CHK Unit Survey: Now they tell me they've over paid

 I own a royalty interest in a CHK well that has been producing for almost 5 years.  I recently received a letter from CHK indicating that they have performed a new survey of the section, and that it is ~5 acres smaller than originally calculated to be.  As a result, according to the letter, I have been overpaid more than 15% on my royalty payments (the section shrunk by less than 1%) and they have suspended my royalties, and, oh by the way, would like for me to start mailing them monthly checks to cover the overpayment.  I have a few questions related to this situation, and I'm hoping some of you will have some advice.

1.  Any idea how a reduction of less than 1% of acreage in the section could lead to an overpayment of more than 15%?

2.  Since I took calculus in college (4 courses), it seems to me that the only statistic that matters is what my % of the unit is.  If the unit got smaller, CHK's income from the well didn't go down, so why should mine?  Did my % of the unit get smaller?

3.  this situation is complicated by the fact that my extended family owns at least 1/2 of the land in the unit, and it seems that all of us were overpaid.  this seems contrary to my simple math approach.  Any comments/observations?

4.  My family members and I are fairly certain that no actual "on the ground" survey was performed.  No stakes, no flags, and some of the sizable tracts are behind locked gates not accessible by CHK.  The CHK financial person that called me (after I didn't respond to the letter) and then the CHK landman I was referred to suggested that perhaps when I bought the property, I didn't get a good survey, and I own less than I thought.  The problem here is that my family bought the property more than 100 years ago, and it has merely been divided among the children.  And we all seem to be the losers in this survey.

5.  Louisiana has a law that sets a statute of limitations of 3 years for claims for the overpayment or underpayment of royalties, assuming the Party asserting a claim has been reasonably diligent in discovering the overpayment or underpayment.  Which leads to the obvious question - why would CHK wait 5 years to do a second (that's right, a second) survey of the unit?

It is very difficult to not make assumptions of bad motives here.  My simple thoughts are that CHK drilled a well, and the well has produced whatever it has produced.  Assuming that every tract is leased, then CHK owes royalties to the mineral owners of whatever the % is of RI.  A survey can't decrease, overall, the RI and result in an increase of the WI.

on final question:  we are guessing that the "survey" is based on satellite data, not on the ground actual surveys.  Would this stand up in a La. court?  Fences may not be in the precise place, but the various owners would be very hard pressed to prove "ownership" through adverse possession.  In fact, almost none of the various family owners of parcels actually live or actively possess their tracts. 

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Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on February 9, 2015 at 3:34

Steve, if CHK did perform a new survey it may be in the database.  If you will send me the section-township-range and I'll check to see if one has been entered. 

Permalink Reply by Bill Mendenhall on February 11, 2015 at 12:04

Skip, are unit surveys available on SONRIS, or are you referring to another database?

Permalink Reply by Skip Peel - Mineral Consultant on February 11, 2015 at 12:28

The Document Access portion of the SONRIS database has some some unit surveys.  That is different from the Data Access portion which we used to call SONRIS Lite.  It's all technically one database.

Permalink Reply by J.J.Jones on February 17, 2015 at 11:14

Skip, CHK did this same thing to us in section 27, 16n, 14w. Most of this section is small parcels, 5-10 acres. CHK said a 5 acre parcel was over paid $800.00 and it would hold back royalty payments until caught up.

                                J.J.

Permalink Reply by Skip Peel - Mineral Consultant on February 17, 2015 at 13:09

J.J., was this recently?

Permalink Reply by J.J.Jones on February 18, 2015 at 4:25

Skip, this was around August 2014, CHK never told me how much I owed them. I called them in January to check how much more I owed and found out it was still over $400.00.They said my property size stayed the same but the section size changed. I guess I have to take their word for that.

                                                                    J.J.Jones

Permalink Reply by Skip Peel - Mineral Consultant on February 18, 2015 at 4:33

J.J., the state requires the operator of a drilling unit to survey the unit including all individual tracts.  CHK in their rush to lock up as much Haynesville Shale as possible didn't perform surveys for all their units.  I appears that the recent reports of "corrections" to ownership interests may be the result of CHK performing surveys that they had previously skipped over as part of their current Haynesville drilling program based on alternate HC (Cross Unit Lateral) wells.  HC wells will have production allocated to existing drilling units based on the linear feet of perforated lateral that lies within each unit.  That process may be problematic if CHK does not have accurate surveys upon which to base the allocation.

Permalink Reply by J.J.Jones on February 18, 2015 at 5:30

Skip, this section was originally leased by Camterra and surveyed by them and then sold to CHK. Now CHK has 60% and Endura has 40%. Have not heard anything from Endura on all this yet.

                                                                     J.J. Jones

Permalink Reply by Skip Peel - Mineral Consultant on February 18, 2015 at 5:45

Since CHK is paying royalty on Endura's share of production, you probably won't hear from them. 

Permalink Reply by J.J.Jones on February 18, 2015 at 6:34

I should have added that I am still recieving checks from Endura on their 40%.

208ef0t5wi05pPermalink Reply by 208ef0t5wi05p on February 9, 2015 at 3:52

Steve,

       Would it be Breaking News to you if I told you "CHESAPEAKE ENERGY IS RUN BY THIEVES"?

They have started rationing royalties in the Utica Shale so we are getting $57 to $150 per acre per month. They are in the process of stealing all of Ohios Natural Gas Liquids. And as you know people are lined up to sue them.

The story you are being told sounds bogus, CHK is too busy stealing from everyone to start surveying land to see if they are getting cheated. This is the first story of this type I've heard. I'd check out the address that they want you to send the payments to.

Also, if you look closely, you have been stolen from for 5 years now.  Ask CHK to pay you what they have stolen from you. Everyone across the country has been victimized by CHK, and no one is being spared.

I assume you pay Real Estate Taxes on the acreage you own. If you pay taxes on the amount on your deed then you own that many acres.

Permalink Reply by Skip Peel - Mineral Consultant on February 9, 2015 at 4:01

Ron, although CHK's reputation leads many to assume the worse it's always a good idea to seek the facts before coming to a conclusion or considering appropriate action to take.  CHK is certainly not the first or only O&G operator to adjust decimal interests in a unit based on a survey that reveals inaccuracies in older surveys.  That is, in fact, a common occurrence because there is a high percentage of inaccurate older surveys that have been copied verbatim in legal instruments down through the decades without any attempt to re-survey to confirm the correct acreage total.

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