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Permalink Reply by Skip Peel - Mineral Consultant on March 11, 2019 at 7:04

Louisiana mineral law does not require a mineral lessor to sign a Division Order.  The only requirement for receiving royalty payments is providing a social security number for tax reporting purposes.

2006 Louisiana Laws - RS 31:138.1 — Division order; precedence of lease; penalties for failure to pay royalties due

§138.1.  Division order; precedence of lease; penalties for failure to pay royalties due

A.  For the purposes of this Article, a "division order" is an instrument setting forth the proportional ownership in oil or gas, or the value thereof, which division order is prepared after examination of title and which is executed by the owners of the production or other persons having authority to act on behalf of the owners thereof.  

B.  A division order may not alter or amend the terms of the oil and gas lease.  A division order that varies the terms of the oil and gas lease is invalid to the extent of the variance, and the terms of the oil and gas lease take precedence.  

C.  The execution of a division order is not a condition precedent to receiving payment from a lessee.  The lessee shall not withhold royalty payments because his lessor has not executed a division order.  

D.  If the lessee fails to pay royalties solely because his lessor has not executed a division order as defined in this Article, the court shall award as damages double the amount of royalties due, legal interest on that sum from the date due, and reasonable attorney's fees.  However, if the lessor fails to supply the name, address, and tax identification number upon written request of the lessee, the lessee's failure to pay royalties shall be deemed reasonable.  

Acts 1992, No. 1110, §1.  

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Permalink Reply by Steve P on March 11, 2019 at 8:20

Up until a few years ago, I've always reviewed them, added my SSN, signed and sent back in.  Never again.  There are all sorts of terms and conditions that may work against you, and may not be contrary to what's in your lease.  You need to provide them with your SSN and a correct mailing address in the event they don't have it.  You should look at the interest they say you own, but you likely don't know if that is correct or not, so I don't suggest you confirm that the interest that they calculated is correct.

If you want to sign their form, I'd strike out nearly all of it, and initial and date your strike-outs.

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Permalink Reply by Skip Peel - Mineral Consultant on March 11, 2019 at 8:34

Every mineral lessor needs to learn the simple math formula that allows them to check their decimal interest against the acreage they think they own.  The best time to do that is when that DO arrives.

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Permalink Reply by casingpoint on March 12, 2019 at 10:08

A division order can sometimes reveal the true character of the operator. In the aforementioned lease, the operator appears to be attempting to get the lessor to indemnify him from the misdeeds of future well operators. Something you do not have to do. This division order has SLEEZE written all over it. 

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Permalink Reply by MJC on March 17, 2019 at 16:07

Aren't division orders issued just prior to drilling? The wording  "prior to the effective date hereof" sounds like anything prior to the signing of the division order. They recently re-surveyed section 25 in Jan. 2019 which includes my property and my decimal percent changed upward just a tad. Mine was independently surveyed and filed in 2016. I have not compared Tellurian's new survey to mine. I'm thinking since they were paying royalties based on a prior survey(s) which may be different from the new survey(s) they don't want to be held responsible for any underpayments based on the old survey(s). The permits have already been issued for (4) new cross-unit lateral? wells on the north boundary of section 25 going south into section 36 and are still under consideration.  There is only one well in this section, the Breedlove 25 H-1, in the southwest corner of section 25 and it goes north. Right now Tellurian is drilling in the Rambin area. I was originally leased with Samson, then Rockcliff and now Tellurian. Gemsbok Energy has been trying to buy our mineral rights. They know about the untapped section and proposed drilling but I suspect they are tied to Tellurian. Tellurian's estimated cost of getting gas to their new proposed Driftwood LNG plant was in my opinion, somewhat low and may depend on them actually owning the minerals? 

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Permalink Reply by Skip Peel - Mineral Consultant on March 18, 2019 at 0:44

DOs are issued after the first well has been turned to sales.  There is a lot of re-surveying going on as the Office of Conservation has started enforcing its rule regarding timely submission of unit survey plats.  Now that long lateral HC wells are becoming the norm, the need for accurate surveys in order to pay correctly has become a greater priority.  A number of early Haynesville Shale operators fudged original surveys during the land rush.  Some more than others.

MJC, I've never heard of Gemsbok Energy and the company doesn't seem to have a website and is not registered with the LA SOS.  It would be interesting to compare their business address with that of Tellurian to see if there might be a connection.  Your thought about Tellurian owning the minerals in their operated units is a good one.  If Tellurian tries to pay their mineral lessors anything less than a market based price per mcf, they will get sued.  By owning the minerals, they could avoid that legal jeopardy.

Knowing a little of how O&G management thinks, it would not surprise me if we eventually find that Gemsbok is affiliated with Springbok.

https://springbokenergy.com/

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Permalink Reply by billy on March 18, 2019 at 3:54

Thank you Skip, for the small landowner without the resources to pay legal and professional fees,  you and this group are a Godsend.

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Permalink Reply by Skip Peel - Mineral Consultant on March 18, 2019 at 5:27

You're welcome, billy.  Do you know how much an experienced O&G attorney charges?  I think you should investigate so that you can make an informed decision when the time comes.  A few hundreds of dollars of up front professional assistance can sometimes be worth thousands of future dollars for a contractual agreement that can last decades.  At least you will know your options under the law.

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Permalink Reply by MJC on March 18, 2019 at 6:28

Skip,

Springbok is correct. So sorry for that. It was late.......

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Permalink Reply by Skip Peel - Mineral Consultant on March 18, 2019 at 6:51

Well it's easy to see how you got your antelopes mixed up.  :-)   I don't think Springbok is associated with Tellurian.  At least they weren't the last I looked.  Maybe I'll look again.  Thanks for the correction.

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