I own a royalty interest only (not a mineral interest) in some East Texas wells that were drilled ca 2005. The operator is wanting to create a waterflood unit out of a bunch of the leases in the neighborhood (I have an interest in less than half of the individual leases).
What happens if a royalty owner does not sign the waterflood unit agreement?
If a majority of the owners sign, then it will go ahead. Not sure what the exact percent is. That is probably in the document. If they waterflood, then royalties to the wells usually increase which benefits the unit at least in the early years. Over time, some wells may water out, but I get paid on the remaining producing wells in the rest of the unit on my waterfloods. Your decimal may go down since the number of acres is increasing, but the increased revenue due to better performance (hopefully) will extend the life of your ownership.
If they get most of the owners to sign (and I expect they will), what would happen if I did not sign? i.e, does it make any difference whether I sign or not? Is is just a vote, and I am stuck with whatever the majority is for, or would I not be forced to participate if I do not sign?
The wells I have an interest in now are fairly good producers; the other wells which will be included in the new unit are producing practically nothing.
The document should tell you the consequences of not signing. In my experience, we have been included even if we did not sign and the majority was reached. The waterflood increases the pressure in the field and pushes the oil to the the higher part of the structure more efficiently.
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