We just received a notice of a well being drilled where we own the mineral rights. We were offered a chance to pay and participate, lease at $650/acre with 3/16th royalty for 3 years or suffer a risk penalty. We don't to lease our minerals so I'm wondering if we should hire an attorney to fight the risk penalty. Is there any chance of not being penalized if we don't participate or lease? Does it make a difference if we can show the offer wasn't competitive in today's market? Also read something about a 16% cost free royalty interest...does that mean there would be no risk penalty on the first 16%?
I've read the ND statute 38-08-08 several times but I'm still not sure what to do.
No there is no chance to avoid the Risk Penalty. As a mineral owner you have 3 choices: 1) participate, 2) Lease 3) Go "Non-Consent" and be force pooled.
The company that will do the well, is required to send you a competitive lease (usually the average of the other signed leases in their tract as those establish the "market value" of the leases in your tract). The lease you may have received may not be from the people/company doing the well, and maybe meant to scare you into signing a below market lease.
You have declared you will not take the first 2 choices. That leaves you with #3. With this choice, the penalties, will take out money for your share of the well, as if you participated, plus other penalties as assigned by the State Board. Your share of the well still costs money...real money. This is a way for the oil company to recoup that cost and it becomes a way for you to be a part of the well, with out YOU risking any cash of your own. BUT...that lack of "risk" is substituted by "risk penalties" that is taken out of your payouts. Consider it "interest" if you will on a loan that the driller takes out for your share of a well costs.
Maria, under the NDIC 38-08, since they have notified prior to commencement of drilling, you will be subject to risk penalty...You do have the opportunity to lease with someone else, as I understand the $650/acre is a low number for leasing...Your 16% royalty is what your entitled to during the payout of the well, but you will be subject to the well paying for itself 1.5x or 2x before you receive your 100%-future well costs...email me and I will give you some more helpful information, as I am in the same situation with my minerals, and might have another option for you, jodykuntz77@gmail.com
If you go non-consent you will receive the weighted average of what everyone else in the spacing leased for or 16%, whichever the operator elects, which nowadays means 16% because it's rare for someone to lease for less and most wouldn't bring the average down greatly if they did.
You would receive the 16% from the very first barrel, I emphasize this because I lost count of how many times a landman told me that I would receive NOTHING until the well payed out and penalty retired, and that is simply not true.
Whether going non-consent would benefit you depends on certain factors, well production [ I like to see 50k bbl in the first 6 months from offset wells ], how long your best estimate is before payout and recovery of penalty [ if it's over 10 years it might not be worth your time] unless you know you have other produceable formations as a factor.
The penalty for non- participating owner is 50% of actual cost of drilling. The penalty is not interest, interest would be a debt with service charges which could increase your debt. If you consider the 50% penalty over a period of years, especially if the government inflates the money, the dollars you pay off the penalty with will be worth far less than the money the operator used to drill the well.
Operators do not drill wells because they think they will make back cost plus 50%. They do drill wells that are sometimes poor, but that wasn't what they expected. When you go non-consent, you are capping the most the operator could make from your acres.
Maria, you only gave a township and range so I have no idea of where you are in it or how close you are to which producing well, if any. I looked at the wells to the east of you and one I'd be glad to be non-consent in and the other I would probably lease, if I were ever to lease anything again. Ive had nothing but bad experiences with leases, to me lease equals lawsuit and no lease I or my brother signed has ever put money in my pocket. On the other hand where I have gone non-consent, I have been paid very fast.
My apologies in advance if my message is not the intent of of this forum. I concur with the prior statements made and point out most specifically that you have 30 days from the certified Invitation to Participate (AFE-Well Proposal Letter) to respond or be deemed to have responded non-consent. I further concur, as a general statement, that the values represented by the operator/broker on behalf of the operator, appear low as I tend to hear more in the $2,000+ range and 3/16ths (more 1/5th in the past 6 months).
