I received a lease offer which presented four options: 1/8 royalty $150 NMA bonus; 3/20 royalty $125 bonus; 3/16 royalty $100 bonus; or participation in well. While I was agreeable to the 3/16 and $100 bonus choice, I requested that lease include a Pugh clause and shut-in agreement for my 20 NMA's. Pretty standard, negotiable requests, I feel. I haven't heard back since I requested the lease considerations. My questions: Without a prior lease agreement, does one forfeit protection of Pugh clause, shut-in clause, or for that matter, any lessor-favorable terms, once one is force pooled? And if that is the case, do oil companies who might feel encumbered by lessors' nagging requests, resort to force-pooling to avoid compromise?
I know force-pooling isn't always a disadvantage to the lessor and often necessary to efficiently obtain minerals. However, I've experienced companies using decade-old addresses and not the updated ones, even wrong addresses, repeatedly, to mitigate their pooling efforts in court. And if you don't make your pooling choice as ordered within 20 days, you'll be given the less favorable one automatically--usually a the lowest 1/8 royalty and slightly higher bonus.
R. M.
What state?
If it's Oklahoma then the company doesn't really gain anything by pooling you. That is to say they don't gain anything that would be better than approving your lease. When pooled in Oklahoma, the pooling only applies to formations listed on the pooling order. If you lease without a depth clause they own to all depths. Oklahoma already has a statutory pugh clause so I seriously doubt that part bothers them. It's already the law. I also have not seen a shut-in clause be of too much concern.
I understand what you're saying about a company using decade old addresses and there are certainly times companies can do a better job, however minerals are a mineral owners responsibility. Many owners are pooled because they, or their families did a pitiful job of managing their assets. People don't like to be told that but it's the truth. If someone moves they should file and Affidavit of Address change against every section they own under. Then if you are pooled you can protest and have proof the address is of record.
Most of my career has been spent working for companies doing lease plays. I would make a serious effort to find people, it can be very difficult at times. Now I work for a company that mainly buys minerals. It does us no good at all to tell people we can't buy because there is too much curative work to do but it happens at least once a week. Poor management and neglect quickly turns in to needing a couple of probates.
There was a book out many year ago named "Minding your minerals" by Amy Love. I wish every mineral owner had a copy. My job would be a lot easier.
Very well stated, Scott
I find it much more satisfying to creatively add value to minerals than to clean up neglected mineral rights.
Scott Pipkin said:
What state?
If it's Oklahoma then the company doesn't really gain anything by pooling you. That is to say they don't gain anything that would be better than approving your lease. When pooled in Oklahoma, the pooling only applies to formations listed on the pooling order. If you lease without a depth clause they own to all depths. Oklahoma already has a statutory pugh clause so I seriously doubt that part bothers them. It's already the law. I also have not seen a shut-in clause be of too much concern.
I understand what you're saying about a company using decade old addresses and there are certainly times companies can do a better job, however minerals are a mineral owners responsibility. Many owners are pooled because they, or their families did a pitiful job of managing their assets. People don't like to be told that but it's the truth. If someone moves they should file and Affidavit of Address change against every section they own under. Then if you are pooled you can protest and have proof the address is of record.
Most of my career has been spent working for companies doing lease plays. I would make a serious effort to find people, it can be very difficult at times. Now I work for a company that mainly buys minerals. It does us no good at all to tell people we can't buy because there is too much curative work to do but it happens at least once a week. Poor management and neglect quickly turns in to needing a couple of probates.
There was a book out many year ago named "Minding your minerals" by Amy Love. I wish every mineral owner had a copy. My job would be a lot easier.
I would disagree with Mr. Pipkin on one issue, the company may gain quite substantially if they were able to pool you at 1/8 royalty if the company "mistakenly" did not use the UPDATED address as the OP stated.
That may be true, but if the address was UPDATED then pooling as "address unkown" would not hold up when challenged.
I was referring to her following questions:
My questions: Without a prior lease agreement, does one forfeit protection of Pugh clause, shut-in clause, or for that matter, any lessor-favorable terms, once one is force pooled? And if that is the case, do oil companies who might feel encumbered by lessors' nagging requests, resort to force-pooling to avoid compromise?
And do you truly believe that most mineral owners even know that that they could challenge the pooling in such a situation? I personally doubt that very many mineral owners would know.
Scott Pipkin said:
That may be true, but if the address was UPDATED then pooling as "address unkown" would not hold up when challenged.
I was referring to her following questions:
My questions: Without a prior lease agreement, does one forfeit protection of Pugh clause, shut-in clause, or for that matter, any lessor-favorable terms, once one is force pooled? And if that is the case, do oil companies who might feel encumbered by lessors' nagging requests, resort to force-pooling to avoid compromise?
This discussion won't go well so I will concede to whatever point it is you are making. I have this crazy idea about personal responsibility in life. Not a popular belief these days I know.
