In need of some guidance/direction

General Mineral Rights Discussion
1

My siblings and I have recently been contacted by a Shell Oil Co rep, concerning property we apparently own in Ward Cty, TX. Problem is, we really know nothing about it. We think our dad inherited this back in the late 60's, along with his brother and sister (all deceased) and, we do remember our mom (also deceased), receiving dividend checks for years from our "oil well". They had dwindled down to $26/mth and, once she passed, none of us even thought about it . . . until now. However, we don't know if we even own the land, the mineral rights, or both, or the size of it, and have no idea where to start looking for those answers.

The rep did send us a "first look" map (and, I think I found our 'claim'), along with a "Surface Use Agreement and Subsurface Wellbore Easement Agreement". Right now, he's just asking our permission to survey and, after that, says they'll "have an idea of the size of pad site and its' location" and, has mentioned compensation "according to the University Land's Rate and Damage Schedule". I've been googling, and poking around your pages for two days, but haven't really found anything that describes how this process works. Any suggestions?

He's also asked if we have any of the other landowner's information (which we do) but, part of me even wonders if this is legit. He also seems to be in a hurry to get permission to survey. Is there a time constraint they're working under? Sounds like we could use an Oil & Gas lawyer? But, is there preliminary info I could/should gather?

Thanks for any insight you might provide! Sorry if I rambled!

2

You must own surface which would entitle you to damages for a well pad. If the well is to be located on your surface in one section, for a horizontal wellbore that will be drilled into and producing from an adjacent sections, then you are entitled to payment for a subsurface wellbore easement. You will not receive royalties if the producing portion of the wellbore is not located on your section and is not unitized into the producing well. In Ward County, the University Lands Rate and Damage Schedule is a good standard for damages for the wellpad and the subsurface wellbore. Here is link to the website for UT Lands System; click on Rate and Damage Schedule in center of page for a pdf download. Ask Shell landman for a legal description with Section and Block and whether it appears you own any of the minerals. It is ok to give him permission to survey as that does not entail any damage to your surface. The hurry you sense is likely because Shell plans to drill very soon. Shell must survey in order to prepare a plat for the RRC to be included in the well permit application to demonstrate the exact location of the drill site. Shell uses licensed and qualified surveyors for this work. Good luck.

http://www.utlands.utsystem.edu/

3

If you own the surface I would be contacting the County Appraiser and County Tax Office to determine who is listed as the surface owner - and also to find out if you owe any delinquent taxes.

4

Thanks for clarifying things. In the agreement, we are referred to as "surface owners" and, it does make this statement:

"WHEREAS, Operator, pursuant to its present and or future leasehold rights, desires to drill and maintain oil and gas well(s) (“Well(s)”)- the pad sites of which are to be located on the Property;" To me, that sounds like they're pretty sure of their chances, so the UT Lands Schedule would apply, just for them to build the pad? The 'easement' part would come into play if they needed to use our land to "get to the oil/gas on the other side"? But, we'd receive royalties only if the 'vein', accessed by that easement, physically comes out of our well? (I need to educate myself on the terminology!)

Guess we've been hesitant to have much communication with the rep, for fear of being taken advantage of. So, acknowledging our ignorance won't give them the upper hand? Are there things we shouldn't mention? We also see no harm in allowing the survey to happen but wanted to have a little more info before we opened that door.

At least now I feel better about the legitimacy of things!

5

Appreciate that tip! We had thought about the back-tax aspect but, didn't know where to look. Actually just found my mom's name listed on the Ward Cty Appraisal District site so, at least now we have a point of contact (and more numbers to try to make sense of!) Thanks! We're also wondering if there were dividends we've been missing out on for the last 5 yrs? Would the oil company rep be the person to ask?

6

Hey, PJ!

Congratulations to you and your siblings on your inheritance.

TennisDaze and Kitchen have both provided you with excellent information and advice.

You should contact the Ward County Appraisal District and the Tax Office as soon as you can. If no one in your family has been paying the taxes for several years, you may be in danger of losing the property.

And, if your family hasn't done so before now, you may have some paperwork that will need to be filed in Ward County - the different probate papers from your deceased parents and your Aunts and Uncles, for example.

Once you determine the legal description(s) of the property(ies) you own, let me know and I will look the area up for you and send you some information about drilling and production activity in your area.

And, yes, it is always a good idea to consult an Attorney about these things. Once you have signed your agreement, it will be almost impossible to amend it and a lot of things can happen that could potentially damage your land.

Their proposed Surface Location (Pad Site) might negatively affect the usefulness of the rest of the land, for example, or alter the natural drainage rendering it useless for farming. Location of the roadway(s) they propose to build is an important issue - you should have final say on it's location. Surface water and Water Well issues need to be addressed: If they dig a well, you can require that they drill it to a different formation that any existing water well is producing from. And require that they turn it over to you when they finish their drilling operations. Lots of things to consider.

