Replies to This Discussion

Permalink Reply by Robert Phillips on February 5, 2013 at 10:17

Depends.  I own land in Ouachita with shallow production.  The deep rights below the Gas Rock were severed many years ago so they are available for leasing.  I suspect this is fairly common.

Permalink Reply by Skip Peel - Mineral Consultant on February 5, 2013 at 10:36

Robert, by what action or legal instrument would the deep rights have been released from the leases covering the Gas Rock?

Permalink Reply by Robert Phillips on February 5, 2013 at 11:08

The lessee-operator must agree to a request to sever the rights below production, and return them to the mineral owner.  That agreement will be filed of record.  In the case of my land, it was done 60 years ago.  With the current interest in the LSBD I don't think you'll be able to get the an operator to release the deep rights.

Permalink Reply by Skip Peel - Mineral Consultant on February 5, 2013 at 11:19

Robert, I think it likely that there are a lot of "all depth" leases still in effect.  Not all lessee-operators were/are as accommodating as the one(s) in your case.  And unless I miss my guess the majority of lessors never made a request for release of deep rights to their lessees.

Permalink Reply by Robert Phillips on February 5, 2013 at 11:25

Skip, in the case of my land, it has been owned by the family since prior to the beginning of Gas Rock production.  Though production has been continuous since the 1920's we reached an agreement with the lessee - operator in the late 1950's to sever the deep rights from that shallow production.  The current operator is Enervest who acknowledges they have no rights below the Gas Rock.

Permalink Reply by Land Rat on February 5, 2013 at 11:12

I guess I see what Skip is getting at. If a mineral servitude was created and remains uninterrupted then someone other than the surface owner "owns" the minerals...in Louisiana you own an interruptable right to explore for the minerals, actually. So, the well that was referenced earlier is on Oxy "fee" land (but only analogously, since fee has no legal significance in Louisiana). The Lessor can sever whatever they want, this does not necessarily vest title in the surface owner.

Permalink Reply by Robert Phillips on February 5, 2013 at 11:19

I'm not a landman but i would think that if the deep rights were released at some time prior to you purchasing the land, 10 years after that release those rights are available to the surface owner by prescription, regardless of whether the shallow wells are producing or not. 

Permalink Reply by Land Rat on February 5, 2013 at 11:17

I will add that I am speaking generally. I know nothing about the monroe gas field or what is typical there. I do know that north louisiana in general was owned by timber companies in large large tracts. The timber companies often sold all of these tracts to oil companies, the oil companies then often sold a mineral servitude (a large contiguous one) to another oil company who then, every ten years, drills a well to interrupt prescription. The predecessor oil company would then sell small tracts off, one at a time to farmers, etc. The mineral servitude remains held be the oil company or its successor in interest (often Exxon in this part of the world) and the surface owner is usually unaware that they don't own the minerals until a drilling rig shows up on their land. I would suspect that a lot of the monroe gas field is like this...though I am sure a lot of it isn't.

Permalink Reply by Land Rat on February 5, 2013 at 11:24

It looks like we have two separate things going on here.

What I am referring to is a situation in which the mineral "fee" is owned by someone other than the surface owner.

You all are talking about an operator leasing only a certain producing interval or leasing the entirety of the "mineral estate" and then releasing a certain depth or depths.

I think the former presents the biggest pitfall to a landowner as they will have ZERO benefits with regard to production. No royalty, no bonus, no nothing...but a an operator who may only utilize their servitude resonably.

At least in the latter situation the lessor will receive the benefit of royalty payments...but probably 1/8 or something antiquated like that.

Permalink Reply by tony allen on February 5, 2013 at 11:31

Anyone care to speculate why SWN did not release the Doles' production numbers?

Permalink Reply by Robert Phillips on February 5, 2013 at 11:35

Yes, I think we're on the same page now.  Cities Service owned 20,000 acres on the west side of the river north of Monroe.  OXY through Cities now likely stills owns all the minerals through continuous production even though much of the surface has been sold off.  I own a large tract with mineral rights adjoining the Cities-OXY minerals three miles south of the Greystone well.  I think it could be a good place to look.

Permalink Reply by Skip Peel - Mineral Consultant on February 5, 2013 at 11:42

Fee (Fee Simple) ownership refers to owning the surface and the associated mineral rights.  When an owner in Fee sells mineral rights in LA he/she creates a mineral servitude.  A mineral servitude conveys the right to explore for and produce hydrocarbons and includes certain surface rights unless expressly excluded.  Mineral servitudes are subject to a 10 year prescriptive period.  Good faith attempts to explore reset the 10 year clock even if a well does not produce.  A well with production suspends the 10 year clock until cessation of production when the clock begins a new for a 10 year period.  At the end of ten years with no production or good faith attempt to produce, the mineral rights revert to the owner of the surface at that time.

A number of oil majors own lands in fee across N LA and there are a number of large, contiguous servitudes which are held by production or are maintained long term through periodic attempts at production by or on behalf of the servitude owner.  Litigation as to the  "good faith" definition are somewhat common.

Generally speaking until the 1970's the vast majority of O&G leases covered "all depths", from "the surface to China".  Savvy land/mineral owners with experienced O&G attorneys began to employ vertical "Pugh" clauses to release depths below those produced at the end of the lease primary term.  This practice gradually spread over years and decades to mineral owners who were paying attention or hiring professional counsel.  Eventually owners of large acreages began to lease by depth interval or formation whereby they protected depths and formations above and below those that were drilled and produced.

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