Can anyone tell me if there has been any TX case law in recent years that provides any relief for mineral owners who are being held hostage by marginal production holding large tracts of minerals at 1/8th royalty? We have several such tracts in south and west TX where no drilling has been done in some cases since the 1950's and some shallow barely productive gas wells are holding thousands of acres, some in prime Eagle Ford oil leg. What does it take to to break these old leases or at least incentivise an operator to renegotiate or release acrage that he cannot afford to drill himself especially when the surface and minerals were separated years ago?
E. Sealy:
Was there any "pugh clause" involved in these earlier leases?
I know of no legislation to help us.
I have had an instance, not in TX, where I was asked to sign a Ratification of Lease to allow them to form a unit or pooling. I refused, told them it was an outdated lease and since they needed the ratification, I needed 3/16ths royalty i.e. fair deal for both of us. It took several months but I got my 3/16ths.
Mr. Sealy, I'm probably not the best person to comment on this, but I think those who are would tell you the same thing in more depth. I think you need to go to court saying the operator has not acted prudently to get your minerals into production, that they have had ample opportunity to do so and there are minerals that are not being exploited, to your detriment. If you have a lawyer I would ask him about this. Edit, I believe they call it an implied covenant.
Mr. Sealy:
I have an excellent contact in Austin that could advise you regarding this matter. Send me a "friend" request and I will discuss this in detail with you.
Please let us know the outcome of your efforts. Good Luck!
Call Attorney Lance Astrella in Denver (Astrella Law P.C.)
He's been getting people out of old, low production leases in Colorado. Just because you're in TX doesn't mean he can't help.
Hopefully they will want something from us where we can get some leverage back!
Ann Whitchurch said:
I know of no legislation to help us.
I have had an instance, not in TX, where I was asked to sign a Ratification of Lease to allow them to form a unit or pooling. I refused, told them it was an outdated lease and since they needed the ratification, I needed 3/16ths royalty i.e. fair deal for both of us. It took several months but I got my 3/16ths.
Unfortunately the original operator drilled 2 offset dry holes to the old gas well back in the 1950's which would satisfy the prudent operator argument. Until the Eagle Ford boom no one even suspected there might be any other productive formation left on this tract to drill. No doubt the operator will drill on this tract eventually but it will be at his sweet time and 1/8 royalty with no bonus. Filing a creative lawsuit for its nuisance factor is risky I am told and could result in me having to pay the operators legal fees on top of mine which is not appealing.
r w kennedy said:
Mr. Sealy, I'm probably not the best person to comment on this, but I think those who are would tell you the same thing in more depth. I think you need to go to court saying the operator has not acted prudently to get your minerals into production, that they have had ample opportunity to do so and there are minerals that are not being exploited, to your detriment. If you have a lawyer I would ask him about this. Edit, I believe they call it an implied covenant.
Mr. Sealy, I didn't know about the two dry holes and I see where they could put a different face on the matter. If your minerals have not been subject to a more recent seismic shoot, there may still be something there. Those two dry wells may not absolve them from further exploration for all time. It might still be worth asking the question. I wish you good luck in any case.
Dear Ed.
The law abhors a forfeiture. However, there is an implied obligation to fully develop the premises. Notice the obligation is to develop - not to explore.
What I counsel people ALL the time is that the decisions that you make today could affect generations of heirs, both positively and negatively.
Dear Buddy, thank you for the clarification.
Buddy Cotten said:
Dear Ed.
The law abhors a forfeiture. However, there is an implied obligation to fully develop the premises. Notice the obligation is to develop - not to explore.
What I counsel people ALL the time is that the decisions that you make today could affect generations of heirs, both positively and negatively.
Best,
Aint that the truth - I will remind GrandDad of that at my next saeance! One You make the best decisions you can at the time and always with incomplete information.
Buddy Cotten said:
Dear Ed.
The law abhors a forfeiture. However, there is an implied obligation to fully develop the premises. Notice the obligation is to develop - not to explore.
What I counsel people ALL the time is that the decisions that you make today could affect generations of heirs, both positively and negatively.
Ed,
Here is my very best advice. Over 30 years ago my only daughter was dying. I did not know what to do, so I asked my Dad.
He said, "Son, you make the very best decision that you are capable of with all the information that you can gather. Then you never look back."
I've been trying to make decisions based on his advice for years.
Buddy
E. Sealy said:
Aint that the truth - I will remind GrandDad of that at my next saeance! One You make the best decisions you can at the time and always with incomplete information.
You know, it is not all bad news. Many lease bought and no production established.
However, not all people were dummies back in the day. The Starks leased 954 acres to the Texas Company n 1928. 1/6th royalty. Almost unheard of.
Better than that $100 per acre. Using the CPI indies, that $95K is worth over $12MM today, or roughly $100K per acre. So some people had the foresight to take care of their heirs