From the actual statute (I thought I would give you a synopsis 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-righteous 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 landmen 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 owner’s cost. That would be 100% of the owner’s 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,
- 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 latter usually can be ballparked 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.
- 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 owner’s 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/uninformed/mistaken/uneducated/etc is very demeaning and degrading and a generalization that paints you in a far worse light than 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 landmen 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, knows 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 lessee 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 lessee is Wyoming. From a quick glance at Montana law, it does not mention a penalty but 200% of the mineral owner’s cost, which I would take to mean as equivalent to the mineral owner’s 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.