You have an imminently drillable Oil and Gas Lease to offer, should the election period to participate not pass, to which many would see to offer a premium. Premium, especially from a third party (non-Operator), because it would be a small non-op working interest whereby the Lessee would not be tying capital up on speculative lease trend (but that it will likely be drilled in the coming 90 days +/-). I would be pleased to identify such parties should you be within the election period. Please email at mchumo@droverstrail.com
Mr. Chumo, I appreciate the delicate way you phrase things, but if you have knowlege of a true third party who may have interest in doing business, I frequently suggest that people contact other operators or even independant non-operating lease companies to see if they will give a better offer. I would have no problem with someone who wanted to announce what they are paying anywhere because to me that would be of interest to many people and be content. In fact, I would suggest that if someone wanted to go to one of the county sites and say what they are paying there that is legitimate content. That is what many groups are for is the sharing of the going rate. The predators do not come right out and say what they are paying because it may stop them from making a killing if they can locate someone really new to mineral rights, their posts, singling someone out and saying contact me, provides no content whatsoever. I probably report as many people just here to pick the low hanging fruit as anyone but I'm not going to report someone for posting content of general interest. Heck, I am even sending you a friend request.
Mr. Kennedy and Group, Thank you for your direct reply. Wishing not to be a predator or perceived in any way as such. My intent was to point out a marketplace that exists around the 30 days of an AFE submittal, and what I have seen as a premium. Without knowledge of the S-T-R, I could not guess, but in generality, what one or others might pay.
My apologies to the group as me intent may have been confused. I was hoping to bring the 30 day election period to light.
Sorry if I wasn't clear, if it's content that would be of interest to the group, post it. If you have knowlege of what anyone is paying anywhere, that is content and please post it, even if it's you yourself, it would still be content. If you have an opinion, blaze away. Sometimes when people ask the going rate for an area, I give them my best estimate of what I would want for it if it were mine, based on information I was able to gather, sometimes I am a little low. I sent you a friend request as I said I would and in the brief message said I thought you would be a positive influence here. And WELCOME. I don't think I can be any more clear than that.
Michael L. Chumo said:
Mr. Kennedy and Group, Thank you for your direct reply. Wishing not to be a predator or perceived in any way as such. My intent was to point out a marketplace that exists around the 30 days of an AFE submittal, and what I have seen as a premium. Without knowledge of the S-T-R, I could not guess, but in generality, what one or others might pay.
My apologies to the group as me intent may have been confused. I was hoping to bring the 30 day election period to light.
Does Montana have thease same penalty's. What happens when the oil company offers me a lease in Oct. I sign it and the reject it, then a second time they e-mail me the same offer Dec. 20th asking for a reply if I want to lease so I did the next day. So im excpecting 2 see a fedext truck some time nothing had come after Christmas, so I called twice befor the new year with no responce. Finaly a week into January Someone ansers and for a second time they didnt keep their end of the deal. Is their anything to protect me.
Daniel Dayton said:
No there is no chance to avoid the Risk Penalty. As a mineral owner you have 3 choices: 1) participate, 2) Lease 3) Go "Non-Consent" and be force pooled.
The company that will do the well, is required to send you a competitive lease (usually the average of the other signed leases in their tract as those establish the "market value" of the leases in your tract). The lease you may have received may not be from the people/company doing the well, and maybe meant to scare you into signing a below market lease.
You have declared you will not take the first 2 choices. That leaves you with #3. With this choice, the penalties, will take out money for your share of the well, as if you participated, plus other penalties as assigned by the State Board. Your share of the well still costs money...real money. This is a way for the oil company to recoup that cost and it becomes a way for you to be a part of the well, with out YOU risking any cash of your own. BUT...that lack of "risk" is substituted by "risk penalties" that is taken out of your payouts. Consider it "interest" if you will on a loan that the driller takes out for your share of a well costs.
Bill, In Montana, you have the same 3 choices. However, the "Non-Consent"/Force Pooling is a little different. The Risk Penalty is 3.5X your participation costs. For MT much of the wells haven't produced enough to make going "non-consent" worth the 3.5x penalty, so you really don't want to be forced pooled in Montana (in ND the penalty is only 1.5..which isn't much)
BUT, you are protected that before a company can drill, they have to offer you a lease by law. That lease has to be "Fair Market" which is usually the average of all the other signed leases in your tract, so they can't offer a crazy low ball offer.
I'm not sure what happened by this: "I sign it and the reject it, then a second time they e-mail me the same offer Dec. 20th asking for a reply if I want to lease so I did the next day." If you signed and notarized the lease, then the lease should be enforced. If you just verbally agreed to a lease, but never signed it the oil company can back out of the lease. (but again as above you are still protected from losing any mineral rights if they drill a well...but, oil companies get leases all the time with out a well though.)
