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Permalink Reply by Steve P on February 17, 2015 at 17:12

Alas,  have lost control of my own thread.  :)  But my nature can't agree with "Greedy Landowner"  So, let's do a bit of a test to see.

Here's an update.  My unit well went into production in early 2010, but I have turned up a copy of a CHK survey from late 2012.  Despite the fact that my letter (and the letters to a number of family members) recites the reduction of unit size (by less than 1%), it is apparent that the claim for overpayment is based on the allegation that my % of the unit is much less than originally calculated.  The logic fault with this is that all of my family members own less, and we own almost 50% of the unit.  The 2012 survey has more than one obvious error.  Despite an unfulfilled promise of a response from CHK, I'm left with the option of sending a 30 day demand for payment of royalties, including an assertion of failure of reasonable diligence on the part of CHK to assert the alleged overpayment of royalties, and, thus, invoking the three year statue of limitations for recovering overpayment of royalties under La. law.

I really regret being in this position.  Hopefully, all of this can be resolved without resorting to litigation.  Let's see!

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Permalink Reply by Dion Warr, CPL on February 18, 2015 at 5:52

Steve P:

Some points to consider:

The unit layout in NW LA more or less follows the layout and orientation of sections (640 ac., MOL). Where infill units did not allow for "whole section" units, aliquots of adjacent sections were combined to form a roughly 640 acre unit (e.g., half-sections of two adjacent sections, quarter sections of four adjacent sections, etc.). In many of these examples, the unitization was adopted based upon prior established units of roughly the same spacing - if a field had prior CV, Hosston, or SMK units, the operator just used the same general boundaries. This was advantageous to "new" HA operators, in that where tracts matched and ownership was basically identical in area and extent, the operator could thus adopt or use prior commissioned surveys for these units for basis of payment, with very little additional work necessary (if any) in order to set up units for royalty payments and other lease burdens.

The problems to which you refer generally occur in areas where prior unitization either didn't exist or prior surveys were so dated that the tract layout no longer matched current ownership. The speed with which the Haynesville was developed did not lend to diligence in obtaining actual on-the ground surveys; to date, there are still relatively few of these units where surveys have been filed of record either in the courthouse or with DNR. Absent actual surveys and short on advice from licensed registered surveyors, multiple methods appear to have been used in order to "build" units and reconcile tract sizes within these units.

There are common problems with the Jeffersonian township grid across NW LA (although not just confined to NW LA). First, not all sections are "square", or have "square" corners; if they were, the Surveyor(s) General maps would be populated by townships that are exactly 480 chains on a side with bearings at right angles and filled with regular sections being 80 chains on a side of similar bearings parallel to the exterior bearings of the township, where prior headright and land grant claims do not otherwise intrude. Relatively few such sections exist, and I'm not easily able to point to a township that fits these criteria. Hence most sections from whence units were overlaid are either rectangular, trapezoidal, or rhomboidal. In such an environment, even regular aliquots of sections are pinched or pulled in order to fit with the orientation of the fabric of the map. Quarter-quarter sections that would normally be called "40s" are pinched on short sides of sections or in corners while others are pulled to stretch out to long sides and corners. How the operators chose to deal with such problems is but one factor in determining possible "survey" error.

Secondly, tracts have subsequently been created by metes and bounds that do not fit the Jeffersonian framework. With a survey on record, companies had to account for leases and tracts that do not conform to government aliquots, lots, or STR.

It has been my experience in dealing with some of the diligence performed in producing HA areas that where operators did not commission unit surveys, units and tract sizes were calculated using a "best fit" analysis of available leases, estimated or assumed tract sizes, and an "accounting" of the remaining unleased tracts so as to reasonably conform with an apparent unit size. Not terribly scientific, but it kept many operators out of trouble for failure to pay timely royalties to leased owners. Where subsequent survey work has not been performed or a substantial objection not made, these types of "frankenunit" calculations have remained in place from the time that the units first produced. In such cases, unit tract sizes do not match any "on the ground" data, save and except those tracts either surveyed and entirely located within the unit, or otherwise matched to and unmodified from a prior existing survey. IMO, these types of calculations are present in the HA units far too often; perhaps the push to properly survey those units with CULs as well as the decrease in speed of development will allow or force more due diligence in obtaining proper unit surveys.

In the meantime, you may wish to consider or research whether the half-section in which your family's interests lie are in fact situated on the "short side" of the section which comprises your production unit. In such an event, a recalculation from an actual survey would reveal the prior error and would result in prior overpayments for acreages formerly attributed to you in error. It is not much solace when you feel like money is being pulled out of your pocket, but it may be of some satisfaction if the operator is actually attempting to rectify prior sloppiness from before.

Good luck to you.

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