In Colorado, Weld County actually, a Well has been drilled into our minerals however we do not have executive rights. The company that drilled the Well is asking us to sign a "ratification" of the lease which has been provided to us. The reason for asking us to sign the document has never been mentioned. We have asked the company but as yet received no answer.
What would be the most likely reason for asking us to sign a ratification?
Bob
Robert,
I am not an oil and gas attorney, but it sounds like they just want you to acknowledge, in writing, that this lease has been executed because you do have royalty rights in the lease.
They will also want you to sign division orders from time to time, agreeing with their analysis of what your royalty interest is, before they send you royalty checks.
If you are in doubt about what the ratification accomplishes, you could hire an oil & gas attorney to read it for you, and analyze and then explain it to you. The company's proposed ratification could contain mistakes that you might not catch, mistakes that could affect your rights.
Ken G.
Landman-Lawyer
Thanks Ken, I appreciate your taking the time to offer up a reasonable rational. I think you are correct. We have a landman who is on it but I think he is waiting for the big kahonnas to give him specific direction.
Bob
Ken G. said:
Robert,
I am not an oil and gas attorney, but it sounds like they just want you to acknowledge, in writing, that this lease has been executed because you do have royalty rights in the lease.
They will also want you to sign division orders from time to time, agreeing with their analysis of what your royalty interest is, before they send you royalty checks.
If you are in doubt about what the ratification accomplishes, you could hire an oil & gas attorney to read it for you, and analyze and then explain it to you. The company's proposed ratification could contain mistakes that you might not catch, mistakes that could affect your rights.
Ken G.
Landman-Lawyer
I agree with Ken G. that usually there is nothing below board with ratifications but I was recently in contact with someone who executed a ratification of a lease for an operator who had leased from someone who had no right to lease the minerals. He did it for free, thinking it was just a formality. I hope you study the lease you are ratifying as hard as the ratification itself.
WOW, RW! I've never heard of that one - sounds like a nightmare! No legitimate company or legitimate Landman would have ever pulled such a shabby stunt.
I would imagine that the law allows for the ripped off Mineral Owner to seek recourse. He or she should consult an Attorney - they may even be able to have the lease nullified. With a local Judge and local Jury, it would be almost impossible for them to lose.
If the Operator has commenced operations on the subject lands they can file for an injunction, freezing the drilling rig in place at thousands upon thousands upon thousands of dollars a day. Any company facing that will be happy to throw money at the situation until it goes away. Lots and lots and lots of money. They're insurance company will make sure they are willing to.
Robert, I am also not at Attorney, and am not familiar with every use for a Ratification.
But I have frequently seen them used in the case of Non-Participating Royalty Interests, with the owners thereof being asked to Ratify a Lease because the lease includes a Pooling Provision (The holder of the Executive Rights does not typically have the right to pool Non-Participating Royalty rights). Some people will request a Pooling Agreement in lieu of a Ratification, fearing that their Royalties will be diluted by the Royalty Provision in the Lease beyond the effect of being pooled with other lands, but you will have to consult an experienced Oil and Gas Attorney on that one.
I have also seen Ratifications used in cases where Remaindermen exist, such as when there is a Trust that might expire or be terminated during the term of the Lease or an Agreement has been made between family members that only becomes effective after someone dies, like a Mineral Deed from a Parent reserving a Life Estate - that sort of thing.
Also, when a Lease is executed by an Estate, the company could ask for the eventual Heirs to the mineral interest to Ratify the Lease.
Ratifications are not something you would typically need to be wary of, but I agree with the others that you should have an experienced Oil and Gas Attorney look over any paperwork you are ever asked by an oil and gas company to sign.
And always keep copies of everything.
Hope this helps -
Charles
Charles Emery Tooke III
Certified Professional Landman
Fort Worth, Texas
Thanks Charles, & RW, I appreciate your input. I am hopeful that this is just a simple issue and can get resolved asap. I am leaning to the idea that it is going to be focused on pooling. Also hope to hear from our attorney this week?? Thanks again guys.
Bob
Charles Emery Tooke III said:
WOW, RW! I've never heard of that one - sounds like a nightmare! No legitimate company or legitimate Landman would have ever pulled such a shabby stunt.
I would imagine that the law allows for the ripped off Mineral Owner to seek recourse. He or she should consult an Attorney - they may even be able to have the lease nullified. With a local Judge and local Jury, it would be almost impossible for them to lose.
If the Operator has commenced operations on the subject lands they can file for an injunction, freezing the drilling rig in place at thousands upon thousands upon thousands of dollars a day. Any company facing that will be happy to throw money at the situation until it goes away. Lots and lots and lots of money. They're insurance company will make sure they are willing to.
