Operator starts to pay on unit basis without permission of owners

My aunt allowed several non-producing tracts to be pooled with 2 tracts that were weak producers. The addendum on the lease states that we are not joining the unit, however the operator sends out new division orders that everyone signs and now we are treated as if we are in the unit.(no longer paid on lease basis) Everyone thought that the pooling of the non-producing tracts with the 2 weak producing tracts prompted the new D/O , it added 107 acres and 2 wells. SO we are not oil and gas attorneys and the family interest has been in production for 90 years so over the generations no one knows what’s going on except I dont get why all the wells pumping on our 200 acres makes less or the same money as when half that many were pumping. They dont pay us on a lease basis but a unit basis must be the answer. Isn’t this illegal to fake you out with tricky division orders paired with a pooling agreement lease with WE ARE NOT JOINING THE UNIT printed on the addendum? Help!!!

It would be more useful if you post the state and county where you are located as “pooling” and “unitization” mean different things in different states.

Dear Modd: you are saying both that your aunt allowed several tracts to be pooled and then that the lease says no pooling. These appear to be mutually contradictory. At any rate, you could ask the operator to show you the equation they are using to come up with the percentage on the division order and review that to see if you agree or not. They may have made an error and included more acreage than what was agreed upon. Also, if the leased premises are in Texas, then a division order can be cancelled on 30 days written notice, according to the Texas Natural Resources Code. In addition, if the premises are in Texas, you may want to go to the county deed records and find the unit declaration that the operator filed, and see who they list as included in the unit. Finally, be aware that there may be reasons why the wells are producing less, such as the depletion of the reservoir as wells age. If the premises are in Texas, you can go the the Texas Railroad Commission website and look up the wells by operator, lease name or lease ID and review the production records over time for each well.

M_Barnes, You are right. The land is in Texas. My aunt pooled several tracts together but specifically said we did not want to join the Unit. The Unit consist of 740 acre and we own 216 acres. We have 30% of the family on record as joining the unit and 70% of the family did not join the unit. The 30% owners have passed away and the land and mineral interest went the 70% family members. Thank You, Modd

Yes Aimee, my aunt pooled several tracts that didn’t have production with two tracts that did have production to avoid having to re-lease the unproductive tracts due to lack of production. The pooling agreement was supposedly just to pool those tracts and not join our land with the unit. The unit was formed to facilitate secondary recovery that lasted about a year before the operator gave up due to low oil prices. My point is or my question is " Why are we paid as if we are in the unit now? " The storage tanks were picked up and the oil now goes to a central collection place. This all took place when the field sold to a new operator and we all thought the new division orders were because of the tracts being pooled since it added 107 leased acres. The production records show , on average , 500-575 BBL per month for the last 10 years. The unit consists of 740 acres we own 216 acres and the lease is .25. the total decimal ownership for everyone comes to .04352118. When I do the math my grand total comes to 0.0760135 I guess I will get the Unit issue addressed then we can figure out the division orders, but if I knew how to mathematically check the division orders I could at least figure out for sure if that’s how we are being paid. The equation should be your land acres divided by the unit acres multiplied by the lease amount , right? 216/740=.29189x.25=.0729729 That is close to what I got and I used 3 acres un-leased working interest. Thank You Modd

You need to carefully review all the legal documents to get answers. You state that some acreage was producing under older lease(s), and those are likely to have a lower royalty rate than 25%. When your aunt pooled the expiring tracts, what are the specific terms in the document that she signed? Did she sign an amended lease to add the acreage to the existing lease or did she opt to be a working interest in the unit/wells and approved the AFE and JOA or did she execute a document that noted she was an unleased mineral owner whose interest comes into pay after payout? I see no sense to pooling unproductive tracts with each other because there would still be no production unless new wells drilled. More likely the pooling agreement for the two tracts contains language that either makes the two tracts part of the unit or allows the operator to combine your pooled tracts with the unit for production purposes. The latter is similar to a sharing agreement which allows two units, or a unit and unpooled acreage, to share the production based on a specified formula. I suggest that you take all the legal documents to an attorney for a review and understanding of your legal situation.

TennisDaze, Thank You for your help. I have asked an attorney to review the most recent lease and she said it is a pooling lease. The lease does say that if the operator wants to join a unit they can, but my aunt blocked that move with the addendum “the interest leased hereunder shall not become part of the unit without further expressed written authorization of the lessor as to lessors interest”. Another concern is If the lease doesn’t UNITIZE OR FORCE YOU IN THE UNIT then can they leave wells shut in or non-productive without loosing the lease.? The lease says they can but I thought ONLY IF THE LAND WAS IN THE UNIT? Thank You! Modd