And TennisDaze is correct in that you will not be eligible to receive any royalties if the producing portion of the borehole (perforations) is/are not on your land. I have, however, seen where Surface Location Owners have negotiated for one or two points of Overriding Royalty from any Wells drilled from any Surface Location located on their lands.

If you need the names of a couple of qualified Oil and Gas Attorneys, I can provide you with some as I am sure the others can too.

You need to protect yourself BEFORE you sign anything.

Hope this helps -

Charles Emery Tooke III

Certified Professional Landman

Fort Worth, Texas

7

Make sure you get Ward County to update the mailing address so that someone can receive the tax bills in the future! It sounds like you will need to get the ownership corrected to reflect the heirs, not only with the operator (Shell) but also the county records.

8

Thanks so much Charles! You made some good points I hadn't even thought of. And, it's becoming more and more obvious we DO need a lawyer. May take you up on your offer for a referral.

But, you're right, there is no documentation linking us kids to this property. That's part of the reason for my consternation. The rep has only contacted two of my four siblings so, how can he be charging ahead with an agreement? Especially when back-taxes could be involved? Definitely not signing anything at this point! But, figure allowing the survey couldn't hurt?

As far as I know, the original piece of land was divided equally among my dad, and his brother and sister. When dad died in 1970 (with no will), we think we, as young children, signed over our shares to mom, who also didn't leave a will. Sounds like we definitely have some paperwork in our future!

This is the legal description from the agreement we received: "The northwest-half (NW/2) of the west-quarter (W/4) of Section 209, Block 34, H. & T. C. RR. CO. Survey, A-240, Ward County, Texas." Appreciate whatever info you might provide.

Thanks for taking the time, and I totally agree with your assessment of TennisDaze and Kitchen's contributions!

9

I'll make sure one of my brothers or sisters (not me!) takes care of that mailing address issue right away! ;-) But yes, I agree, establishing ownership seems to be our first step, which is why I'm intrigued that the oil company rep had already drawn up an agreement with only one of my sisters listed as 'surface owner'.

Have a feeling this could take awhile!

10

Might instead be Abstract # A-280.

11

She could be the only one of you listed in the Tax Rolls.

12

If neither of your parents left a Will and there are only the four of you, then all you probably will need is an Affidavit of Heirship with copies of their Death Certificates attached as Exhibits.

File that in the Official Public Records of Ward County (the County Clerk's Office) and send certified copies to whoever was and/or is paying the royalties today. They will send you each new Division Orders and release any funds they are holding in suspense.

As soon as you can, find out what the land is being used for. If it is for cattle grazing, you are going to want a fence around the Drill Site.

13

There do not appear to be any operating wells in NW/2 of W/4 which is approximately 160 acres. There was one Delaware well in W/4 which ceased producing in 1974. Devon has 2 horizontal wells on 320 acres in SE/2 of Section 209. There are also 2 shallow wells in N/4 which are likely on 40 acre spacing. That area does not have cattle grazing and fencing. In most of Ward County, without providing feed, it is generally estimated that you need 100 acres per cow. There has been a lot of oil and gas leasing in Section 209 in recent years so you may or may not own as much of the minerals as surface. With respect to the surface, you and your siblings own an undivided interest in whatever surface interest your father had. (It depends on whether he owned 1/3 of 160 acres or the 160 acres were divided into separate tracts between him and his siblings.) Based on my readings, in Texas, one co-tenant can grant a third party the right to use a joint property, subject to a duty to account to the other co-tenants. There is a limitation that one co-tenant cannot grant a pipeline easement without the joinder of the other co-tenants, as that tis the conveyance of a property interest. However, it may be possible for one co-tenant to clearly limit his agreement with the operator to only his interest and be paid proportionately less. Then the remaining surface owners can be signed up later. You definitely need to take action to clear up your title to the surface and any minerals.

14

Wow, that's a lot to digest! I'm so confused! Now I'm not even sure what they want the land for. But, you gave me some good food for thought. We definitely need to consult with someone! And it sounds like we need to do it quickly.

As far as how the property was divided -- on the Ward County Appraisal District's site, I found my mom, my uncle's deceased wife, and my aunt's daughter (very much alive!). Except for the 'owner information', everything else is identical among the three. (but, on my uncle's deceased wife's 'information', instead of her address, it shows "% Transfer/Split Out(No Holdin". Maybe indicating her share was transferred to her kids? Or she sold out?) So, it doesn't appear they divided the land, but shared the royalties equally? Otherwise, I have no idea what this is telling me!

Thanks for your help!

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15

Thanks for the guidance, Charles.