Replies to This Discussion

Permalink Reply by flex auger on June 7, 2012 at 9:28

I dont know about finding out his % of leasehold in your section. You do not have to accept his terms (yet) The company will have to take the request to intergrate a section to the Arkansas Oil and Gas Commission which meets monthly. The Commission will review the terms they are offering agianst others and decide the amount you will get if intergrated. You will have 15 days after the commission rules to do something else (lease for a better offer to someone else) if you can get an offer. Accept the terms and decide which of about 4 options to take, money, a % of working intrest with penalty etc. You should be notified by mail before the meeting and after the meeting giving you time to respond. Its not a bad thing being intergrated as long as you get the "highest and best" offer, which you should.

Permalink Reply by PJ on June 14, 2012 at 15:14

Thank Flex, this is very helpful information.

Permalink Reply by The_Baron on June 11, 2012 at 7:59

Rebecca:

 

They may not have recorded all their leases yet, and without intimate knowledge of who the mineral owners are in your area it will be hard, maybe impossible,  to determine if they have indeed been leased. You may get lucky and be able to go back through the latest leases recorded and hope to stumble onto leases in your area, but their is a lot of activity going on and you may be looking for a needle in a haystack especially if there is old HBP leases intheir prospective unit.

 

You could Ask him for a signed statement or affadavit. Tell him it needs to be notorized. If he is lying to you it  could prove useful later.  If he is really persitant, he may not yet have what he needs to force integrate and is looking for a few last minute peices, or he could be trying to break someone elses block.

 

If he is telling the truth, you can and will be force integrated. If you have legitamte concerns, or requirments you need in your lease (such as surface use restrictions) then you could go before the commision and present your case. I would suggest only dealing with him by writing or email so you can maintain a paper record of how he negotiates with you. Save all your emails... print them out.

Permalink Reply by Rebecca Lane on June 11, 2012 at 15:02

Thank you both so much for your information. Very much appreciated.

Permalink Reply by Johnny on June 13, 2012 at 3:43

All the information is good and accurate that was given on this matter.  I would certainly have him state all that he has told you verbally in either email or written letter.  If he hesitates, he is probably blowing smoke...

Permalink Reply by Ron Jon on June 13, 2012 at 4:02

Sounds like flex is familiar with the AR O&G commission.  What is the process in Arkansas?  They don't have set parameters or options?...it sounds like the Commission has the latitude to set terms?

Ron

Permalink Reply by Skip Peel - Mineral Consultant on June 13, 2012 at 4:11

http://www.geology.ar.gov/pdf/Leasing%20Manual%202008.pdf

Permalink Reply by Lerret on June 13, 2012 at 4:14

CALL THE LANDMAN A LIAR. ALL LEASES ARE NEGOTIABLE - THEY ARE NOTHING MORE THAN A CONTRACT PERIOD.

The company makes an offer before the O & G commission on the lease. If you don't defend yourself, then you are screwed.

ABSOLUTELY DO NOT SIGN ANY LEASE THAT TAKES OUT POST-PRODUCTION EXPENSES OF ANY KIND.

 

NEVER NEVER NEVER

I just appraised an estate where the royalty owners have only 1/8th but also pay post-production expenses.  NOT INCLUDING THE SEVERANCE TAX, they were being whacked from 31% to 42% of EACH AND EVERY CHECK FOR THESE PHANTOM CHARGES.

 

TRANSPORTATION COST?  That is the pipeline from the well head to a feeder line... the "company" is almost always a subsidary of the operator.

TREATMENT?  who the heck knows what that is?

MARKETING? again, phantom expenses that shouild be the sole responsibllity of the WORKING INTERESTS

COMPRESSION COSTS?  Your gas has to be compressed in order to go into the line. Again, why is that a responsiblity of a ROYALTY owner... the WORKING INTERESTS SHOULD PAY THAT

 

3/16th and NO POST PRODUCTION expenses would be myh minimum. Hang the bonus...and if you sign with those PP expenses, then I pray you get a very LARGE BONUS 'cause that is about as good as its going to get.

 

TERREL SHIELDS, PRESIDENT ARKANSAS CHAPTER

NATIONAL ASSOCIATION OF ROYALTY OWNERS

Come join us in Searcy August 4th

Permalink Reply by Skip Peel - Mineral Consultant on June 13, 2012 at 4:33

Transportation costs can be applicable to the point of sale not just to the "feeder" line.  Sometimes the gathering and marketing company is a subsidiary of the operator, sometimes they are not.  IMO, those who do not understand "treatment" and assume leadership of any royalty owner group should learn or not mention it.  Marketing and compression are not inherently lessor adverse costs, the details are important.  Most states have regulatory statutes that outline approved charges against lessor's royalty interest.  Arkansas mineral law is in need of overhaul as are those of all producing states.  Getting accurate information and choosing which issues to prioritize are crucial.  In Arkansas Forced Integration regulations should be at the top of the list.

Permalink Reply by Lerret on June 13, 2012 at 6:30

Forced Leases before the commission do not allow post-production expenses.

Prior to reregulation of gas 30+ years ago NONE of those expenses were deducted except any applicable TAX.   I draw royalty payments that take only bonafide taxes out of it.

 

Treatment?  I know what it is. I know that in one instance in Arkansas there are 4 separate "owners" of gas who market it separately ( BP, CHK (now BHP), SEECO, and XTO)...each pay different price for the gas and charge different "treatment" and "marketing" costs.  Further, I know one royalty owner (ORRI) who saw his deductions double when the operator of some wells he had an interest in changed hands.  He threatened suit and the charges changed.

And there is a case pending in Conway Co. over these post production expenses that were charged against an integrated party.

Any landman who threatens to integrate someone is an incompetent.  BTW, I just heard about one land company in OKC that changed their name because they had become so associated with Chesapeake, no one would talk to them ....I wonder why?

Permalink Reply by Lerret on June 13, 2012 at 7:03

For a little light reading... again, landmen pressure unsophisticated mineral owners in ways that they would never consider if dealing with their own peers.  And they are generally unaccountable in court.

http://en.allexperts.com/q/Energy-Industry-Oil-2441/2010/9/Royalty-...

http://wga-austin.com/royaltyaudits.html

for the small fry, you cannot afford the legal expense. This one sided "negotiation" breaks down into a losing proposition for the landowner.  NARO was instrumental in requiring deed stamps on all mineral deeds. In Arkansas that meant appraisers and landowners could readily determine what companies were actually paying for mineral deeds (actual fee in mineral). CHK bought many of them for a multiple of what others paid thru their M C Minerals... all that transferred to BHP. But do you think McClendon was paying post production expenses at the same rate the royalty owners were?  And as for the state, the deed stamps for White County alone amounted to over $200,000 when CHK sold out to BHP....deed stamp money that every homeowner pays when buying a house...Again, everyone knows those rules.  But the average mineral owner has nary a clue about what "post production" expenses are or that they will likely exceed 50% of the check once a well has been on line for a while. What happens when it exceed 100% and the operator sends the royalty owner a dun for money?...could easily happen.

http://ag.arkansas.gov/opinions/docs/94-332.html

 

Permalink Reply by GoshDarn on June 13, 2012 at 7:07

Lerret:

Arkansas landowners are lucky to have you fighting the good fight.  Our hats are off to you.

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