In Texas operator has plat for H shale well. The Plat is perfect Rectangular for better N/S lateral. They cut a 24 acres off a tract that deep rights control by another operator that will not deal with operator drilling new unit. These 24 acres stick out into the rectangular unitCan operator just leave the 24 acres out if not in drill site? Do there have to escrow royalties on the 24 acres? what happen to royalty owner of the 24 acres?
Skip thanks-- follow up question to clarify---mineral owner per say is not a ULMO since operator A has his minerals HPB in a lease with a shallow vertical well. Operator B is cutting across and picking up the 24a of operator A's unit plat of the shallow well . Does this change anything or is Operator A who will not agree to deal terms of farm out or sell deep rights to Operator B or JV of deep rights with operator B cause mineral owner to become a UMO in operator or is it the operator A that is the UMO in B's H shale well unit? As result is the mineral owner just screwed out of his deep minerals Royalty in these 24 acres? Can Mineral owner do anything? Operator A has 80% WI in the 24 a. deep minerals, but has not transfered them to Operator B . If A is a ULMO to operator B does he by not agree to deal become UMO operator by default and then have to paid the 20% Royalty to Lessor ( Mineral owner)
I'm no expert on Texas pooling regs but all forms of unitization of which I am aware include the authority to force pool. In other words a mineral owner can choose to lease or not. IMO operator A in your example doesn't have that choice. They will be force pooled and either pay their proportional well cost or they will have that cost paid out of their proportional share and incur a penalty that will effectively mean they realize no payment for the minerals. Now how the mineral owner will be paid is beyond my pay grade. I suspect they will receive royalty based on the lease terms of the other mineral interests pooled in the unit. To increase your odds of finding a respondent with greater knowledge than myself, this question should be posted here:
While waiting for an answer, I suggest you revisit this archived discussion from the group;
Ben-- hope you check in on this question-- Thanks
I sent him an e-mail so maybe he will check in soon.
If I understand what you are saying, B has created a unit and excludes 24 acres leased by A because A will not deal with B. That leaves A and A's lessor out of the well that B drills assuming the 24 acres is non-drillsite. A's lessor must complain to A and the lessor's only recourse is against A. A owns the mineral estate under the lease, and so A is the one with standing to pursue forced pooling under MIPA or drill its own well. If I'm A's lessor, I want to know exactly what terms A was offered by B to be included in the unit, and why A refused such terms. If a reasonably prudent operator under these circumstances would have taken B's terms, then A's lessor has to go after A for not complying with its obligations under the lease. But in this regard, the terms of A's lease may control and the fact question of whether a reasonably prudent operator would have accepted B's terms is a central question. On the other hand, if the 24 acres is a drillsite tract, then A is treated as a co-tenant and will start getting revenues after payout. Arguably, A's obligations to pay royalty to its lessor under the lease is not contingent on payout, meaning A must pay its lessor the requisite royalty even if the well has not and never pays out. Hope this helps.
Ben--- thanks yes very helpful and understand unit is just in surveying status for new unit but B has told land owner of 24a ( at time getting ok to cross land for survey)( surface owner also has 1/3 undivided mineral in the 24 that A has HBP) that the 24a will be put in unit plat so B can get best N/S laterals and use his 100a south of 24a. therefore drill 6 wells rather than 4. He will drill on the west border and the 24a would not be crossed by lateral until #5 or #6 well drilled on Eastern border of plat. So if no agreement made between A & B then mineral owner only get Royalty paid by A on well #5 and #6 as lateral crosses the 24a. But if A agrees to PSA then A would be a WI in the 24 and mineral owner receives payment all wells because then he is a mineral owner like all in unit and paid according to his lease with A. --- Am I understanding correct?
That is correct adubu
Ben-- if A non-consents and then if and when well #5 and #6 drilled that lateral go across the 24a tract and A then pays R to mineral owner on well #5 and #6. Is interest decimal calculated for mineral owner on just the well # 5 &6 assume 80 a spacing or is it calculated on the 550a unit? If only on each well mineral owner would basically receive same amout of money if in all wells but not sure if 5 &6 are ever drilled and R from first wells never received.
Adubu, I'm replying to your question just below (for some reason there is not a "Reply" button at the end of your post). A's lessor's royalty will be calculated on the 550 acre unit, not on the basis of spacing. So the lessor's decimal interest in 5 and 6 would be Lease royalty fraction * 24/550 * lessor's respective mineral ownership.
Ben--- thank you for your time and comments--- so bottom line mineral owner get royalties per sign lease with A if (1) A and B sign agreement of some kind so the deep rights in 24 is placed in unit like all other mineral owners in leased by B in unit (2) if no agreement because A non consent then mineral owners of 24a get royalties only if lateral cross the 24a in example well # 5 or #6. Operator A pays royalties under 24 per A Lessor lease with Lessee. Otherwise if no lateral comes across the 24a and no agreement then mineral owners in the 24a receives nothing --- Is this correct?
Based on your described circumstances, yes, I believe that is correct. It ain't easy being "un-leasy" in Texas.