Replies to This Discussion

Permalink Reply by GoshDarn on September 30, 2012 at 22:31

Dwight:

The short answer is "no."  Once someone signs a valid O&G lease and the production continues into the future (in La.), the mineral estate is encumbered for as long as that production continues forward in "paying quantities."  Note:  The O&G term is HBP, i.e., held by production.

Now, more or less, when the production eventually does stop -- then the terms of the lease will expire after a certain period of time.

So, at that point, once "all" production which encumbers your family's land (which might also include other wells if the 640 acre section/tract has been unitized with yet other production) ceases -- then there's a time period after that expiration; and so after that length of time has passed, you'll then be able to negotiate a completely new lease (if an operator/landman makes you an offer).

Note:  Your RI -- i.e., royalty interest -- looks to be based upon a fairly small bit of acreage (heirship) and/or a lease with a small percentage of royalty, e.g., 1/8th (which wasn't that uncommon years ago). 

Note also that certain wells/formations can stay in production for many decades.  My family has an old HBP stripper "shallow" oil well that's been in production, possibly going back to the 1940's or so.  Some wells can go back longer than that and stay in production for the foreseeable future.

Disclaimer:  The above is a general quick late-night opinion, and I might have rushed it and miss-stated a minor point or two.  Also, I'm not a lawyer.

Finally, and I'm just guessing based upon you low RI, but still -- based upon that -- don't hold your breath on any big sugar plums (unless there's something going on that's not obvious).

That said, if you post the number of acres your family owns (in total sum per all heirs) and a rough idea of where the land  is located, i.e., township and range -- someone might chirp up with better info.  It also helps to check the old lease and see what was signed as to the 1/8th or maybe 3/16ths.

Good luck.

GD

 

 

 

 

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Permalink Reply by Henry on September 30, 2012 at 22:50

This is a classic example of why one should make sure that the lease is "right" when a landowner signs.  There are generally no do-overs, and a lease can be in force for 50 - 100 years.  Most of the leases that were signed for the Haynesville Shale in the past few years will likely still be in force when the people who signed them are long gone.  My mother has a lease from the 1960's, and it pays a tiny fraction like yours does -- she gets about $20/year, every year.  Our headache is not with the royalty, but the continued use (and trashing) of the surface for 50 years now.

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Permalink Reply by Skip Peel - Mineral Consultant on October 1, 2012 at 2:39

Dwight, in a word, no.  An Oil, Gas & Mineral lease remains in force through continuous production or other lease terms regardless of the date of execution.  The operator of a well may change and the mineral interest may be handed down in time to heirs but the original lease is the controlling legal instrument.  You can research production in the hopes of finding gaps not covered by shut in provisions but even if one or more of sufficient length exist you would likely need the services of an O&G attorney to pursue termination of the lease.

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Permalink Reply by Thomas C. Gandolfo on October 2, 2012 at 4:39

I just read recently that there's a recently enacted Louisiana Law which prohibits the use of well water in conjunction with Fracking Operations to complete an Oil/Gas Well.  This might give you some "leverage" in negotiating with the Well operating company.

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Permalink Reply by Skip Peel - Mineral Consultant on October 2, 2012 at 4:45

Thomas, the Office of Conservation requested that E&P companies avoid wherever possible the use of well water sourced from potable aquifers.  It's not a law although it should be.

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Permalink Reply by robert minton on October 2, 2012 at 15:30

Generally, NO, to first question.

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Permalink Reply by Andrew on December 8, 2012 at 12:00

At the risk of fighting the avalanche of "no" in response to your question, I would say it depends.

The responses to your question seem to assume the "contract" you are referring to was an oil and gas lease. In that case, "no" would be the correct answer - you can't reform a lease merely because one of the parties dies.

If the "contract" your parents signed is NOT an oil and gas lease, the answer may be different. If this is the case, it would depend on the type of contract and the specific language.

***For the experts among us, I'm thinking of such rare (but technically possible) contracts as a usufruct or life estate of royalties. Also, if the contract did not create real rights, such as if the royalties were given in lieu of payment for services rendered, it could arguably terminate with the death of the parties. Some contracts are, after all, "strictly personal."

Here's an example of an analogous situation. My grandfather performed services to a barber some years ago, for which the barber was ultimately not able to pay. In lieu of payment for my grandfather's services, he arranged for my father to get 1 free haircut per month for life. It would be ludicrous to suggest that I should inherit my father's free haircuts. Likewise, if the barber dies his heirs wouldn't be burdened by the obligation of providing those haircuts. A similar contract could be made by a shoestring wildcatter who couldn't afford to pay some well services, so instead gave the person royalties for life. Unlikely, but possible.

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Permalink Reply by Andrew on December 8, 2012 at 12:02

PS - I'm not a lawyer.

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Permalink Reply by Bobi Carr ("parker") on December 8, 2012 at 12:11

Dwight,

Speak to an attorney.  Although, you may not be able to change the terms of the existing oil and gas lease.  You "MAY" be able to have formations that are not being produced released for lack of development.  In other words, let's say they are presently producing minerals from the Cotton Valley formation and have not produced your Haynesville Shale rights.  You "MAY" be able to have these rights released.  Then you could enter into a lease with a higher royalty for the released formation(s).

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Permalink Reply by Bobi Carr ("parker") on December 8, 2012 at 12:11

Of course, if it isn't a big enough tract, the expense wouldn't be worth the effort.

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