Replies to This Discussion

Permalink Reply by James W Funk on November 10, 2015 at 3:15

I can share my experience in leasing with an investor:   We signed lease with good bonus, but the investor would not participate with EnCana and thus we went unleased on a very good producing well.  So far this has cost us over $ 400,000 in lost revenue we could have had if leasing directly.  EnCana is protected under LA law and only has to pay us once the well pays out.  They way they expense everything, that will be about 15 years.

The law has now changed, but out loss continues.  Always good to know who the players will be.

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Permalink Reply by Henry on November 10, 2015 at 3:18

Interesting.  I hadn't thought of this possibility.  But I'm still confused.  Presumably your lease required them to pay some percent royalty on all production?  

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Permalink Reply by James W Funk on November 10, 2015 at 3:39

The lease was with the other party.  We could go after them, but they had nothing.  Was speculative on their part, that is why they would not participate in working interest in the well.  We had no lease with EnCana.

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Permalink Reply by Skip Peel - Mineral Consultant on November 10, 2015 at 3:55

An investor holding a working interest (one or more leases) in a drilling and production unit has two choices: participate under the terms of an JOE (Joint Operating Agreement) by paying their prorated share of the well costs, or have their interest produced without their consent and be assessed a risk penalty of 200%.  See the linked discussion on the statute that addresses who pays the lessors of a non-participating working interest.

http://www.gohaynesvilleshale.com/forum/topics/louisiana-amends-la-...

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Permalink Reply by RONNY on November 10, 2015 at 10:22

What if the operator has the required amount of acreage to drill the unit and says they are not interested in leasing your acreage?  Would not a lease with a reputable investor and the leverage of La. mineral code 30-10 to compel operator to tender royalty be an option?  Is there anything in La mineral law which compels an operator to give a lease if acreage is in drilled unit? thanks.

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Permalink Reply by Skip Peel - Mineral Consultant on November 10, 2015 at 10:59

When the state grants an application for a compulsory unit the operator is given the power to "force pool" all mineral interests, leased and unleased.  Unleased interests are afforded UMI status and dealt with under the statutes governing same. 

In the past mineral interests leased to a lessee that chose not to participate in development have been in a bad situation where their lessee owes them royalty yet the operator has no obligation to pay their lessee because they are not covering their portion of the wellcosts.  Those non-participating lessees hope not to be sued by their lessors and usually attempt to lay the blame on the operator.  The amended statute, as I understand it (IANAL), requires the operator to pay the non-consenting lessee only the monies owed to that lessee's lessors as royalty and requires the non-consenting lessee to pay those monies to their lessors.

As usual I suggest that those members who find themselves in such a situation get professional help from an experienced O&G attorney as there are special notice requirements and existing case law that can make the process of demanding payment from a non-participating Working Interest complex.

There is no requirement for an operator to offer a lease to all interests in a drilling and production unit.  The state provides protections for a UMI that often make it a good business decision to offer a lease however.  The majority of UMIs in the Haynesville Shale Play are owners of very small mineral interests who were offered a lease that they turned down.  A  minority of UMIs were simply overlooked in title due diligence and never offered a lease.  The latter case certainly deserve a lease in line with the royalty paid to the majority of the leased interests in the unit and with the standard beneficial and protective lease clauses.  I lobbied friends on the committee formed to assist in crafting legislation regarding Cross Unit Laterals to include a requirement to offer a lease to those who were "overlooked" in the leasing and pooling process.  Although they got the question included in discussions, they were not successful in getting such mineral owner protection included in the recommendation that was forwarded to the legislature.

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Permalink Reply by shannon brewster on November 14, 2015 at 10:23

Just received lease papers from them for land in natchitoches parish. 1000 dollars an acre and 1/5 royalty.

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Permalink Reply by Skip Peel - Mineral Consultant on November 14, 2015 at 10:34

That's interesting..  shannon, please post the section-township-range so we know where in Natchitoches Parish.

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Permalink Reply by shannon brewster on March 25, 2016 at 14:13

19 9 10 is receiling leases and the section next to this is to. Blue ribbon is who's leasing and alot of people are jumping in signing but we will wait for someone else.

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Permalink Reply by Skip Peel - Mineral Consultant on March 25, 2016 at 14:33

It could be a long wait, shannon.  Considering this location (the far edge of the explored basin) and the price of natural gas, I doubt there will be any other company interested in leasing for some time.

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