This last year I inherited mineral rights from my Dad who passed away in February. The mineral rights are held in a family trust and will soon be up for renewal. Would the monies received from leasing the rights thru the trust be subject to taxes?
We have mineral rights near Alexander, and have received a lease offer. To help us decide whether to lease or non-consent, we would like to read a forced pooling document. Could anyone point me to one, or email me a copy, please?
Hello Ed. I have here an excellent responce to the question you are wondering aboutā¦ I hope this is in good form to copy past and I beg forgiveness from RW KENNEDY if I steped on any toesā¦ here is his responce to meā¦
Mr. Volney, the actual law for ND on forced pooling is 38-08-08 and explains the risk penalty as being 50% of the actual cost of drilling and completing a well, this does not include surface equipment. Surface equipment and operating costs are dollar for dollar and from what I have seen operating costs are very low. There are bills to be paid, the low cost of operation, repairs can be costly per well but if you donāt have that many acres in a 1280 they donāt look much bigger than a car repair bill, best of all these arenāt your bills until the well pays out and retires the penalty and you are receiving your 100%, if the well never pays out, you are out nothing out of pocket, since they can only recover from the production of your minerals. In ND if your well never paid out the operator could place a lien against the production of your minerals. I donāt see the lien as a problem because if they couldnāt get production with the first well, I donāt see anyone being in a hurry to drill it again. When your well does pay out, retire the penalty and you receive 100%, you receive more than the operator does by the amount of royalty you do not have to pay. If you could not pay your bills with 20% to 25% more money than the operator is receiving, then I pity the operator. Another interesting item in the ND law is that anyone who has a working interest in a well can surrender it at any time to the operator and not be responsible for the wells bills from that point on, the person surrendering the working interest will also be paid salvage price for their share of the surface equipment. I may do this just before my wells are plugged. I am not as up on Montana non-consent law. Now for the good part, read the laws, they are in plain language, you may have to look up a few oil terms but itās not hard to understand. Once youāve read the laws, think about how often you have heard non-consent being discussed, where someone actually knew what they were talking about. Either most landmen have not read the laws and or are unknowledgeble or they are not telling you how it actually is, they do have a interest in seeing people lease. To be fair though, they probably just donāt know, itās no part of their business if you go non-consent, but I think some do know and are simply not truthful. Landmen are trying to do a job and that is get you leased, they donāt even want you to know you have other options. Iāve heard that 85% of mineral owners sign the first lease they see and donāt even try to negotiate, of course most wonāt go looking for a law they donāt even know exists, to see what rights and responsibilities they will have if they donāt sign the lease. I know of some people who learned the rules of non-consent late, they have really good property that would have paid off the well and penalty in 6 months but they signed leases for 15% royalty, and they tell everyone that you had better lease, because they traded some millions of dollars for a few hundred thousand royalty and bonus included and were representing their families interest also. If you go non-consent, get at least a fair well that pays out and retires the penalty in less than 5 years, I think they would feel that they had failed, and failed their relatives in the bargain also. They refuse to talk about non-consent except to say you had better sign a lease. I pity them. If I might suggest that you read the laws over a couple times then I would be glad to answer any questions that I can. Mr. Volney, I know the feeling about your post going poof. I have some cable line replacement work going on and any interuption in service and the post will not be sent, Iāll be much happier whan they are finished.
That was fast, B Volney! We think we pretty much understand the issues your post discussed. What weāre looking for is an actual, formal, NDIC forced pooling document. We want to read the specific legalese contained in one. Thanks very much for the input - thereās never too much.
I received today the content of pooling orders, straight from the Industrial Commission, State of North Dakota: As per your request the following is the form of the pooling orders issued by the Commission. Inserted into this form is the legal description and name of the pool, etc.: (2) Pursuant to North Dakota Administrative Code (NDAC) Section 43-02-03-88.1, the Director is authorized to sign, on behalf of the Commission, orders relating to, inter alia, pooling under North Dakota Century Code (NDCC) Section 38-08-08. (3) The applicant is the owner of an interest in an oil and gas leasehold estate in a spacing unit for the Pool described as all of Sections and , Township North, Range West, County, North Dakota. (4) Said spacing unit is created in accordance with an order of the Commission and there are separately owned tracts and/or separately owned interests in the spacing unit, and some of the owners thereof have not voluntarily pooled their interests for the development and operation of said spacing unit. (5) The Commission makes no findings with regard to the specific acreage or percentage attributed to separately owned tracts or interests. (6) Counsel for applicant requests an order of the Commission pooling all interests in the spacing unit. (7) There were no objections to this application. (8) NDCC Section 38-08-08 requires the Commission to enter a pooling order upon application when two or more separately owned tracts are embraced within a spacing unit, or there are separately owned interests in all or a part of a spacing unit, in the absence of voluntary pooling. The section further provides that working interest owners in the spacing unit shall pay their share of the reasonable actual cost of drilling and operating the well plus a reasonable charge for supervision. In addition to such costs and charges, nonparticipating lessees may be required to pay a risk penalty of 200 percent and unleased mineral interest owners may be required to pay a risk penalty of 50% of their share of the reasonable actual cost of drilling