Hello! I purchased a small farm in Indiana in 2005 and started a small equine rescue operation. A local old-timer has told us that at one time there was an oil well on the property, but we're not sure where or when. Last month, I received a certified letter from Countrymark informing us that they would be surveying our property for a proposed well, and a couple days later, I found their surveyors wandering around in my barn and pasture. From what I understand, state law says their well must be 200' from an existing structure, and they measured their 200' from right up against my barn. After repeated emails trying to get information on what is going on, they tell me that there is an existing mineral lease from "October 6, 1962, which has been held by production (HBP) since the date of the lease", although they have as yet been unable to provide me with a copy of this, and my title insurance company can find no record of it, either.
They have contacted one of my neighbors and attempted to get a mineral lease from them, even though the well will be nowhere near their property; they told the neighbors it was part of a "pooling" operation, and that if a well were put on my property, they would get a monthly take even without having a well or access but that since I didn't own mineral rights, I would get nothing. Weird?
My issue is this: I don't mind if they drill here, and it's not that I'm mad that I get no money from it. But the location that they have chosen virtually ruins this farm for what I use it for (out of 15 acres, surely that isn't the only spot that would work...?). Not only would I be losing whatever space they use for the well, but I will lose whatever ground they take for their access road, which will pretty much bisect the entire property and cut off access to half of my pasture. As well as having a well less than a stone's throw from my backyard. So if I indeed do NOT own the mineral rights, do I have a leg to stand on to tell them to move the proposed well? Is it normal for a lease to be "HBP" or to be in effect for that long, and be unable to be found by the title search company? Feeling rather overwhelmed and not sure where to turn, so any information will be a great help. Thank you.
It is entirely possible that a well is still producing 50 years after it was drilled. It's also possible that one well could hold a very large lease, particularly if the lease was taken 50 years ago. The producing well which is holding the lease has nothing to do with some old abandoned well on your land, but is most likely producing nearby. At one time there was probably one big farm and it was leased out that way. Then the minerals under your farm were held back from some sale in the past, so that even though the surface estate has been chopped up, the original mineral estate is still intact under someone else's name.
Your Title Company most likely didn't do a mineral title search as part of your Title Policy, unless you specificly asked them for one. If you have doubts as to the validity of the HBP status, you should order a mineral title opinion to be certain. However, I would guess that no Company is going to spend the money to drill a well unless they are satisfied that they have clear title. Not saying it never happens, but it is rare.
As to your surface damages, they are required to compensate you for real and actual damages to the productive value of your land. Not sure about Indiana, since I haven't worked there in 30 years, but I don't think you can be compensated for any "dimunition of value." Basically, if you lose 2 acres of grazing land they are only liable for the annual value of 2 acres of grazing land, which is not going to be very much money. If new fences are required they should be responsible for that also. Most likely they will offer you a one-time payment and be done with it. That's where you can begin your negotiations. There may be some amount of negotiating you can do on the location of the well, but they might have compellng geological reasons for where they want to drill it.
On the bright side, they may drill a dry hole and if so they might just go away and leave you alone.
What Mr. Durret says about compelling geological reasons may be so but they don't necessarily have to drill straight down.
Thanks for the quick reply! I was afraid of that. Would the mineral title opinion be something I order from the title company? I would generally agree that it would be strange for them to drill if they weren't certain of clear title, but some things just don't quite smell right to me so I'd like to check. In your experience, do these leases generally go on indefinitely or is it likely that it has some end date that just hasn't happened yet? And I'm assuming that's something I will find out for sure with the mineral title opinion?
In answer to your question about how long a lease will last: HBP stands for “Held By Production”. The lease remains in effect as long as any well on that lease is producing “in paying quantities” . Once production ceases, the lease terminates. The exact definition of “paying quantities” has been the subject of many a court case, however.
Most real estate title companies are not capable of compiling a mineral title opinion. You should look for a title company or attorney who has specific expertise in mineral title.
