appreciated.

rw:

If the lease has reached it's expiration date, does an operator have to file a release in order for you to negotiate a new lease with another operator? I would think that the actual lease would take precedence over any other action in regards to the termination. What occurs in all the top leasing actions that are negotiated on a regular basis? If I top lease to another operator and the current lease expires, must the original lessee file a record of release or is the company doing the top leasing just gambling on the fact that a release will be signed? Finally, I was unaware that the lessee could dominate a lease in such a manner but if this is possible, maybe leases should contain a clause which would address this issue.

Charles, good points all. I think the other lessors want to see the release so there is absolutely no risk to them. A pad has probably been built in the spacing but I have not seen an affidavit to extend due to continuing operations. I have been looking into ways to tell when the pad was built, as I believe that it is not recent enough to constitute continuing operations. The lease primary term has expired. I think that at the least, if the lessee claims to hold the lease by continuing operations that they should put it in writing. I think continuing operations is not the case as they are offering more money and more % royalty to sign a new lease. There would be no reason for them to do so at this time if the lease was held by continuing operations. It is my understanding that the lessee resisted any negotiations previously for a new lease. Now they want one.

rw:

I have to agree with you in that something must be going on if they are offering more money and additional royalty. Maybe they are planning on drilling and currently getting their investors in line for XX number of additional wells. Sometimes, I give up on second guessing these companies actions as I don't feel that I have enought "inside" info to make decisions. I have been told that a drilling will begin soon only to be waiting a year later. I'm at the point that when I know a rig is on location, something must be happening. I've seen numerous sites in East Texas where a pad was built only to be grown over in weeds and heavy vegetation over several years.

Thank you Charles, I really think the lessee will say anything whatsoever at this point to keep the acres from being leased to someone else, that's why I think this lessee should put it in writing that the lease continues, failing their recording the affidavit to extend due to continuing operations, of which I have seen several, but none covering this spacing. I don't think the lessee will respond, but I think it will be good to include the letter requesting clarification, with the statement of fact, that they did have the opportunity to assert their retaining the lease and why, and have only themselves to blame for not doing so should it become an issue in the future.

rw:

I agree with you in that the lessee should be contacted in regards to this matter. I would let them know that your proceeding with your business thus putting the ball in their court, so to say.

Thank you Charles. I am asking these questions on someone elses behalf. The lessee would not enjoy it if it were me because if the ball was in my court, I would just hang onto it. I would pull out all the stops to find out every particular about the pad that they claimed constituted continuing operations, which I am pretty sure they do not, due to the weeks of silent treatment followed by a lease offer with ultimatum, of you have to decide right now. If it were me, I am carried interest elsewhere, I wouldn't mind being carried in this spacing also, as the production from all around it is quite impressive.

rw:

In some cases, the mineral owner must take the bull by the horns and play hard ball as the minerals belong to the lessor thus action should be taken accordingly.

r w kennedy said:

Thank you Charles. I am asking these questions on someone elses behalf. The lessee would not enjoy it if it were me because if the ball was in my court, I would just hang onto it. I would pull out all the stops to find out every particular about the pad that they claimed constituted continuing operations, which I am pretty sure they do not, due to the weeks of silent treatment followed by a lease offer with ultimatum, of you have to decide right now. If it were me, I am carried interest elsewhere, I wouldn't mind being carried in this spacing also, as the production from all around it is quite impressive.

In Texas there is a document called a "Non-Production Affidavit" When clearing the title on properties that had mineral leases of record, we, the title company would ask the seller to sign the affidavit, which would be recorded. It is a self-serving affidavit for the owner, but I would think something of record would assist in negotiations.

Thank you Ms. Hudnall, I had seen the affidavits of non-production in ND also, It had slipped my mind because as there was no well, the likelyhood of production would be pretty slim. It certainly wouldn't hurt to record an affidavit of non-production, as long as less than perfect curatives are being done, may as well throw the kitchen sink at it. Thank you so much!

Mary Jo Hudnall said:

In Texas there is a document called a "Non-Production Affidavit" When clearing the title on properties that had mineral leases of record, we, the title company would ask the seller to sign the affidavit, which would be recorded. It is a self-serving affidavit for the owner, but I would think something of record would assist in negotiations.

I have two tracts (30 ac. with ½ minerals and 17 ac. with full minerals) that I purchased in 2007 that are not under any current mineral lease. My title has exceptions that each tract is subject to “terms, conditions, and stipulations of mineral lease…..dated Oct 12, 1979”, Trinity County, Texas.

I obtained copies of these leases from the county clerk and they each were for a term of “5 years from & after October 29, 1979”. Apparently no release was filed on either lease.

Should I obtain an Affidavit of Non-Production on these properties to free them up for possible future leases? No drilling has ever been done on these properties to my knowledge. I also own 150 acres (1/2 minerals) adjacent to these tracts that are currently under the last year of lease.

I would. If you had a mortgage when you purchased the property, the lender should have required the non-production affidavits to enable the the title company to exclude the mineral lease exception from their Mortgagee's Title Policy. I have had to get releases from oil companies on commercial high dollar land...it is very difficult.

Vernon said:

I have two tracts (30 ac. with ½ minerals and 17 ac. with full minerals) that I purchased in 2007 that are not under any current mineral lease. My title has exceptions that each tract is subject to “terms, conditions, and stipulations of mineral lease…..dated Oct 12, 1979”, Trinity County, Texas.

I obtained copies of these leases from the county clerk and they each were for a term of “5 years from & after October 29, 1979”. Apparently no release was filed on either lease.

Should I obtain an Affidavit of Non-Production on these properties to free them up for possible future leases? No drilling has ever been done on these properties to my knowledge. I also own 150 acres (1/2 minerals) adjacent to these tracts that are currently under the last year of lease.

There was no mortgage so that must be why the affidavit was not mentioned at closing.

I guess I will have to go the route of the affidavit. I attempted to contact the Lessee today. I am not sure if he (Tommy Jeter & Assoc., Lufkin, TX) was working for himself or for someone else but he died in 2003 and his company is no more. His brother is a landman but doesn't know who or where any of his brother's records are.

Mary Jo Hudnall said:

I have had to get releases from oil companies on commercial high dollar land...it is very difficult.

The affidavit should be fine b/c if there is no production, the lease terminates.



Vernon said:

There was no mortgage so that must be why the affidavit was not mentioned at closing.

I guess I will have to go the route of the affidavit. I attempted to contact the Lessee today. I am not sure if he (Tommy Jeter & Assoc., Lufkin, TX) was working for himself or for someone else but he died in 2003 and his company is no more. His brother is a landman but doesn't know who or where any of his brother's records are.

Mary Jo Hudnall said:

I have had to get releases from oil companies on commercial high dollar land...it is very difficult.