and completing the well. This application is not a petition for a risk penalty, therefore the Commission makes no findings with regard to whether any particular owner with an interest in the spacing unit at issue in this application may impose a risk penalty against any other owner. The requirements for imposition of a risk penalty are set forth in NDCC Section 38-08-08 and NDAC Section 43-02-03-16.3. (9) This application should be granted in order to prevent waste and protect correlative rights. IT IS THEREFORE ORDERED: (1) All oil and gas interests in a spacing unit for the Pool described as all of Sections and , Township North, Range West, County, North Dakota, are hereby pooled for the development and operation of the spacing unit. (2) This pooling shall not determine or establish the specific acreage to be attributed to separately owned tracts, or specific interests attributed to separately owned interests. (3) The operator of the well for the spacing unit shall conduct operations in a manner so as to protect correlative rights of all interested parties. (4) All owners of interests shall recover or receive, without unnecessary expense, their just and equitable share of production from the spacing unit in the proportion as their interests may appear in the spacing unit. (5) The working interest owners shall reimburse the operator for their proportionate share of the reasonable actual cost of drilling and operating said well, plus a reasonable charge for supervision. (6) In the event of any dispute as to such costs the Commission shall determine the proper cost. (7) In the event the size of the spacing unit pooled herein is modified by the Commission, this order shall terminate as of the date of such order. (8) This order shall be effective from the date of first operations within the spacing unit, and shall remain in full force and effect until further order of the Commission. Dated this day of, 2012. INDUSTRIAL COMMISSION STATE OF NORTH DAKOTA By the Director, on behalf of the Commission. __________________________________________ Lynn D. Helms Director
B Volney, weāve read 38-08-08 until weāre blue in the face. The actual pooling document seems to follow it fully, and add nothing really new. Do your friends call you B? (i.e., request for name)
I tried to reply last night about the pooling document but was having internet difficulties. Although never having seen the pooling form I was sure there were no juicy details in it. The state of ND had already laid a grid over most of the western part of the state and declared the spacings. There is unspaced territory on the eastern edge of producing areas at least in Mountrail county, to allow operators the greatest latitude in that area. Operators can request changes and to the best of my knowledge are never denied. Pooling is a done deal for the asking.
Edā¦ If you get that document, I would be interested in reading it as well, allso have you gone to the statutes of ND law and looked up the 38-08-08 section, it is also a good readā¦ Brianā¦
Our real interest was as to whether there might have been some areas negatively affecting non-consent owners. There are none.
Ed I stand 6ā8" my friends call me Sirā¦ No really the B stands for Brian, and that works for me LOL thanks for the posting, that is a good read, Iām really thinking good things about poolingā¦
Has anyone else experienced big cost overruns in drilling costs, then, as a working interest owner, been asked to pay their share of that cost overrun? Are cost overruns common and, if a drilling budget was agreed upon, who pays?
Dear Ms. Ellis,
The first item to consider is the AFE (Authority for Expenditure). Most include a misc factor of 10% for contingencies.
In a cost overrun, the burden is placed on the working interest owners. Hopefully, they had the smarts to enter into a Joint Operating Agreement which addresses such matters.
I recently received an offer to buy my mineral acres in McKenzie county, T-149 R 96 for $4,000 an acre if they are leased at 3/16, more if the royalty is higher. The wells I have there have almost payed for themselves and infil wells are being drilled in the area. Needless to say, Iām not selling. If you are unleased I think that would translate to a value much higher. Iām just posting this for informational purposes. I also think you could get $4,000 in lease bonus if you negotiate hard and are willing to go non consent in the end. I was being offered $3,000 an acre bonus on my Dunn county acres [ which I consider to be slightly more valuable ] in 2010, both areas would still be profitable at todays prices.
Hi, I have an interest in a 1280 acre unit, we have 320 acres out of that with 20% ownership and 20% royalty, the areas are 149n 93w section 32 with section 32 and 29 being the 1280 acre pooling unit. Another area is 151n 94w section 32 with section 29 and 32 being a 1280 acre pooled unit. Should we be excited about any of this? Thank you.
Iād be excited by 20% ownership in 320 acres = 64 net acres, my excitement would dim after leasing for 20% so what I was actually paid would be = to slightly less than 13 acres. Enerplus has permits to drill 29/32 with 4 wells, 2 would be good and 4 would be better if they drill them all at once and actually get most or all of the minerals in production. There is alot to be said for not having to wait 30 years to get the greater amount of what you are going to receive. I think you are in a good if not great area. 151 -94 section 32, spaced with 29 already has a well drilled by WPX Energy Williston, named Delores Sand 29-32H. Itās doing pretty well with 17,726 barrels oil in april and 18,459 barrels in may. A good to better than good solid well in my opinion, I hope you have plenty of acres under it. All in all I would say you can be excited but donāt spend the money until you get it and put back at least 30% of what you do get for taxes until you know what you will owe. Congratulations and good luck with your well and future wells.
The comment just below was for Daniel Stclaire. The wells named for horses havenāt been drilled yet, the Delores Sand has been drilled and the monthly production for Aptil and May are below. I hope Mr. Stclaire sees this and that it helps.
Thank you for the information r w kennedy.
Richard, maby this drop in link will help you with your search,
Richard, sorry there is more, under āoperatorā enter Hess Corp and under āfieldā enter Blue Buttesā¦ I didnt find a madison PIII but maby this will help narrowing your searchā¦ Brianā¦
Hey, thanks much for the link. I did try that web site to no avail. I think Iām going to try to contact Hess directly to see if they can give me specific information about the wellās location.