One drilling company (for sake of clarification - call it B Company) sent me a certified letter for me to choose between leasing or assigning my mineral interest for a cash consideration; 2) or lease for a cash per acre retaining a royalty; or 3) participate in drilling costs.
I have the mineral rights leased for 3 years with an option- with drilling company. 'A Company'. I contacted them, asked them what I should do about the letter and was told to ignore it since the company doing the drilling probably didn't know my mineral interests were currently leased with them.
She also informed me that should the well produce, that Company 'B' is drilling, that my royalties would be the same amount/percentage as with company 'A' I have leased to. She was NOT aware of Company 'B's drilling.
This situation, she described as 'a non-cost bearing interest' for me. However, my current Lessee Company A's would be 'cost bearing.' I then asked, "even if they were not aware of Company B's drilling?
(which has resulted in a producing well.)
I have asked a couple of people in the Colorado County State Land Board and was told to apply #18 on my current lease. Which in short says if I chose to lease with the Company that is drilling that lease would be subordinate to lease I have with Company A.
I'm sure this situation is pretty common - but not to me. I would really appreciate knowing what I should do about this - if anything.
Pam Kelly
Dear Pam,
I can think of any number of things that could have caused the confusion. It appears that B may be laying the groundwork for a forced pooling hearing with the COGCC. B may not have knowledge of your lease with A if it hasn't been recorded or if A and B aren't communicating to B's satisfaction. If you have a large acreage block with A, find a lawyer that practices before the COGCC and have him/her review the B letter and respond in a timely manner to B with copies to the COG. You will certainly find out what acreage and formations of yours may be in the B well, if any. Also, your relationship with A will be clarified. It is important to you that A act in good faith under the lease with you in administering your minerals that they hold in trust.
Gary, Since you were so kind to explain in detail the best way for me to deal with this, I would like to clarify a few things, that I may have omitted.
I rec'd the certified letter June 29. (I think it is called an NPRI non participating royalty interest) July 3. I then called Co. A, and I was advised by them, to disregard it because Co. B probably didn't know that my mineral rights were leased to them, (Co. A ). This, she thought was because they ( A) was late recording leases.
I should have contacted B myself, but felt my loyalty belonged to my Lessor so I called them first.. (I agree with your suggestion that I hire an attorney. especially since the offer in the Certified Letter was considerably better than the lease I currently hold from Co. A) .
Also, B has already applied and was approved by COGCC, to drill on the acreage I own (3/8 of 327 acres). Co B has been approved to pool all non-consenting interests for the the spacing units in the application lands. This date was August 12.
Two Questions: 1 ) It looks as if am considered 'non-consenting'? (2) Does it really matter or make a difference to the royalty percentage I will receive? (3) Should I contact Co. B ? (4) Can a company lease rights on top of another company's lease? Not talking about a top lease when first lease is running out.
One well , located on part of my acreage, is producing.yea!! Is there a way to find out how much it is producing?
The company (B) is "DATA CONFIDENTIAL" until June.
Thank you for your time, I am learning a lot.
Pam Kelly
Gary L. Hutchinson said:
Dear Pam,
I can think of any number of things that could have caused the confusion. It appears that B may be laying the groundwork for a forced pooling hearing with the COGCC. B may not have knowledge of your lease with A if it hasn't been recorded or if A and B aren't communicating to B's satisfaction. If you have a large acreage block with A, find a lawyer that practices before the COGCC and have him/her review the B letter and respond in a timely manner to B with copies to the COG. You will certainly find out what acreage and formations of yours may be in the B well, if any. Also, your relationship with A will be clarified. It is important to you that A act in good faith under the lease with you in administering your minerals that they hold in trust.
Gary L Hutchinson
Minerals Management
Hi Cliff, I appreciate your reply. I have gone into some detail on my reply to Gary Hutchinson, so won't repeat myself, just will comment on two things you said - can't go to courthouse yet, I live in Iowa. And you may be right about the two companies working on a joint agreement. I thought that might be the case since co. A, my lessor, has been working in another Township altogether. Not in my area. Even though Co. A bought up a lot of area in the Township where B is working.
Thanks again for your reply,
Pam Kelly
Cliff Williams said:
I agree with Gary. I would go to the county courthouse and look at the recorded leases and determine if your lease had been recorded. It could be that the two companies are working on a joint operating agreement. Some of the people within the companies I do attorney work for do not know what the other departments are working on. Perhaps your Co. A lady didn't know what the land managers are working on with Co. B.
I would be concerned enough to call and speak with both Co A and Co B people to make sure I'm not left out of the production. Raise some noise or hire a oil and gas attorney to assert your interests.
Cliff Williams