Robert, I am also not at Attorney, and am not familiar with every use for a Ratification.
But I have frequently seen them used in the case of Non-Participating Royalty Interests, with the owners thereof being asked to Ratify a Lease because the lease includes a Pooling Provision (The holder of the Executive Rights does not typically have the right to pool Non-Participating Royalty rights). Some people will request a Pooling Agreement in lieu of a Ratification, fearing that their Royalties will be diluted by the Royalty Provision in the Lease beyond the effect of being pooled with other lands, but you will have to consult an experienced Oil and Gas Attorney on that one.
I have also seen Ratifications used in cases where Remaindermen exist, such as when there is a Trust that might expire or be terminated during the term of the Lease or an Agreement has been made between family members that only becomes effective after someone dies, like a Mineral Deed from a Parent reserving a Life Estate - that sort of thing.
Also, when a Lease is executed by an Estate, the company could ask for the eventual Heirs to the mineral interest to Ratify the Lease.
Ratifications are not something you would typically need to be wary of, but I agree with the others that you should have an experienced Oil and Gas Attorney look over any paperwork you are ever asked by an oil and gas company to sign.
And always keep copies of everything.
Hope this helps -
Charles
Charles Emery Tooke III
Certified Professional Landman
Fort Worth, Texas
Robert,
As I said, I am not an oil and gas attorney. However, a good oil and gas attorney preparing a title opinion would probably recommend getting lease ratification from anyone with any possible interest in that lease, and others writing in this thread have provided some typical examples. In some states, courts have held that executive rights owners may have some duties to protect the interests of the royalty owners. I don't think, but don't know, that courts in Colorado have ever said that.
Once you sign the lease ratification, it would be hard for you or a clever lawyer to later raise any objection to the lease.
And that is what they are typically trying to accomplish - making sure that no one can later challenge a lease, or challenge who received royalty payments, etc. They want to be sure you don't have any objection; they want to minimize any legal risk, which you can understand, since a new well often involves investment - and risk - of millions of dollars.
Ken G
Landman-Lawyer
Charles,
There appears to be just such a case that Clint is posting about here:
Looks like a ratification was used to validate a lease - which was actually a forgery. Now the courts will have to sort that out. I posed the question on Clint's thread.....
What would the walking away lesson be from a situation like that?
Wilson
Charles Emery Tooke III said:
WOW, RW! I've never heard of that one - sounds like a nightmare! No legitimate company or legitimate Landman would have ever pulled such a shabby stunt.
There's an Oil and Gas Company and a Land Services Firm and a Field Landman out there somewhere that are about to be TOAST.
Always have an experienced Oil and Gas Attorney review any documents you are asked to sign.
Guys I will post the answer to my question when I get it from our attorney or landman which should be anytime now. Thanks for your responses.
Bob
Charles Emery Tooke III said:
There's an Oil and Gas Company and a Land Services Firm and a Field Landman out there somewhere that are about to be TOAST.
Always have an experienced Oil and Gas Attorney review any documents you are asked to sign.
Our Attorney came back with an answer. "Sign and return it". I am getting this second hand and can not offer up any reasoning beyond "it is not a problem". So there you go, a $200 an hour answer!
Bob
Robert L. Tofson said:
Guys I will post the answer to my question when I get it from our attorney or landman which should be anytime now. Thanks for your responses.
Bob
Charles Emery Tooke III said:There's an Oil and Gas Company and a Land Services Firm and a Field Landman out there somewhere that are about to be TOAST.
Always have an experienced Oil and Gas Attorney review any documents you are asked to sign.
GUYS:
A ratification is VERY COMMON. Many transfer executive rights at time of sale for many reasons, most times because they will not be around to deal with leases and it makes sense for a person to own the surface and some executive rights in many cases. All you are doing is saying that yes I understand there is a lease, understand that your interest will be handled according to the terms of that lease and you will be compensated accordingly but I strongly suggest you thoroughly read and understand the document to it’s fullest even if that means running by an attorney.
There are many options there, sometimes you are paid the same as the executive lessor for your interest, sometimes you are not and the party that executed the lease is responsible for providing to you and your heirs etc… your pro rata share of the bonus. Most all times you will have a separate Div. Order reflecting your interest unless you have only an ORRI on that share and in which time you would not be asked to ratify.
ALL THAT BEING SAID, there are numerous reasons why or why you wouldn’t sign the document based on location of your tract. I will leave that to you to discuss with your attorney. I too am a professional landman and not an attorney so based on the above information all of which its contents are for informational purposes only and in no way is any form of advise is being offered, please consult with your attorney for legal advise.