Mr. Dayton is, I think, mistaken on the penalty amount for the mineral OWNER in Montana, the penalty could well be that high if you held the mineral rights as leasee and failed to participate or come to some agreement with the operator. The only state I have seen where the non-consenting mineral owner was treated as harshly as an uncooperative leasee is Wyoming. From a quick glance at Montana law, it does not mention a penalty but 200% of the mineral owners cost, which I would take to mean as equivalent to the mineral owners cost plus a 100% penalty, which while I don't consider it great, would not be even in the same realm as a 350% penalty. I would not hold this against Mr. Dayton because non-consent is no part of the business of leasing and landmen who actually know the laws on non-consent are probably more rare than frogs fur or hens teeth.
Thank you for the information. "I sign it and the reject it, then a second time they e-mail me the same offer Dec. 20th asking for a reply if I want to lease so I did the next day."
That was me having a lease that was signed and notorized 3 days after a the letter was dated saying the lease was not vailed. So a month later I asked for the lease back because they still told me it was void, if not then at least distroy it so I could at least try to find another lease with someone. Plus this is also from having famiely with shares claming to repusent me to the Oil company and not tell me anything. Daniel Dayton said:
Bill, In Montana, you have the same 3 choices. However, the "Non-Consent"/Force Pooling is a little different. The Risk Penalty is 3.5X your participation costs. For MT much of the wells haven't produced enough to make going "non-consent" worth the 3.5x penalty, so you really don't want to be forced pooled in Montana (in ND the penalty is only 1.5..which isn't much)
BUT, you are protected that before a company can drill, they have to offer you a lease by law. That lease has to be "Fair Market" which is usually the average of all the other signed leases in your tract, so they can't offer a crazy low ball offer.
I'm not sure what happened by this: "I sign it and the reject it, then a second time they e-mail me the same offer Dec. 20th asking for a reply if I want to lease so I did the next day." If you signed and notarized the lease, then the lease should be enforced. If you just verbally agreed to a lease, but never signed it the oil company can back out of the lease. (but again as above you are still protected from losing any mineral rights if they drill a well...but, oil companies get leases all the time with out a well though.)
1) The 3.5x amount is a 2.5 penalty plus the amount of the participation which would be 100% of course. The Montana board allows for 200% of costs PLUS another up to $200% for the cost of the equipment. The later usually can be ballparked at at about 50% of the costs. SO...add those up, you get 100% for the actual cost, 200% for the penalty, and 50% for the equipment costs..or around 350% or 3.5x.
The following is an excerpt I took from a legal presentation to the Division Order Analysts dated Oct 15th, 2010.
(from the Montana section)
If an owner refuses to contribute its share of the cost of operations the order will provide for the payment of the costs attributable to the non‐consenting party to be recovered from that party’s interest in the production, excluding any royalty obligations owed by consenting parties. The Board broadly defines what costs may be recovered and reserves the authority to settle any cost disputes. The order may allow for the consenting parties to receive all production from the well until such parties have recovered all their costs plus: (1) 100% of the non‐consenting party’s share of the costs of newly acquired surface equipment beyond the wellhead connections (broadly defined) and the costs of operation of the well commencing with first production until the costs have been recovered; and (2a) 200% of the non‐consenting party’s share of the costs and expenses of preparing the site and drilling the well (broadly defined) after deducting any cash contributions plus (2b) 200% of the costs of equipment in the well including wellhead connections.
During the cost recovery period, the non‐consenting owner is entitled to receive a landowner royalty equal to 12.5% of the non‐consenting owner’s proportionate share of production from the unit.
2) as for your 2nd assertions that it's not part of a landman's job, it is very much the part of professional landman that is engaged in leasing to know the options and be able to explain in simple but broad terms what a mineral owners options are. Many landmen actually will represent the mineral owner in the negotiations for leasing.
Also your broad slam that Landmen don't know what they are doing and thus many are bad/uniformed/ mistaken/uneducated/etc is very demeaning and degrading and a generalization that paints you in a far worse light then those you are dismissing.
In fact I personally have a degree in Petroleum Land Management from the University of Oklahoma. I'm a proud member of the Denver Association of Petroleum Landmen, the Montana Association of Petroleum Landmen, and the national American Associations of Professional Landmen. These associations hold professionalism and continuing education as cornerstones of their organizations. You will find that many of these land men that you don't think "actually know the laws" are very much informed. Yes there is a lot of things to know, and no one, including you know them all.
