If I enter into a lease with Company A at $1500 per acre, 25% royalty, 3 year term and Company B force pools the acreage into a 640 unit what happens to my lease? Will I still receive the 25% due by original lease terms. If Company B drills a well, who will pay me the royalty due? Company A (original Lessee) or the driller/operator Company B?
The landman at your Company B could tell you more, once they have gone through all the searches of owners.
I was told yesterday that my existing lease meant the force pooling did not apply to me (the old lease would be in effect with the new company that is force pooling those owners without leases.)
It is my understanding that 3-year term means the company has 3 years to drill but then keeps the lease as long as there is any production. (My 2 year lease was started in 1975 with an ancestor, and is still in effect with next to no production.)
The landman with the new company that is drilling said they send the pooling notice to everyone, just to cover all their bases.
I don't know who sends the royalty payment, but guessing it would be the drilling company?
Check the application to see if your lessee was named as a Respondent. If so, you lease may have been recorded and B found it.
If not, A may be using your acreage to participate in the well with B. A and B then have an operating agreement that determines who pays your royalty under the lease. If a put the lease into the OA, B will probably pay but if not, A will pay you out of its proceeds taking what deductions it can get away with.
Also, if the lease to A is not recorded, A is not in an agreement with B, A or its assigns is not noticed on the ORDER, you better have an attorney make your option under the order subject to your rights under the lease. Who knows, A may have sold the lease to B for $3000/ac and took a trip.
It always pays to lease directly to the operator or allow your acreage to be force pooled if it is small. Keeps your options open and the regulators are usually fair in determining bonus and royalty options.
Gary L Hutchinson
Minerals Managment