The default election really needs to be addressed with legislation and or the OCC.
The default should be based on something other than the highest bonus amount paid. I doubt anyone "selects" this option during the election period, and in most cases it is difficult to find a lease for 1/8 RI on file. The OCC needs to be acting with the absent mineral owner's best interest in mind with the default selection.
r w kennedy said:
I would disagree with Mr. Pipkin on one issue, the company may gain quite substantially if they were able to pool you at 1/8 royalty if the company "mistakenly" did not use the UPDATED address as the OP stated.
The point is that the OP stated that the information was updated, and that is being personally responsible, in mine and I believe in most other people's opinion. That is my point.
Scott Pipkin said:
This discussion won't go well so I will concede to whatever point it is you are making. I have this crazy idea about personal responsibility in life. Not a popular belief these days I know.
I agree with you, Scott. People rarely take responsibility for their own actions or lack of action. Multiple generations have not treated the rights as a valuable asset. They didn't transfer them, mention them in a will, or even document them. Then 2-3 generations later the current owner(s) are not willing to correct mistakes previously made (probate, etc.) and place fault at the oil companies for holding the funds in suspense.
I also believe there is some blame to be placed on the oil companies and landmen. Too many times I have worked with people that were leased with a AoH, being told that is all they need. Then when it is division order time, it is held.
I'd say the majority (based on number of owners not NMA) have records that are in a mess. My family's were and still are to some extent. I've spent the last 4 years cleaning it up.
Scott Pipkin said:
This discussion won't go well so I will concede to whatever point it is you are making. I have this crazy idea about personal responsibility in life. Not a popular belief these days I know.
I'd say it depends on how it was updated. I accept that there is usually room to place blame on both parties in most instances. However, I'm not willing to always automatically place the blame on the landmen and oil companies.
r w kennedy said:
The point is that the OP stated that the information was updated, and that is being personally responsible, in mine and I believe in most other people's opinion. That is my point.
Scott Pipkin said:
This discussion won't go well so I will concede to whatever point it is you are making. I have this crazy idea about personal responsibility in life. Not a popular belief these days I know.
Thanks for your input Scott, and yes, my case is in Oklahoma. So as it rests, if the oil company rebuffs my clause requests and chooses the pooling strategy then they won’t be privileged with unlimited future drilling strata but also won’t lose bonus money in case they decide not to drill at all. I see nothing wrong with their choice, and their right to make it.
As far as the address issue is concerned, my address and my siblings’ have been diligently updated by dint of affidavits in all of the counties where our mineral rights are held. In addition to notifying the county clerks with address change affidavits, I also am registered with the Oklahoma Mineral Owner Registry, for whatever additional owner location help they may provide. What I found irksome with the oil company was their constant and deliberate use of the outdated addresses, even after I notified them to stop using them. The reason I knew the lease was being sent to the wrong address in the first place, was because I sold my house to a personal friend who still resides there. He was kind enough to forward them to me. Personally, I suspect they were hoping to get the lowly, 1/8 royalty default, which is, as Rick pointed out, is another matter that should be further re-examined in the courts. Anyway, when I was pooled a year or so back, my friend living at the old address, forwarded me the Pooling Order and I just made it under the 20 day “make your choice or take the 1/8” requirement and chose the higher royalty.
Recently, the same oil company had a renewed interest in another property I own and began their lease request using, guess what?, the old addresses.
Hey, I applaud and understand the Herculean efforts true landmen are taxed with in tracking down owners. I can only imagine how rough it must get out there dealing with deadbeats who, curiously, neglect the responsibility they owe to maintain their own valuable assets.
I'll check out the book Scott.
Thanks to all--RM
What state?
If it's Oklahoma then the company doesn't really gain anything by pooling you. That is to say they don't gain anything that would be better than approving your lease. When pooled in Oklahoma, the pooling only applies to formations listed on the pooling order. If you lease without a depth clause they own to all depths. Oklahoma already has a statutory pugh clause so I seriously doubt that part bothers them. It's already the law. I also have not seen a shut-in clause be of too much concern.
I understand what you're saying about a company using decade old addresses and there are certainly times companies can do a better job, however minerals are a mineral owners responsibility. Many owners are pooled because they, or their families did a pitiful job of managing their assets. People don't like to be told that but it's the truth. If someone moves they should file and Affidavit of Address change against every section they own under. Then if you are pooled you can protest and have proof the address is of record.
Most of my career has been spent working for companies doing lease plays. I would make a serious effort to find people, it can be very difficult at times. Now I work for a company that mainly buys minerals. It does us no good at all to tell people we can't buy because there is too much curative work to do but it happens at least once a week. Poor management and neglect quickly turns in to needing a couple of probates.
There was a book out many year ago named "Minding your minerals" by Amy Love. I wish every mineral owner had a copy. My job would be a lot easier.