Possible bad Lease agreement, any suggestions?
I was just informed that lease that we made with the OG company may be bad. We do show an operational well from 1965 on our property but have recieved no royalties for years and the meter is removed. Any suggestions. We signed a contract for $175 per acre and 20% and would jump at the chance to renegotiate. Any suggestions? Thanks in advance.
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Replies to This Discussion
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Permalink Reply by Grillin' - MmmMmm on -
When was the lease signed? Does the well show up in Sonris as a producer or did it go off production? What is the length of your lease and how long do they have once production stops to resume production or drilling? Finally, do you happen to know if your acreage has been included in a unit?
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Permalink Reply by carey on
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The latest lease was signed just over a year ago. The early lease was signed back in the 60's I believe. We are trying to get a copy of it now. It does show up in sonris as a producer but according to my dad, the meter was removed years ago and he has recieved no royalty for years. We are not familiar with the old lease so don't know the particulars. The property is in a unit which I haven't been able to determine. The property is sec 20 t13nr16w.
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Permalink Reply by Kassi on
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If you did not sign a lease and it was signed by a prior owner you will need to research it. Find the original lease @ the clerk of courts office. You will need to trace ownership of the well. Mmmarkkk is right. You need to find out if the well has been producing, and how much. You can check the Sonris site. You will need to have a demand letter issued to the company that currently owns the lease to either produce/pay or release you from the old lease if it is holding you in production.
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The old lease was signed by my grandmother. My father inherited the property. The sonris site shows a shallow well still producing on the porperty. Any possibility of a good lawyer getting the well declared abandoned which would possibly open the door to renegotiating the lease signed in march 2007 since it was illegal to enter that lease at the time? I know it will be hard to determine without knowing how the old lease was written. Any merit to claiming it isn't producing because they haven't paid royalties in years?
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The new lease covers all 70 acres. We are not sure about the old lease which we are actively searching for. We believe it covers the seventy acres. My father actually signed the old lease, not my grandmother.
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Ok, Scenario one: The operator has not paid royalties in years:
RS 31:137-142 address this basically If a land owner seeks relief for the failure of the operator to make timely or proper payment of royalties, he must give the operator written notice of such failure as a prerequisite to a judicial demand for damages or dissolution of the lease. Then the operator has 30 days to either pay you or give a reasonable reason as to why you have not received royalties. If the operator pays you then you cannot have the lease terminated unless it is found that the original failure to pay was fraudulent or willful without reasonable grounds. Then the court may decide to terminate the lease or order the operator to pay you back royalties and penalties.
Scenario 2: the operator has not met the requirement to be a reasonably prudent operator and adequately develop the leased lands. You have to go through the same steps as above. Send a written demand to develop the land or release the lease. Let him have time to respond. Go to the courts if the response is not satisfactory.
The laws were written by and for the industry. This is why we need a strong lobbying effort for some much needed changes.
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In either of the scenarios, I reckon it would be prudent to use an oil/gas counsel instead of going it alone. Would you agree?
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Yes that is true. What I do is perform the leg work. Research the title, trace the chain of ownership of the land to ensure the current owner actually owns the minerals. Research the chain of ownership of the well/lease. I then put it all into an abstract for the attorney along with questions regarding the findings as it relates to the law. This way the attorney has less work to do at $250.00 per hour and our fees are less. Just be sure you get a quality O&G attorney. I do not trust just any attorney to handle O&G issues like this. I use Randy Davidson when I need legal input. He is worth every penny. He is also honest enough to tell you when you do not have a case so you will not spend excess money and time chasing an inevitable failure.
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That is the problem? They didn't research it and we didn't realize it was still under production since the royalty checks had stopped. The checks were miniscule, some less than a dollar and the most my dad remembers ever getting was close to $200 for a year. Definitely different from the scenario we are looking at today.
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That is simple, they are not researching far enough back. In my case the lease in question is over 53 years old. It was found while research was being conducted in another section (there have never been wells in my section only in the other section). Many land men have only been looking back 20 or 30 years, especially when there is no history of a well in an area. They have basically thrown their money away.
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If you had to guess, how do you think the old leasing company will respond to our request to let us out of the old lease. I'm also not sure how they are reporting production without the meter which my dad insist is missing.
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First about the meter. Can you get someone to take time and date stamped pictures of the well without the meter every few days to prove it is not there?
Now about getting out of the lease. Given the magnitude of money to be made off of the Haynesville shale I doubt any company will willingly give up a lease. There is only one way to find out. If you do not ask the answer is definitly no. If you do ask, at least you have a chance.
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