Replies to This Discussion

Permalink Reply by BirdDawg, plain ole' idiot on June 4, 2010 at 4:58

Thanks Les.

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Permalink Reply by Les Bamburg on June 4, 2010 at 2:43

Baron, you should change your title since this bill has nothing to do with unleased mineral owners (carried working interest owners). It also does not impact royalty owners. The bill only addresses royalty payment responsibility in the event an O&G company elects to non-consent a well.

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Permalink Reply by The_Baron on June 4, 2010 at 8:00

Goshdarn,

personally I was hoping someone with a legal background would chime in, I find the wording of the bill to be confusing at best, the digest, which is intended to give lawmakers and citizens a laymans description of the bill is just as confusing.

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Permalink Reply by Henry on June 4, 2010 at 11:25

Now I don't feel so bad about not understanding this, if The Baron is confused.

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Permalink Reply by Les Bamburg on June 4, 2010 at 18:57

GD, I feel very comfortable with my interpretion of the proposed language in the bill in regard to unleased mineral owners. In other word, the revisions do not change the treatment of the unleased mineral owner under the existing mineral law. The interpretion is based on the following provision which remains essentially unchanged in the code:

"(e)(i) The provisions of Subparagraph (b) of this Paragraph with respect to the risk charge shall not apply to any unleased interest not subject to an oil, gas, and mineral lease."

The above says the unleased mineral owner will not be subject to the 200% risk charge (penalty). This is the only part of the proposed HB 1329 that applies to the unleased mineral owner.

Also keep in mind that any payments received by an unleased mineral owner are not considered to be royalty so much of the new language would not be applicable.

My interpretion of the bill's intent is just to address royalty payment responsibility when one of the O&G companies elects to non-consent a new well. As you are aware each company is responsible for paying its own royalty owners. The current law just states royalty owners still must be paid even if their lessee elects to non-consent. This puts the non-consent company in the position of paying royalties even when the company is not receiving its share of production. The amendment in the bill would require the companies partiticipating in the well to pay the non-consenting company's royalty owners. This seems logical since those participating companies are receiving the additional production until well costs plus risk penalty are recouped. The royalty owners will receive the same share under the original or revised law. There is the additional provision that says the maximum royalty level required to be paid by the participating owners is 30%. But the language goes on to say that any royalty amount in excess of 30% will be paid by the non-consenting owner so the royalty owners will receive the same total payment.

I did not take this to any legal counsel but the interpretation of such provisions sometimes relies more heavily on experience with contractual and regulatory provisions.

I hope this has helped and I would be interested to hear any feedback from the senator.

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Permalink Reply by Henry on June 4, 2010 at 23:21

Les B,
I'm impressed. If you could read that bill, and come to such a clear understanding, and explain it so succinctly, my hat's off to you. Thanks for sharing your insight.

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Permalink Reply by Kat Bloomfield on June 5, 2010 at 3:06

An interesting fact: Henry Burns not only sponsored this proposed bill, he was also the sponsor of House Bill No. 1128, uploaded below, and which passed in the 2008 regular session-----that bill changed the risk charge from one hundred percent to two hundred percent. Remember---that one slipped through almost unnoticed and many experienced landmen on here were unaware of the increase in the penalty.

Seems Henry Burns is at it again.

Isn't Burns the name of Homer's boss?

Attachments:

• henry burns bill 1128.pdf, 186 KB

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Permalink Reply by Henry on June 5, 2010 at 6:22

Caliente,
I read the 2008 bill you just uploaded. Would you please help me out... Does this only apply to working interest partners? I cannot tell from reading it whether it applies to the UMO or not. Any help is appreciated. Thanks, in advance.

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Permalink Reply by Les Bamburg on June 5, 2010 at 18:13

Henry, this only increased the risk penalty for O&G companies and does not apply to unleased mineral owners.

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Permalink Reply by Les Bamburg on June 6, 2010 at 2:57

GD, I believe the increase in the risk payment passed and is part of the mineral code.

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Permalink Reply by Kat Bloomfield on June 6, 2010 at 5:10

the predecessor HB 1469 died. I think the cited HB 1329 is still floating around. Hasn't passed/not passed, yet.

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Permalink Reply by Les Bamburg on June 6, 2010 at 5:24

Caliente, my comment was related to HB 1128 which I believe passed.

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