UMO and TRRC Rule 37

General Mineral Rights Discussion
1

Scenario: An Operator forms a pooled unit consisting of 2 sections (19 & 30). Operator has a leased 25% undivided interest in N/2 of section 19 and UMO has other 75% undivided interest in Section 19. So, a co-tenancy arrangement exists in N/2 of Section 19.

Operator also holds 100% leasehold in Section 30. A pooling agreement exists between all the other lessors in Sections 19 and 30. Operator plans to drill a horizontal well with drill site being in the N/2 of Section 19.

TRRC has established that unpooled mineral owner within a pooled unit creates a "property line" for Rule 37 spacing exception purposes.

Since UMO has a co-tenant relationship with the Operator in N/2 of Section 19, and Operator holds 100% of leasehold in Section 30, would Rule 37 be applicable?

I have read many articles on this, but none talks about a co-tenancy situation.

2

A proration unit or drilling unit has no title significance. Fact is, the operator does not even have to have all the interests under lease to form a proration unit in Texas. On horizontal wellbores, it becomes a sticky wicket.

If the first take point is 467' off the N/2, then you are left outside the gate, gnashing your teeth.

A good way to limit your exposure on being left out is to sign a lease, or offer to join and pay your way from day 1. Signing a lease is your better tact, generally. In Texas, it just may not be wise to not execute a lease.