So sorry. This is all kind of new to me. Thank you for taking the time on my questions. Your responses were very helpful. Going forward I’ll know to use landman.
You do need all signatures. If a majority has already signed. Then you can use that leverage and sue the holdouts. Force them to defend in court or sign and move on.
Jeff, I think you just described a STORY, I bet a really good and convincing one that someone told you. It does not apply in Tx, nor would it apply in Colorado where your homepage says your minerals are. In Colorado, you would simply be force pooled if they had 50% leased. I've never been force pooled in Colorado, but I imagine it's more of an administrative hearing to make sure that statutes and regulations are being adhered to than a lawsuit. It's serious business taking someones property to protect the rights of someone else. In Tx, they would either cut you out, pay you if you were drillsite or wellbore tract, but they would probably be telling you anything they thought would make you sign a lease, alot of STORY. To keep from hearing STORY, you need to only do business in writing or where legal by recorded phone conversation, which is legal just about anywhere if you inform the other party you are recording, it cuts the STORY way down. Many won't even talk to you because they are afraid they can't reign in STORY and they will say something they wish they hadn't. I hope this helps.
Jeff Fregeau said:
You do need all signatures. If a majority has already signed. Then you can use that leverage and sue the holdouts. Force them to defend in court or sign and move on.
OK, he must be thinking of an administrative hearing to approve the forced pooling, not an actual civil lawsuit. That makes more sense. What you described for Texas is exactly what happens in the real world, I saw it many, many times. They'll cut a tract out in a heartbeat if it's not drill-site or within 300' on either side of the horizontal, as is their prerogative. So these mineral owners who adopt the attitude of "Hey, they NEED me so I'm going to get more out of them" usually end up with NOTHING.
I contacted one mineral owner, she ignored me for a while, then we talked and my client authorized me to offer her close to $100K, she strung me along, finally she agreed to sign. So I drove three hours to her office, she told me all excitedly about how she was going to retire early from teaching and use the bonus money to buy a home in the country for her and her husband, then she decided she wanted MORE money and for an attorney to review the OGL.
By the time the attorney got through reviewing the OGL, we were three months down the road, enough time for my client to have drilled a test well on a neighboring tract, reviewed the drilling logs, and decided to abandon the area. The teacher called me back one day, I told her the news, and she basically told me that "You can't do that, you made me an offer and I have taken some steps with my employer and with my personal finances to buy that home in the country!" The teacher got schooled.
Pete, in that situation, I think the lawyer was not doing a good job of explaining the facts of life. When you pay a lawyer, you are paying for his opinion, opinions are his stock and trade, or possibly she went to a lawyer who had absolutely no oil and gas experience. I had one lawyer tell me that he turned down $25,000 per acre and 22.5% royalty here in Ft. Worth in 2008, I walked out of his office and he did not represent me.
I know of a similar situation, 100 acres, 3 of 4 owners signed with leases recorded, well going in next door, with several laterals going in opposite direction. What can they do?
Please see my scenario. The 3 children are NOT holding out for more money. The parents and the surface owner secretly negotiated with the landman. The landman NEVER contacted the 3 children. The 3 children did NOT know a landman had approached the parents & surface owner until the 3 children were presented with a lease and told to sign - no discussion, no questions, no rights - just sign.
Once again, the 3 children were NOT holding out for more money. They simply wanted to understand the lease in order to make an informed decision. I don’t know of many people that would blindly sign a binding contract.
It’s a case of “group think” And bullying. Run with us or we’ll run over you. NOT about the 3 children holding out for more money.
how long do you have to wait before you rec, your money after signing a lease , it's been over 90 days now and we have not rec. any thing yet after several call to them and them saying it will be in the next check run.
Dave Quincy said:
It's unlikely that the co. would drill the land without everybody, but undivided interests are more often pooled, or included in a unit.
The concern you were told to have about payment is way overstated. A lease is a contract. A bargained for exchange, or a meeting of the minds between lessor and lessee. If there is an agreed upon consideration between the parties, and the lessee fails to pay you the agreed upon consideration, there is a breach of contract, and no valid lease. You would be free to accept any other offer if not paid the agreed upon consideration.
Regarding the lease stating that consideration has been received, that is not strong enough. There has to be an actual transfer of the agreed upon consideration from lessee to lessor for a valid lease to exist. (A canceled check would be one example of proof.)
Just don't think that the average landman is stupid enough to pay you before you have delivered the signed lease. I know that I wouldn't.
In a case where you did deliver a signed lease, and they didn't pay you the agreed upon consideration, then they would have no lease. They would not have kept their end of the bargained for exchange. (lease contract requiring that consideration be paid.)
Jean,
Your scenario is on a different discussion thread. Since you brought it up, though, in your case, I never stated that the three children were holding out "for more money," nor should you infer that from my comments on this thread. On this discussion thread, Marie stated "some are holding out for more money," so in this case the holdouts are wanting more money.
The example I cited above from my own experience does not mean that all holdouts want more money, like in your case, of course not. There are a variety of reasons for a holdout. The example cited above was simply to make the point that most Operators are willing and able to cut a tract out of a drilling unit that they don't deem necessary, regardless of the reason for the holdout or holdouts.
From their perspective, they couldn't care less what the reason for the holdout(s) is, if the holdout(s) can't agree to terms with the Operator and their tract is not "essential" to the proposed drilling unit, they're gone!
