My family’s check stubs from Marathon have never mentioned more than two wells which upon further investigation I found at least 12 wells in the unit are our wells. The only product, that I know of, we were ever been paid for was oil ONLY. I was never paid for any natural gas or condensate or any other plant products.
I went to see the man who was in charge of the Garland field in Northwest Wyoming. He confirmed that Marathon had NOT been paying me or my family for anything other than oil. He also showed me a copy of the lease. Anything other than oil had lines drawn through it with a pen without any initials or signatures. It seemed very odd that if you had a signed lease that it would not include all products from any wells drilled on your mineral rights. Anyone could have simply lined these out AFTER the lease was signed. Also, it does not make sense at all that Marathon should be allowed to remove gas from the well without making any payments. I’m wondering if the lease is legal at all since the critical items were lined out which allowed production to be taken without proper, industry practice payment.
After I discovered this, Marathon sold all their holdings in Wyoming to Merit Energy. So, I had to start fresh with Merit as the new operator. Merit called to let me know that they were going along with the lease with the lease that had the lines drawn through it.
An oil and gas lease is a contract between two parties and it can have whatever terms that the two parties agree to. As old as the Garland field is, my guess is that the gas was essentially worthless at the time after processing and transportation costs and no one wanted to mess with it. Maybe your family made a bad deal, but they made it.
While I believe it is good practice to initial edits, I don’t believe it renders the document unenforceable if it’s not done. Somewhere your family should have their original signed copy of the lease, and if it doesn’t have the line-outs you would have a legitimate argument.
As far as which wells you should be paid on, the Company will be relying on a Division Order Title Opinion, prepared by a title attorney. Most likely someone in the past signed a Division Order agreeing to the calculations. You could challenge the DOTO but you would probably have to go through an attorney to do so.
These old units typically have commingled tank batteries where multiple wells produce into a single set of tanks. When the oil is sold, it may look like it is only from one well but it could actually be from several wells. I don’t know if that is the dase here, but it might be.
Robert,
You can go to the county Clerk office and get a copy of the original lease. If the gas is not marked out on that lease, then get a good oil & gas attorney real fast.
Also, does your lease show no deduction? If so, then they can't take out of transportation, etc. If it doesn't say, then you may be paying up to 50% of the check for all the deduction.
I would ask to see the Division orders for all the wells to make sure you are getting pay for each well. Also, if it has 12 wells, what is the spacing? If you own a section of minerals, then that would be 4 wells per quarter or 40 a spacing. Are you sure all the wells are part of your minerals?
Thank you. Thank you. I am enjoying the genius replies I'm getting. I am forwarding them to my client family. I am asking the family to sign up for this forum since it is so valuable. I just received a call from them; they went to the court house and found a lease that was signed 5 years earlier without the line outs. I recommended they take them both to 3 or 4 landmen to get their opinions.
Robert,
Now you need to check and make sure a correction to the lease wasn't file 5 years later. Or did they get a new lease and marked it out at that time.
A land man can only give their option and they are in business to make money. I would take what you have to an oil & gas attorney and have it checked out. Sometimes it"s best not to let oil companies know you are working on things, let the attorney get what you have coming and any back interest that is due you. Also, I don't know about Wyoming, but sometimes their is an misc or mineral book at the co. clerk office. If the surface was sold and you only have the minerals, it maybe in those books.
You need to get a recorded copy of the current lease that is at issue to see if the lines are "crossed out." Then discuss this with a Wyoming oil and gas attorney. It may be possible to argue that the resulting language only allowed the oil company to drill and produce oil and gas from an oil well and that they have no right to produce gas and condensate from a gas well.
In Kansas I have seen leases for only one commodity (only oil or only gas) in areas that historically produce both oil and gas. For example, in a situation of a gas lease only where oil is sometimes marginally produced, the mineral owner owns 100% of the oil produced and could take it in-kind or arrange with the operator to market the oil and receive all or a significant portion of the proceeds since the operator has no lease for the oil. I would imagine the same can be said for producing gas on an oil-only lease. I would follow the suggestions of others in this thread and make sure you have copies of the filed lease and any amendments or lease modifications. The language in your lease will dictate. In Kansas there was a class action lawsuit over this because the operator (gas only) was producing marginal amounts of oil and selling it - without reporting the production to the state and without paying the royalty owner 100% of the proceeds or allowing the royalty owner the option to take the oil in-kind.
Wow! Kitchen, I think you have a point. If I understand you right: If the gas portion was crossed out, it could mean that the operator cannot take it since they did not lease it...... That would be a life saver for the mineral owner! You guys are sooooooooo smart!!
Thanks you guys! What great information. I may drive the fifty miles today to find the recorded lease. I also have a hunch that we might own that fifty acres of surface. If so, that would be powerful as well. Wouldn’t it? We haven’t done the title work for Bighorn County yet although much of that information will be at the Park County Courthouse.
That is correct. The operator should only be taking what they legally have title to. In this case, a gas only lease means they only have the rights to the gas. In Texas the lessee actually has title to the hydrocarbon described in the lease. So if you only leased oil (no associated hydrocarbons), then the lessee only has title to oil, and not the other minerals and hydrocarbons that may also be produced in conjunction with oil. This is why it is so important to get the filed copy of your lease to see if it differs from the copy you received. In Kansas this did not amount of a significant amount of money, but a few hundred barrels of oil a year over a few years does add up to be a significant amount. This subject is often overlooked in my opinion. Helium is another product in Kansas that can be more valuable than natural gas. The only people who will get paid for helium must be an honest operator or a diligent royalty owner, the situation you are describing here is no different.
Kitchen, I love it. Thanks for a great job!! Bob
I hoped a copy of the recorded lease might be in the Park County Court House, but no such luck. I’ll see if I can I find it in Basin later on today. Thanks for giving me a little direction.
I went to the Bighorn county courthouse and found the recorded copy of the lease. It looked very different than the lease given to me by Merit energy but all the details were exactly the same. I had copies blown up to a much larger size so they were much more legible. The lease was updated in 1935. I had more than one map showing me that little 47 acre lease. Over a period of time I began to wonder where was the well that was drilled back in 1935 or 36. I finally looked up the two wells shown to be on that 47 acres. One was drilled in 1973 and one was drilled in 1985. I then went back to see if the lease was still in force some thirty eight years after the lease was signed and recorded. The lease was only good for a period of one year. I havent talked to Merit energy about this fact but I feel very good about my position today other than the day I found the recorded lease. Any suggestions about what I should do next?
You might not get a reply since this site has changed everything. It was almost like they don’t exist any longer.