So in 2009 my dad gets a certified letter from an Attorney for XTO Energy. It says a Hearing is set for XTO authorizing the recovery from each nonparticipating owner a risk penalty.
We had no clue we were heirs to about 7 acres of minerals in ND. This letter was for one area of minerals in Burke County, ND. My dad called the attorney and he said he was not needed at the hearing? I just found out about this 2 weeks ago from him. We have not leased to XTO but they have an active well on this section of land.
Now what do I do?? Obviously XTO's Attorney knew we were Heirs to my Great Grandmothers estate, but they went ahead and drilled. No Royalties or Leases by us?
Do I hire an attorney?
Cory:
How long has the well been producing on your mineral acreage? Sounds like you are a participant in this well possibly based on the facts in your post . If you had decided to parcipate in the well and did not want to share the cost of drilling and completing the well (which may be the catagory your in), then you would be a "non-consent" (non-participating) party thus be subject to a % penalty. Other working interests owners will charge you that % penalty once they recover the drilling and completion costs since they carried you by paying your share of the costs. You wouldn't have to pay this penalty up front as it would come out of the proceeds due you once the well had recovered it's drilling and completion costs. You may possibly recieve a small royalty during this wait time because not all your intersts would be allocated as "non-consent" interests. The North Dakota Statutes addresses this matter. If the well never makes enough to recover the costs of drilling and completing, you may never recieve anything but this small royalty payment. This is why it is a somewhat "risky" decision to go the participation route. In regards to the ND Statutes, see part 38-08-08. I am providing this information from my old notes so others may add to this scenerio. I have never taken this participation route as I have always leased but at one time I did take notes about this matter. In regards to your question about hiring an attorney, again, this is your decision but if things occured as you say and no notification was recieved by your family, you may want to think about seeking legal advice from an oil and gas attorney, preferably one from ND. Hope this helps.
As Charles says you should read ND Century code 38-08-08. The operator by law is required to make you a lease offer or participation. These could be gorunds to challenge the risk penalty. One thing that you may consider is that you may need to probate an estate in ND if it has not already been done to gain clear title to these minerals so you can be paid. As Charles mentioned if you are non-consent and carried interest you receive a royalty until the well is paid off and the risk penalty of 50% of the actual cost of drilling is paid off. The royalty for a carried interest is the weighted average of what everyone else in the spacing leased for or 16% whichever the operator elects. This does not include surface equipment which is deducted from your share on a dollar for dollar basis. If you can give a legal description I can look up the production of your well so you can see how it has done.
I appreciate all of your help! The well I am referring to above is located in Burke County. Section 20 township 161 range 94 west. It appears the wells status was 4/22/2009. File #17941.
I also have mineral acres in Mountrail County. I see an active well here since 2010. I am confused by this one tho. It appears there are 4 file #'s for this section of land. I see on the map that there is a Well with three Horizontal lines going through the section.
The land description I have in Mountrail County is:1 mineral acre in the Northwest Quarter of the Northwest Quarter of Section 25, the Northeast Quarter of the Northeast Quarter of Section 26, Township 157 North, Range 94 West. This is how the old Probate Decree reads.
I appreciate everyones help in this situation. I just don't know what to do. I have contacted two Attorneys in ND., and neither have called me back? I don't know where to turn. The problem I have is this Probate Decree is from 1969 and was my Fathers Grandmother. So I assume I will have to find her Probate Decree. I know my Fathers mother had no Will and he knew nothing about the mineral rights. So is the issue here, to see if my Great Grandmother willed the mineral right somewhere else? I don't believe she did, because my Father received the Hearing notice at His Grandmothers house addressed to "The Heirs of Marie Nelson" So obviously she still owned mineral rights in Burke County. The only Heir of Marie Nelson is my Father. This was my Fathers moms-mom.
Thanks Charles. I wrote a reply to the comments I received.
charles s mallory said:
Cory:
How long has the well been producing on your mineral acreage? Sounds like you are a participant in this well possibly based on the facts in your post . If you had decided to parcipate in the well and did not want to share the cost of drilling and completing the well (which may be the catagory your in), then you would be a "non-consent" (non-participating) party thus be subject to a % penalty. Other working interests owners will charge you that % penalty once they recover the drilling and completion costs since they carried you by paying your share of the costs. You wouldn't have to pay this penalty up front as it would come out of the proceeds due you once the well had recovered it's drilling and completion costs. You may possibly recieve a small royalty during this wait time because not all your intersts would be allocated as "non-consent" interests. The North Dakota Statutes addresses this matter. If the well never makes enough to recover the costs of drilling and completing, you may never recieve anything but this small royalty payment. This is why it is a somewhat "risky" decision to go the participation route. In regards to the ND Statutes, see part 38-08-08. I am providing this information from my old notes so others may add to this scenerio. I have never taken this participation route as I have always leased but at one time I did take notes about this matter. In regards to your question about hiring an attorney, again, this is your decision but if things occured as you say and no notification was recieved by your family, you may want to think about seeking legal advice from an oil and gas attorney, preferably one from ND. Hope this helps.