P.W.
I have discovered in three units that my deceased wife's trusts own a small interest, the Oil company is relying on the "more or less" language in the lease to include additional acreage discovered on the survey. In two of the Units, the oil company did not pay any bonus, or amend the lease, but merely attributed close to the actual amount, as if leased, and paid the R.I. on it. In the overall Unit over 3% of the acreage in the Unit, is in this category. Since the Oil company knew the original leases had bonuses paid on 20 some acres less than went into the Unit, it would appear that they made the election to treat this "Unleased" but now known acreage as working interest acreage-as opposed to paying no bonus, but treating it as leased, and paying close to what the R.I. would have been if leased at same R.I. If Working Interest, the funds should have been put into Texas Unclaimed Funds--in these two wells, they are both in Gomez Field, and the difference in treating this acreage as working interest or leased on the two 20+ acre tracts is over $15 million. Pretty big, more or less assumption, when they knew they had acreage for which no bonus was paid.
In the other Unit in this same field, all in FSIL, we have a major oil company that leased the acreage, and then formed the Unit, and discovered the fact that some 10+ acres was not leased, but was put into the unit, they then assigned the lease to another operator--and no one has paid anything on the 10 + acres for some 40+ years.
In both instances the two major oil companies, even though they have known for 40+ years that they are using unleased acreage under the "More or Less" clause, claim the lease is valid, and holding additional acreage, that they have not orderly developed--because no "Pugh" Clause language--and refuse to release it.
Each has over 180 acres they are holding, but will not develop it, or release it.
With the multiple pay zone formations being discovered, it is time to get these constructive fraud interpretations by the oil companies corrected. Should have to orderly develop the acreage on the lease, and each zone, as it is discovered, or lose the lease--as it thwarts America's goal to gain independence of foreign oil, and thwarts putting more Americans to work. The major can count this acreage as productive acreage to boost their reserves, and no requirement to orderly drill it. Anyone with any clout with the National Assn of Royalty Owners--or Texas Comptroller, should get these matters addressed. A class action lawsuit attorney who specializes in these type of cases would also be appreciated.
Thanks,
Tradermiketx
Would all of these assumptions still be true if the royalty in question were an overriding one (no production expense pass-through)? We have been offered a small bonus to lease on property that has never been drilled on before in Loving Co., Tx.
"If the well is productive enough to reach payout (pay for itself), then on a go-forward basis the Lessee would lose money for every single non-consent co-tenant that they have in the drilling unit, hence their willingness to "work around" tracts with an unleased mineral interest whenever possible."
Would the lessee necessarily lose money or simply realize less profit? After payout, would a non-consent co-tenant owner of "x" net mineral acres in a 640 acre drilling unit in Texas be entitled to x/640 share of the oil and gas produced? Ex. 40 nma / 640 acres equals 1/16 or 6.25%? In making a decision, would one compare that cut with that of a signed a lease with a 20% royalty x 1/16 = 1.25%?
Dear AJ,
In Texas, it is not the quantum of interest in the "drilling unit" that counts. It is the mineral interest on the drillsite tract.
For example, suppose that Farmer Jones had a 1/10 interest in a 40 acre drillsite tract, which was part of a 640 acre pooled unit.
Leased at 20%, Farmer Jones would be entitled, as a share of first production, (20% x 1/10 x 40/640) .125%.
Unleased under the drillsite, after payout, Farmer Jones would be entitled to 1/10 of the well. 10%
Unleased not under the drillsite, Farmer Jones receives no bonus and no royalty.
Thank you for the detailed explanation, Buddy Cotten. I have gotten the impression from brief conversations over the years that it is likely to be a very big headache for the mineral owner who chooses not to lease.
The only caveat to the explanation above is for horizontals where the unleased tract in question doesn’t cover the entire productive bore path. Tx case law recognizes that you can’t treat unleased covenants the same for horizontal and vertical wells. Otherwise the explanation is absolutely right.
Dear AJ,
There is a blogpost written on this board about is it feasible to go unleased in the world of horizontal drilling.
The author's contention is that it is not.
Perhaps 98 percent of the time it is not feasible, unless you have a small interest under a very large tract.
Best,
Buddy CottenThank you (again). I will try to find and read the blogpost you reference.
Buddy - here is the response i got from the offering party when I asked him the same question: "You own an undivided interest in a 418 acre tract. There is no way to drill “around” you without excluding the entire tract, which is where our leasehold is. Once we drill, this entire tract will likely end up being the entire unit, or at least the largest tract in any future unit. Further, we wouldn’t want to drill around you anyway. Your interest is as important to us as any and we want to treat you as fair as we have treated everyone else that we have leased in this tract. Until we have everyone leased, we won’t be able to drill, so the sooner we have everyone’s paperwork in this office, the sooner we can work towards drilling. Any delays that happen during the leasing process will only further delay plans to drill."
Does this response give me a position of strength? I think the other leasees probably caved too low and I may be the last one he needs. However, there are all kinds of production related expense items that I have never seen before in an ORRI.
Ms. Smythe,
Your question confuses me. You make reference to an ORRI. Do you have an ORRI or a mineral interest?
If you have an ORRI, there is already a lease or obligation in place. Does the operator want you to consent to pooling?
Best,
Buddy Cotten