I stumbled across a mineral interest

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1

This is a new ploy developed by ABSOLUTELY unscrupulous companies, with the full endorsement of their attorneys.

I went as far as contacting landowner attorneys in various states and they are finding an increase of this incredibly abhorable behavior.

It is (in primarily Texas) a way for the oil companies to legally appropriate landowner royalties and mineral interest. See my blog post here for an example of how it works.:

http://www.mineralrightsforum.com/profiles/blogs/pooling-in-texas-part-3

I have had TWO clients in the past 5 months who have stumbled across mineral and royalty interests in a pooled unit, but not pooled. One (the mineral interest) was a drillsite tract without being leased. Small interest, but there nevertheless, The other was a NPRI who absolutely was managing her minerals and caught the problem

The nefarious oil companies position is that "OH, there you are. We have been looking for you.:" right. Sign here and we will put you in a pay status-- but only from the date you sign.

The problem is that the unleased/unratified interest is only entitled to royalties at the time of ratification of the leases/pooled unit.

So the longer you wait, the MORE money is stolen (with sanction of law). Legal, yes. Just, no.

So, how do you fix the problem.

First, know what you own (a mineral book).

Second, know if there are any units covering your property.

Third, monitor new permits to see if the P-1(application of permit) covers your property.

Fourth, monitor the permits to see if the P-12 (Certificate of Pooling Authority) covers your property.

2

Mr. Cotton, you have my interest. You stated that an unleased mineral interest would only be entitled to royalty payments. What would 1) the percent of the royalty payment be 2) I thought land had to be leased in order to be drilled in Texas if it was the drill site. I realize you have a far greater knowledge than most and was trying to understand how this could be possible if you owned the land and minerals. I can see where it could happen for a person who has a NPRI. Please help clear my foggy brain.

3

Mr. Cotten,

Thank you for bringing awareness to this issue. It is absolutely a problem. I think that your advice for how to avoid the problem is spot-on.

4

Hello again Mr. Cotten. Thanks for helping all of us out. In above example, I thought that the oil co would have the $ in suspense and then pay it to NPRI owner once ratified. This week, I have been tasked with ratifying a NEMI (non-executive mineral interest) that slipped through the cracks. This is a drill site tract in a producing, fracing unit. I remember reading (somewhere?) that NPRI owners on drill site tracts can seize all the royalty if not ratified?? Sounds way too severe but that's the way I remember it. My question is: given this is drill site and producing, what is the worst case scenario for the oil co in this situation?

5

Dear Mr. Goode,

Addressing Texas properties only..

You do not have a worse case scenario, the oil company does. If you are a drillsite, then by not ratifying the lease or the unit (as a non-executive mineral interest owner or NPRI), you are in the well from day one.

If you are unleased, then that is where the problems begin.

The jury is sort of out right now on accounting for unleased/unratified interests in the bore path of a horizontal well where there are perfs on or within 330' from the boundary of the tract.

If someone knows of some infomation on this topic, please let us all know. I do know that the last two sessions of the state legislature, bills were introduced but not passed, to address the cost/revenue sharing on horizontal drainholes.

Buddy Cotten