Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on August 30, 2014 at 5:48

Sounds like minerals are under a field-wide order.  It can be complicated and the specifics are critical.  I can't offer an opinion with the few facts provided.  I don't think it is a federal issue.  The LA mineral code would be the controlling legal and regulatory statutes. jeff, if you would care to provide further details I will try to give you an opinion.

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Permalink Reply by 1kw6x71km1v37 on August 30, 2014 at 11:15

The first thing to establish is are the royalty owners being paid and cashing the checks. You cash the checks, you are bound by the lease.

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Permalink Reply by jeff on August 30, 2014 at 13:00

They have been cashing checks however until recently they were unaware of the truth. The royalty/surface owners now know about it. Regardless, the fact of false reporting is the question. These are 1900 acre chalk units I am talking about.  

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Permalink Reply by 1kw6x71km1v37 on August 31, 2014 at 5:25

Without a field-wide unit as suggested by Skip Peel, the false reporting and payment for fictional volumes  almost certainly is a fraud being carried on to preserve the leaseholds.

If that be the case, the lease should not bind the royalty owners if they pursued dissolution.

Dissolution of the leases must be looked at from the point-of-view of the operator. Why is he making royalty payments to hold unproductive acreage?

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Permalink Reply by jeff on September 1, 2014 at 3:43

In my opinion they are hoping to keep from plugging a very expensive well and to hold TMS and Chalk acreage.

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Permalink Reply by Two Dogs, Pirate on September 1, 2014 at 4:46

Is this the concrete company OGML?

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Permalink Reply by 1kw6x71km1v37 on September 1, 2014 at 8:42

Holding acreage is exactly what they are attempting to do, and they will do almost anything to keep that unit well going. Apparently in your case that includes reporting non-existent production, LOL.

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Permalink Reply by Andrew on September 4, 2014 at 13:58

Anyone who knowingly files a false production report to the Commissioner would be committing a number of felonies. Both the filer and their company could face staggering civil penalties, and the individual filer could face years in prison. That seems like a high price to pay to HBP a few oil and gas leases that aren't economic. It's unlikely anyone would risk such dire consequences so that they could overpay royalties without actual production. Anyone that actually falsifies a state report to overstate production is dumber than a woodpecker on a tin pole.

I think it's more likely that the lessee is paying shut-in royalties in order to maintain their leases, which is allowed in almost all gas leases, or that there is something else happening that is short of outright fraud. 

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Permalink Reply by obed w odom on September 5, 2014 at 16:46

Andrew, your comment about a woodpecker on a tin pole provided my laugh of the day. I had not heard this one before but will add it to my repertoire. Thanks.

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Permalink Reply by Gaynell Roberts on September 2, 2014 at 6:19

With these kind of tactics, how can any landowner be sure if he/she is receiving their fair share of the minerals?

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Permalink Reply by 1kw6x71km1v37 on September 2, 2014 at 6:37

As long as you are being paid for unproduced minerals, I reckon you're getting far more than your "fair share".

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Permalink Reply by Skip Peel - Mineral Consultant on September 2, 2014 at 7:41

I don't know what tactics are supposedly being employed in this case.  I'm waiting for Jeff to provide some details.  If his accusation is valid, it will demonstrate something minerals owners should be aware of and look out for.  If not, it may serve as an example of the fact that complex issues are easily misconstrued.

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