Replies to This Discussion

Permalink Reply by Joe Aldridge on November 21, 2013 at 0:28

Max,

That's not quite correct on the prescription of minerals and it is a common misconception. You do not have to have production. Prescription is interrupted by the simple act of drilling to a formation that is known to be producible. In our area of North EBR parish that would be Frio at about 6,500 ft. At the time of drilling the clock resets to a new 10 year period. At least this is my understanding.

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Permalink Reply by Max on November 21, 2013 at 2:35

Joe, yes, I remember reading something about that in a discussion about prescription, I think Skip explained that the drilling had to have begun and reached a certain depth to stop the clock.  After learning this fact, I set a mental note to keep an eye out in case a circumstance like this comes up. 

I'll learning along with everyone else from this site and it seems like every time I get a grasp on the in's and out's, a new one pops up...thanks for the info.

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Permalink Reply by Joe Aldridge on November 21, 2013 at 9:32

Max,

What I've never been able to get a grasp on is what happens with prescription at the point that production ends on a property that was HBP. Does prescription end at that point or does it reset to a new 10 year period at the date of abandonment? I've never gotten an answer to that. Maybe someone on GHS has the answer to that.

Also, I would like to thank you for the post about heirship. I understand about usufruct but the Executors and their rights and duties was not clear to me. Its troubling that a person or persons that is not a competent professional or expert can make decisions that affect the property of the heirs up to the JOP. I always thought that the job of the executor was to make sure all of the bills of the estate were paid and then divide the property among the heirs. If the outstanding bills have been paid how do they continue to act as executors? Are there outstanding bills of the estate that need to be liquidated by the lease to EXCO? To that end, If there are not any, I really don't understand EXCO taking a chance on building a site on property that might have the problems that appear to be possible here. 

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Permalink Reply by Thomas C. McKowen, IV on November 21, 2013 at 9:58

Joe,       A new 10 year prescriptive period starts on the date of cessation of actual production.

             Executors have very.broad powers in Louisiana.  It would be very very unlikely for a court to overturn their actions because there were no bills to pay. 

 

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Permalink Reply by Joe Aldridge on November 21, 2013 at 11:29

Tom,

Thanks, that is what I thought about prescription but never had it confirmed. 

It seems that there could be an abuse of power with Executors that go beyond simply settling the estate. Just my take.

Permalink Reply by Dion Warr, CPL on November 21, 2013 at 14:18

T. McKowen:

Not quite. The prescriptive period for a mineral servitude begins anew only at the cessation of good-faith operations to pursue the production of minerals in the case of oil and gas. Even unsuccessful operations will interrupt prescription. Last production is the most stringent marker; in doing mineral history work, we usually look and notate the date of last production as well as the P&A date (most liberal interpretation, as no operations can occur past the P&A date short of cutting the cap plate and drilling out the plugs, or in the case of a T/A, pulling the Halliburton tombstone and replacing the drilling collar / top assembly and "dropping the hammer"). Now if the last operator just "let the well go dry" and the next activity was the P&A, I'll agree wholeheartedly with you.

If it's close re: prescriptive date, we'll pull the files at the district and/or review the operator's files and/or request the drilling contractor's files for all the dates after last production and before the P&A, or obtain affidavits from same as to their activities to try and nail down a red-letter date or provide same to legal counsel to ultimately make a legal determination.

Permalink Reply by Max on November 21, 2013 at 15:28

Joe,

I may have to deal with prescription someday, and I'm still learning about it.  I know my children don't have the time to dig into the details, so we're trying to build a record base. 

Most people, including land owners, never have to deal with mineral issues, the land they own is never leased or the minerals produced.  Mom and dad die, pass on the place, split the place up, or sell it, that's it; that's before a producing gas well on the property changes things.

The Executor thing is important.  Folks write their Will, and to save money, name a child/spouse to perform the task.  That's OK most of the time, but if you have a large estate with several heirs, it may not be smart.  The 2.5% Executor fee would be spent far better if a professional handled the estate rather than a child/spouse. 

I don't think EXCO has anything to worry about.  They know what they signed, but I see your point that they could be asked to appear.

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Permalink Reply by Dion Warr, CPL on November 21, 2013 at 14:48

Joe:

As I allude to with Tom below, good-faith operations with the reasonable expectancy of production is usually enough to constitute use. Ultimately, it is fact-dependent in context and relevance; for instance, a 400' well is likely no more than a water well in S LA, while in Bellevue Field, it is likely a producer.

In any event, oil and gas is where you find it, and likely if a company permits an EBR well to the base of the Frio and encounters oil or gas shows at 4,000', even if the operator does not pursue the Frio and unsuccessfully attempts to complete at 4,000' prior to P&A, the mineral servitude owner would still likely be able to prove use. It is arguable, and certainly could come down to a judicial determination, but IMO the servitude owner could probably make a compelling argument.

FYI, in S EBR, well south of the shelf, Nesser Field has produced from the 5500' Sand for quite a while, which is above the Frio. It's not typical, but... the operator(s) have obtained a few hundred to a couple thousand barrels of oil per month for a number of years. Check out the McCann wells in 49-8S-2E on SONRIS. Nice little oil pocket.

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Permalink Reply by Max on November 21, 2013 at 15:58

Dion, thanks for the info.

Max

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Permalink Reply by Thomas C. McKowen, IV on November 22, 2013 at 3:48

I agree with you.  But technicaly, prescription begins again when production ceases.  The additional operations you reference would interrupt the new prescriptive period.  This distinction has no practical impact that I can think of.

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Permalink Reply by Dion Warr, CPL on November 22, 2013 at 4:34

T. McKowen:

You are likely looking at the situation as a fee owner or as the owner of a tract subject to a mineral servitude who would gain rights upon extinguishment; of course one in that position would mark from date of last production. Think in terms of a motivated Lessor and mineral servitude owner who is relying upon the pending set of operations to hold a substantial servitude and is marking off days on the calendar waiting for their Lessee's rig to show up, depack and start turning a bit to the right. The Lessee always has the option of making a deal with Lessor's successor in title, whereas one's mineral servitude is extinguished, it passes instantly to the surface owner, who after patiently waiting for the passage of ten consecutive years of nonuse is unlikely to voluntarily interrupt the running of prescription by acknowledgement.

I personally have not worked on a project where the inclusion of such operations has served to extend a mineral servitude. I have researched a situation where nine years, eleven months and eighteen days have passed between operations which resulted in (reported) 3 barrels of production prior to immediately P&Aing the well and the spudding of the next well, and another project where a tract had been double-leased because of a question of mineral ownership where a gap initially determined to be ten years and four months was closed to ten years and a little less than a month by inclusion of operations in investigating the two cross-claims. I can't be sure that I'll ever be involved on one where it actually happens, but I've gotten to within a couple of weeks either way.

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Permalink Reply by Max on November 22, 2013 at 2:58

Dion,

Do you know how producing minerals are valued (is there a value placed on them), when an estate determines the gross value of the estate? 

I'm asking this question to see if producing minerals are calculated into the 2.5% (executor pay) gross amount value of an estate.

My take on minerals is that they are treated as income (if producing) and don't count as an asset.

Max

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