I hope this helps.
r w kennedy said:
Mr. Dayton is, I think, mistaken on the penalty amount for the mineral OWNER in Montana, the penalty could well be that high if you held the mineral rights as leasee and failed to participate or come to some agreement with the operator. The only state I have seen where the non-consenting mineral owner was treated as harshly as an uncooperative leasee is Wyoming. From a quick glance at Montana law, it does not mention a penalty but 200% of the mineral owners cost, which I would take to mean as equivalent to the mineral owners cost plus a 100% penalty, which while I don't consider it great, would not be even in the same realm as a 350% penalty. I would not hold this against Mr. Dayton because non-consent is no part of the business of leasing and landmen who actually know the laws on non-consent are probably more rare than frogs fur or hens teeth.
So do they half to offer me a lease agen before they drill? If they they dont does this aply to me sence I wanted to lease and they said no. Daniel Dayton said:
Mr. Kennedy,
1) The 3.5x amount is a 2.5 penalty plus the amount of the participation which would be 100% of course. The Montana board allows for 200% of costs PLUS another up to $200% for the cost of the equipment. The later usually can be ballparked at at about 50% of the costs. SO...add those up, you get 100% for the actual cost, 200% for the penalty, and 50% for the equipment costs..or around 350% or 3.5x.
The following is an excerpt I took from a legal presentation to the Division Order Analysts dated Oct 15th, 2010.
(from the Montana section)
If an owner refuses to contribute its share of the cost of operations the order will provide for the payment of the costs attributable to the non‐consenting party to be recovered from that party’s interest in the production, excluding any royalty obligations owed by consenting parties. The Board broadly defines what costs may be recovered and reserves the authority to settle any cost disputes. The order may allow for the consenting parties to receive all production from the well until such parties have recovered all their costs plus: (1) 100% of the non‐consenting party’s share of the costs of newly acquired surface equipment beyond the wellhead connections (broadly defined) and the costs of operation of the well commencing with first production until the costs have been recovered; and (2a) 200% of the non‐consenting party’s share of the costs and expenses of preparing the site and drilling the well (broadly defined) after deducting any cash contributions plus (2b) 200% of the costs of equipment in the well including wellhead connections.
During the cost recovery period, the non‐consenting owner is entitled to receive a landowner royalty equal to 12.5% of the non‐consenting owner’s proportionate share of production from the unit.
2) as for your 2nd assertions that it's not part of a landman's job, it is very much the part of professional landman that is engaged in leasing to know the options and be able to explain in simple but broad terms what a mineral owners options are. Many landmen actually will represent the mineral owner in the negotiations for leasing.
Also your broad slam that Landmen don't know what they are doing and thus many are bad/uniformed/ mistaken/uneducated/etc is very demeaning and degrading and a generalization that paints you in a far worse light then those you are dismissing.
In fact I personally have a degree in Petroleum Land Management from the University of Oklahoma. I'm a proud member of the Denver Association of Petroleum Landmen, the Montana Association of Petroleum Landmen, and the national American Associations of Professional Landmen. These associations hold professionalism and continuing education as cornerstones of their organizations. You will find that many of these land men that you don't think "actually know the laws" are very much informed. Yes there is a lot of things to know, and no one, including you know them all.
I hope this helps.
r w kennedy said:
Mr. Dayton is, I think, mistaken on the penalty amount for the mineral OWNER in Montana, the penalty could well be that high if you held the mineral rights as leasee and failed to participate or come to some agreement with the operator. The only state I have seen where the non-consenting mineral owner was treated as harshly as an uncooperative leasee is Wyoming. From a quick glance at Montana law, it does not mention a penalty but 200% of the mineral owners cost, which I would take to mean as equivalent to the mineral owners cost plus a 100% penalty, which while I don't consider it great, would not be even in the same realm as a 350% penalty. I would not hold this against Mr. Dayton because non-consent is no part of the business of leasing and landmen who actually know the laws on non-consent are probably more rare than frogs fur or hens teeth.
Mr. Dayton, I would suggest you read the actual law [82-11-202], which does not mention penalties. The law says 200% of the owners cost. That would be 100% of the owners cost as if they actually participated plus 100% which one could call a penalty.
