If you choose to go non-consent and receive 16% until your debt to the operator is paid, do you have any legal liabilities during that time period? Because from the looks of it, the well debt won’t be paid off for another 3 years or so.
From my reading of the law, you have nothing but a royalty interest until your part of the well and 50% risk penalty are paid for.
That’s what I was thinking too… and you don’t sign a JOA until it is paid in full, right? So if there was some sort of catastrophe, since you’re not considered a full share you can’t be liable?
From my reading of the law, you have nothing but a royalty interest until your part of the well and 50% risk penalty are paid for.
RMS, since you are being “carried” literally against your will, you would have no more liability than someone who leased until you become a working interest, more really since it was done against your will. I think it would be in the operator’s best interest to defend you also.
The operator has a lien on your WI interest share of production until the well is paid off, because you went non-consent. As a WI owner, you are expected to share in the costs of a well, and the lien is the operator’s remedy if you don’t. That is the extent of your relationship to the operator.
Since you aren’t participating in the well and don’t have a JOA, you obviously are not covered by the operator’s liability policy for the well which you may have been if you were a party to the JOA. The operator has no obligation to defend you on anything (and in fact are a hostile interest to the operator since you didn’t pay your costs up front like the operator has to), and you are on your own if not part of the operator’s JOA. You have a WI in the well, and will be treated just like any other working interest owner as far as liability if there is a catastrophe. If you have any assets at risk, you need to talk to an insurance person knowledgeable about O&G matters.