Mr. johnson, the Running in Burke county has produced 53,844 bbl oil in 3 years, is now producing around 1,000 bbl a month probably isn't a great candidate for being a carried interest or paying participation. I think it will probably pay off in another 6 or 7 years, but that would not include your risk penalty if you are a carried interest. If xto considers you a non-consent carried interest they are probably holding about $3,000 that belongs to your dad, that is after production and seperation taxes but not including federal tax. You would also get a 15% depletion federal tax credit. Section 26 T-157 R-94 in Mountrail has produced about 172,000 bbl of oil from the 3 wells in the spacing. The wells were drilled from a single pad and are so close together that it appears to be one well with 3 legs but if you zoom in you can see it's 3 wells. This is a good area. The well drilled in section 3 T-156 R94 legs into your section 25 and has only been producing 47 days but has produced 29,078 bbl of oil, another good area. About lawyers, lawyers in ND are extremely busy with the oil boom, they can pick and choose what they want to work on. If you called one and said you had 10 sections with 25 wells and you think your lease is invalid you will get an immediate return of the call, and that's if the secretary doesn't keep you on the phone promising that some one will be there quickly and please hang on. Small interests do not get that kind of attention. I think to get your best bang for the buck you need to work on collecting the carried interest royalty from the Burke county acres because those acres are not going to be madly productive and pay off the well and risk penalty in this decade but to hire a lawyer to make xto make you a lease offer would cost more than you will ever receive. You could complain to the ND Industrial Commission about not receiving a lease offer or participation offer but you may not find much help there but you don't know until you try. I think it would be optimum in Burke if you could lease and receive a higher royalty and bonus because the well just isn't productive enough for participation or being a carried interest to pay off in less than 10 to 15 years. About Mountrail county, Hess is your operator and you need to contact them if you want a lease offer from them but I would FIRST try to find some other lessee first so you could possibly have some competition to set the market value, I would try Cody oil and gas first. I hope this helps and I would be glad to answer any questions that I may.
Cory,
If I understood you correctly, your father received this letter in 2009. You learned about this recently. Neither your father or you have received any money from the wells.
1) The first thing you need to do is start with "Marie Nelson's" probate or lack thereof. It would be great if your dad is the only heir, it will make it much easier, and if all there is to probate is those minerals. You need to get that done first.
2) Once the probate is done and the minerals transferred to your father, you need to have him contact the operator's of the wells. The royalties have most likely been held in suspension because of death. (of mineral owner that we are assuming is Marie Nelson)
3) I would think you (your father) will have an opportunity to work out some lease deal with the operator or others if he wants to. If you don't lease make certain you learn about the pro's and con's of becoming a working interest owner.
...if you want, you could contact one of the operators right now. If you have a Hess well start with them, (I had good luck with them regarding this) I did it through email. Tell them who you are, and your relationship with Marie Nelson, and if she has an interest in the, "name of well" or any other Hess operated wells. If you get the right person they will say yes or no without you providing DNA proof or one of your kidneys as proof of your relationship...If they say yes, than obviously you need to get cracking on the probate. ( they might even tell you the dollar amount in suspension.) They did for me.
Andrew: Do you have any contacts at Hess. I emailed them days ago and they have not contacted me. I went to the Hess website and clicked on Owners/interests and contacted then through this area? Hopefully this was the correct are I needed to be in.
Thanks for all the good advice. I am close to getting a copy of the probate decree here in MN, but then I guess I need to file it in each county that the wells are located? Is there any way of doing this through the mail, or does this have to be done in person?
Andrew Babcock said:
Cory,
If I understood you correctly, your father received this letter in 2009. You learned about this recently. Neither your father or you have received any money from the wells.
1) The first thing you need to do is start with "Marie Nelson's" probate or lack thereof. It would be great if your dad is the only heir, it will make it much easier, and if all there is to probate is those minerals. You need to get that done first.
2) Once the probate is done and the minerals transferred to your father, you need to have him contact the operator's of the wells. The royalties have most likely been held in suspension because of death. (of mineral owner that we are assuming is Marie Nelson)
3) I would think you (your father) will have an opportunity to work out some lease deal with the operator or others if he wants to. If you don't lease make certain you learn about the pro's and con's of becoming a working interest owner.
...if you want, you could contact one of the operators right now. If you have a Hess well start with them, (I had good luck with them regarding this) I did it through email. Tell them who you are, and your relationship with Marie Nelson, and if she has an interest in the, "name of well" or any other Hess operated wells. If you get the right person they will say yes or no without you providing DNA proof or one of your kidneys as proof of your relationship...If they say yes, than obviously you need to get cracking on the probate. ( they might even tell you the dollar amount in suspension.) They did for me.
When you get a copy of her MN probate...find out who the personal rep. was....contact them and find out if they did an ancillary probate in ND. or if any ND probate was done....( if not, you are going to have to get that done)
If you have to still do that ND probate, you will have to record the deeds in the counties where the wells are.
....I am hoping that you a) find the rep and/or attorney that did Marie Nelson's probate and go from there.
Is there a way of filing a Probate decree in the Counties where I have mineral rights, without traveling to the County in person.?
Yes, but it still must be decrees from a ND court. ND does not recognize out of state probates. You can record probate decree by mail.
CORY P. JOHNSON said:
Is there a way of filing a Probate decree in the Counties where I have mineral rights, without traveling to the County in person.?