Mr. Dayton, your excerpt from a presentation that you pasted in does not support your contention. It's evident to me to gain the appreciation that you have, is that paragraphs have been combined, you are either mixing and matching or you are the victim of it.
In your paragraph with the (1) it is supposed to be (i), change of paragraph.
The law is not written so that you pay for EVERYTHING twice over and then you pay for EVERYTHING again 100% or 200%. You have the opportunity to take 8 minutes, clear your mind and read the actual law, not a presentation and evidently, you would be the best informed landman in your circle. Or you can take a firm stance that the actual law does not change what you KNOW. I have faith that you could read and understand the actual law, the only question I have is will you do it? Can you allow yourself to do it?
Daniel Dayton said:
Mr. Kennedy,
1) The 3.5x amount is a 2.5 penalty plus the amount of the participation which would be 100% of course. The Montana board allows for 200% of costs PLUS another up to $200% for the cost of the equipment. The later usually can be ballparked at at about 50% of the costs. SO...add those up, you get 100% for the actual cost, 200% for the penalty, and 50% for the equipment costs..or around 350% or 3.5x.
The following is an excerpt I took from a legal presentation to the Division Order Analysts dated Oct 15th, 2010.
(from the Montana section)
If an owner refuses to contribute its share of the cost of operations the order will provide for the payment of the costs attributable to the non‐consenting party to be recovered from that party’s interest in the production, excluding any royalty obligations owed by consenting parties. The Board broadly defines what costs may be recovered and reserves the authority to settle any cost disputes. The order may allow for the consenting parties to receive all production from the well until such parties have recovered all their costs plus: (1) 100% of the non‐consenting party’s share of the costs of newly acquired surface equipment beyond the wellhead connections (broadly defined) and the costs of operation of the well commencing with first production until the costs have been recovered; and (2a) 200% of the non‐consenting party’s share of the costs and expenses of preparing the site and drilling the well (broadly defined) after deducting any cash contributions plus (2b) 200% of the costs of equipment in the well including wellhead connections.
During the cost recovery period, the non‐consenting owner is entitled to receive a landowner royalty equal to 12.5% of the non‐consenting owner’s proportionate share of production from the unit.
2) as for your 2nd assertions that it's not part of a landman's job, it is very much the part of professional landman that is engaged in leasing to know the options and be able to explain in simple but broad terms what a mineral owners options are. Many landmen actually will represent the mineral owner in the negotiations for leasing.
Also your broad slam that Landmen don't know what they are doing and thus many are bad/uniformed/ mistaken/uneducated/etc is very demeaning and degrading and a generalization that paints you in a far worse light then those you are dismissing.
In fact I personally have a degree in Petroleum Land Management from the University of Oklahoma. I'm a proud member of the Denver Association of Petroleum Landmen, the Montana Association of Petroleum Landmen, and the national American Associations of Professional Landmen. These associations hold professionalism and continuing education as cornerstones of their organizations. You will find that many of these land men that you don't think "actually know the laws" are very much informed. Yes there is a lot of things to know, and no one, including you know them all.
I hope this helps.
r w kennedy said:
Mr. Dayton is, I think, mistaken on the penalty amount for the mineral OWNER in Montana, the penalty could well be that high if you held the mineral rights as leasee and failed to participate or come to some agreement with the operator. The only state I have seen where the non-consenting mineral owner was treated as harshly as an uncooperative leasee is Wyoming. From a quick glance at Montana law, it does not mention a penalty but 200% of the mineral owners cost, which I would take to mean as equivalent to the mineral owners cost plus a 100% penalty, which while I don't consider it great, would not be even in the same realm as a 350% penalty. I would not hold this against Mr. Dayton because non-consent is no part of the business of leasing and landmen who actually know the laws on non-consent are probably more rare than frogs fur or hens teeth.
Bill, If the company that offered you the lease actually is the one that eventually drills, then yes they, or whomever actually drills, do have to offer you a lease before they drill.
However, if they were just taking leases to flip, or to just invest, or if they don't know if they are going to drill or not at this point they don't have to offer you a lease NOW/today.
Many leases and tracts will never see a well or a drill.
Bill D said:
So do they half to offer me a lease agen before they drill? If they they dont does this aply to me sence I wanted to lease and they said no. Daniel Dayton said:
From the actual statute (I thought I would give you a synopses for reading ease, but I take it that's not the road you like to go down.)