Thanks for all the info, folks. I am having a difficult time finding a lawyer in our county...our county is rather underpopulated, for lack of a better term. I found one by the name of Fleig, but he was not friendly in the least. Does the lawyer absolutely have to be from the same county?
Next question:
I got a communication from the oil company today. Previously, they had told me the lease that was HBP was from October 6, 1962; when I asked for a copy, they said they'd mail it. I emailed them again after almost two weeks of waiting and asked for a digital copy...the lease they then emailed was dated 1979, not 1962, and was to an individual. They have not answered me yet as to what happened to the 1962 lease they mentioned, or what connection the individual had with the oil company. Fishy?
Also...I would be very interested in seeing the description of the land area on the provided lease on an actual map. Reason being, the lease reads (after talk about rods of length here and there) "the land herein conveyed containing 13 acres more or less"...my property is 15 acres, so if this lease is indeed containing the larger "old" farm my parcel was carved out of, I'd be interested in finding out how the area specified relates. What would be the best way/who would be the best person to talk to in order to see this specified range on a map? Would a surveyor be able to roughly sketch it out, or am I barking up the wrong tree?
Surprisingly, a quick reply from the oil company, answering (somewhat) my question about the relationship.
"Countrymark has no connection to (individual named on 1979 lease). These leases have been assigned
several times from 1979. We acquired the leases which make-up the unit from Core
Minerals Operating in May, 2010. "
So now I am really interested in finding out where that 13 acres is in relation to my 15...
Yes a surveyor should be able to lay out exactly what the Lease covers based on the description in the Lease. You could also compare it to the description in your Deed to see if it matches. If it really is the same property and there really are no producing wells on the property currently it's hard to see how it could be HBP unless it was unitized.
Your attorney definitely does not need to be in your County, but should be in State. I seem to recall that there were a fair number of Oil and Gas professionals in Evansville, but that was 30 years ago.
It's really hard for me to tell if it's the same description, because one uses rods and the other uses feet. It sounds extremely similar, though.
Thank you!
I found a surveyor who is going to look at the descriptions today to see if/where they overlap, if any. The lease itself reads "...one year...and as long thereafter as oil or gas...is produced from said land by lessee."
Is it normal for leases to be handed off to others without record? As in, the named lessee has no connection to the oil company, so I find it difficult to understand how it's still valid if the named lessee isn't the one producing. Also sent out feelers to two other lawyers this morning for consultation. I don't want a fight, I just want them to move it :(. It's going to be rather difficult to rescue and rehabilitate horses if I can't access my pasture.
If I take a lease from you for the right to drill for oil under your land, I can sell that lease to anyone I want. That is typically done with a separate document called an Assignment, and the original lease is not altered. There is probably a whole series of Assignments since 1979 ending with the current company. Those would typically be recorded in the Courthouse.
That really isnt your issue, however. You need to find out:
A). Who owns the mineral estate under your land?
B). Is that mineral estate covered by the Lease they showed you?
C). How is that Lease considered HBP if there are no producing wells?
Again, if the answer in A) Is not you, then you really have no standing to question B)&C) really. That is an issue between the Mineral Owner and the Compamy.
Good luck.
Very good info, thank you! And I'm assuming I find the answer to question A) by finding a title company or attorney familiar with mineral title opinion, as you mentioned earlier?
Just another update; a surveyor was able to plot out the lease area versus our property this morning; the lease covers part of my property as well as a portion of a neighbor's property, none of which has had any wells/etc. in at least the last 7 years. Still waiting to hear back from a lawyer and the title company (in relation to mineral title opinion).
Update: The oil company has finally provided me with the pooling documentation. However, the pooling document is from 1964 and calls out the lease from 1962. Seems to me that it would no longer be valid; if there was another lease created in 1979? I'm still having difficulty locating a lawyer that will give me a call back. Maybe that should tell me something, but having someone look over a couple documents and inform me of my rights and how to find out who owns the mineral estate shouldn't be that big of a request, lol. Will keep hunting.