(i) 100% of the refusing owner's share of the cost of newly acquired surface equipment beyond the wellhead connections, including but not limited to stock tanks, separators, treaters, pumping equipment, and piping, plus 100% of the refusing owner's share of the cost of operation of the well commencing with first production and continuing until the agreeing owners have recovered the costs; and (ii) 200% of the refusing owner's share of the costs and expenses of staking, well site preparation, obtaining rights-of-way, rigging up, drilling, reworking, deepening or plugging back, testing, and completing the well, after deducting any cash contributions received from the refusing owners by the agreeing owners, and 200% of that portion of the cost of equipment in the well, including the wellhead connections.
And Mr. Kennedy, I would caution you in your enthusiastic and self rightous interpretation of law as it applies to giving advice, if you are not an attorney yourself. I am not one, nor do I claim to have all knowledge of the cases that establish precedence in Montana (or any other state).
Again, I simply replied to help a person with a fairly simple question. I did not mean to be attacked for doing so, nor did I expect to be cross-examined on my knowledge of the law, of which I never claimed to be an oil and gas attorney. (who charge $100 an hour or more). I fully understand your disdain and distrust for all landman and anyone in the oil business. My answering this person's question, I appear to have offended you.
r w kennedy said:
Mr. Dayton, I would suggest you read the actual law [82-11-202], which does not mention penalties. The law says 200% of the owners cost. That would be 100% of the owners cost as if they actually participated plus 100% which one could call a penalty.
Mr. Dayton, your excerpt from a presentation that you pasted in does not support your contention. It's evident to me to gain the appreciation that you have, is that paragraphs have been combined, you are either mixing and matching or you are the victim of it.
In your paragraph with the (1) it is supposed to be (i), change of paragraph.
The law is not written so that you pay for EVERYTHING twice over and then you pay for EVERYTHING again 100% or 200%. You have the opportunity to take 8 minutes, clear your mind and read the actual law, not a presentation and evidently, you would be the best informed landman in your circle. Or you can take a firm stance that the actual law does not change what you KNOW. I have faith that you could read and understand the actual law, the only question I have is will you do it? Can you allow yourself to do it?
Daniel Dayton said:
Mr. Kennedy,
1) The 3.5x amount is a 2.5 penalty plus the amount of the participation which would be 100% of course. The Montana board allows for 200% of costs PLUS another up to $200% for the cost of the equipment. The later usually can be ballparked at at about 50% of the costs. SO...add those up, you get 100% for the actual cost, 200% for the penalty, and 50% for the equipment costs..or around 350% or 3.5x.
The following is an excerpt I took from a legal presentation to the Division Order Analysts dated Oct 15th, 2010.
(from the Montana section)
If an owner refuses to contribute its share of the cost of operations the order will provide for the payment of the costs attributable to the non‐consenting party to be recovered from that party’s interest in the production, excluding any royalty obligations owed by consenting parties. The Board broadly defines what costs may be recovered and reserves the authority to settle any cost disputes. The order may allow for the consenting parties to receive all production from the well until such parties have recovered all their costs plus: (1) 100% of the non‐consenting party’s share of the costs of newly acquired surface equipment beyond the wellhead connections (broadly defined) and the costs of operation of the well commencing with first production until the costs have been recovered; and (2a) 200% of the non‐consenting party’s share of the costs and expenses of preparing the site and drilling the well (broadly defined) after deducting any cash contributions plus (2b) 200% of the costs of equipment in the well including wellhead connections.
During the cost recovery period, the non‐consenting owner is entitled to receive a landowner royalty equal to 12.5% of the non‐consenting owner’s proportionate share of production from the unit.
2) as for your 2nd assertions that it's not part of a landman's job, it is very much the part of professional landman that is engaged in leasing to know the options and be able to explain in simple but broad terms what a mineral owners options are. Many landmen actually will represent the mineral owner in the negotiations for leasing.
Also your broad slam that Landmen don't know what they are doing and thus many are bad/uniformed/ mistaken/uneducated/etc is very demeaning and degrading and a generalization that paints you in a far worse light then those you are dismissing.
In fact I personally have a degree in Petroleum Land Management from the University of Oklahoma. I'm a proud member of the Denver Association of Petroleum Landmen, the Montana Association of Petroleum Landmen, and the national American Associations of Professional Landmen. These associations hold professionalism and continuing education as cornerstones of their organizations. You will find that many of these land men that you don't think "actually know the laws" are very much informed. Yes there is a lot of things to know, and no one, including you know them all.
I hope this helps.
r w kennedy said:
Mr. Dayton is, I think, mistaken on the penalty amount for the mineral OWNER in Montana, the penalty could well be that high if you held the mineral rights as leasee and failed to participate or come to some agreement with the operator. The only state I have seen where the non-consenting mineral owner was treated as harshly as an uncooperative leasee is Wyoming. From a quick glance at Montana law, it does not mention a penalty but 200% of the mineral owners cost, which I would take to mean as equivalent to the mineral owners cost plus a 100% penalty, which while I don't consider it great, would not be even in the same realm as a 350% penalty. I would not hold this against Mr. Dayton because non-consent is no part of the business of leasing and landmen who actually know the laws on non-consent are probably more rare than frogs fur or hens teeth.
So then sence Apache was basickly useing Shale Exp. almost like yould use a shale company, hideing behind Shale Exp. to get cheaper leases by owners not nowing how a Larg Oil Co. was so intrested in Daniels Co. and lets not forget Apaching now being able to screw people over. I even told them my self that Shale was being shady clear back in October but I gess they dint care as long as they saved a couple of bucks to them, but for me it would be a small fortune. And all my rambling just menns I get to be screwed over once more. Ant life a peach. But iI am greatfull to you for taking you time to talk to me Thank You. Daniel Dayton said:
Bill, If the company that offered you the lease actually is the one that eventually drills, then yes they, or whomever actually drills, do have to offer you a lease before they drill.
However, if they were just taking leases to flip, or to just invest, or if they don't know if they are going to drill or not at this point they don't have to offer you a lease NOW/today.
Many leases and tracts will never see a well or a drill.
Bill D said:
So do they half to offer me a lease agen before they drill? If they they dont does this aply to me sence I wanted to lease and they said no. Daniel Dayton said:
Thank you for taking time out of your bussy scedual helping me. r w kennedy said:
Mr. Dayton, I would suggest you read the actual law [82-11-202], which does not mention penalties. The law says 200% of the owners cost. That would be 100% of the owners cost as if they actually participated plus 100% which one could call a penalty.
Mr. Dayton, your excerpt from a presentation that you pasted in does not support your contention. It's evident to me to gain the appreciation that you have, is that paragraphs have been combined, you are either mixing and matching or you are the victim of it.
In your paragraph with the (1) it is supposed to be (i), change of paragraph.
The law is not written so that you pay for EVERYTHING twice over and then you pay for EVERYTHING again 100% or 200%. You have the opportunity to take 8 minutes, clear your mind and read the actual law, not a presentation and evidently, you would be the best informed landman in your circle. Or you can take a firm stance that the actual law does not change what you KNOW. I have faith that you could read and understand the actual law, the only question I have is will you do it? Can you allow yourself to do it?
Daniel Dayton said:
Mr. Kennedy,
1) The 3.5x amount is a 2.5 penalty plus the amount of the participation which would be 100% of course. The Montana board allows for 200% of costs PLUS another up to $200% for the cost of the equipment. The later usually can be ballparked at at about 50% of the costs. SO...add those up, you get 100% for the actual cost, 200% for the penalty, and 50% for the equipment costs..or around 350% or 3.5x.
The following is an excerpt I took from a legal presentation to the Division Order Analysts dated Oct 15th, 2010.
(from the Montana section)
If an owner refuses to contribute its share of the cost of operations the order will provide for the payment of the costs attributable to the non‐consenting party to be recovered from that party’s interest in the production, excluding any royalty obligations owed by consenting parties. The Board broadly defines what costs may be recovered and reserves the authority to settle any cost disputes. The order may allow for the consenting parties to receive all production from the well until such parties have recovered all their costs plus: (1) 100% of the non‐consenting party’s share of the costs of newly acquired surface equipment beyond the wellhead connections (broadly defined) and the costs of operation of the well commencing with first production until the costs have been recovered; and (2a) 200% of the non‐consenting party’s share of the costs and expenses of preparing the site and drilling the well (broadly defined) after deducting any cash contributions plus (2b) 200% of the costs of equipment in the well including wellhead connections.
During the cost recovery period, the non‐consenting owner is entitled to receive a landowner royalty equal to 12.5% of the non‐consenting owner’s proportionate share of production from the unit.
2) as for your 2nd assertions that it's not part of a landman's job, it is very much the part of professional landman that is engaged in leasing to know the options and be able to explain in simple but broad terms what a mineral owners options are. Many landmen actually will represent the mineral owner in the negotiations for leasing.
Also your broad slam that Landmen don't know what they are doing and thus many are bad/uniformed/ mistaken/uneducated/etc is very demeaning and degrading and a generalization that paints you in a far worse light then those you are dismissing.
In fact I personally have a degree in Petroleum Land Management from the University of Oklahoma. I'm a proud member of the Denver Association of Petroleum Landmen, the Montana Association of Petroleum Landmen, and the national American Associations of Professional Landmen. These associations hold professionalism and continuing education as cornerstones of their organizations. You will find that many of these land men that you don't think "actually know the laws" are very much informed. Yes there is a lot of things to know, and no one, including you know them all.
I hope this helps.
r w kennedy said:
Mr. Dayton is, I think, mistaken on the penalty amount for the mineral OWNER in Montana, the penalty could well be that high if you held the mineral rights as leasee and failed to participate or come to some agreement with the operator. The only state I have seen where the non-consenting mineral owner was treated as harshly as an uncooperative leasee is Wyoming. From a quick glance at Montana law, it does not mention a penalty but 200% of the mineral owners cost, which I would take to mean as equivalent to the mineral owners cost plus a 100% penalty, which while I don't consider it great, would not be even in the same realm as a 350% penalty. I would not hold this against Mr. Dayton because non-consent is no part of the business of leasing and landmen who actually know the laws on non-consent are probably more rare than frogs fur or hens teeth.
Mr. Dayton, we have established that there is a 200% of owners cost for some things and a 100% owners cost for others, but you have shown nothing that would show that everything has a 200% cost and that some other things have an additional 100% penalty in addition to a 200% cost already assessed. You can't show a 350% penalty as you asserted because there is none.
I realise that landmen do not like to be told they are wrong and may interpret it as an attack, unfortunately, just because you don't like being contradicted, that does not make it an attack.
Mr. Dayton, you say I have disdain for all landmen but that is not true. I have disdain for landmen who do not tell the truth or spread information that is untrue. There are some landmen and oil and gas professionals on my friends list so I am sorry but I have to contradict you again.
You can't show where you could come up with a 350% penalty so you want to distance yourself from it by saying you are not a lawyer. Since you are trying to claim that you are not a lawyer and incapable of determining what the law says, on what basis are you going around telling people that there is a 350% penalty?
I want to thank you for your concern for my welfare in giving advice, I usually tell people what I have found in the law and recommend they read it for themselves, since I actually read the law, I think I will be fine, but thank you anyway.
I believe that the facts have shown that there is no 350% penalty for refusing mineral owners in Montana and that you really do not know what you are talking about in this case. Please stop spreading misinformation and understand that if I contradict you, it's in the interest of making sure that accurate information is out there. It's nothing personal, as you would seem to want to portray it. This is not about me being right and you being wrong, or you admitting you were wrong, although I think you missed an OMG opportunity to show what an honest and standup guy you were and certainly would have earned my respect. As things stand, I hope you have a great day.
Daniel Dayton said:
Bill, In Montana, you have the same 3 choices. However, the "Non-Consent"/Force Pooling is a little different. The Risk Penalty is 3.5X your participation costs. For MT much of the wells haven't produced enough to make going "non-consent" worth the 3.5x penalty, so you really don't want to be forced pooled in Montana (in ND the penalty is only 1.5..which isn't much)
BUT, you are protected that before a company can drill, they have to offer you a lease by law. That lease has to be "Fair Market" which is usually the average of all the other signed leases in your tract, so they can't offer a crazy low ball offer.
I'm not sure what happened by this: "I sign it and the reject it, then a second time they e-mail me the same offer Dec. 20th asking for a reply if I want to lease so I did the next day." If you signed and notarized the lease, then the lease should be enforced. If you just verbally agreed to a lease, but never signed it the oil company can back out of the lease. (but again as above you are still protected from losing any mineral rights if they drill a well...but, oil companies get leases all the time with out a well though.)