I am an unleased mineral interest owner. I can't help but notice the derisive comments slung my way and towards others like me. Seems industry types hurl slurs at us, particularly when business is slow, i.e., when natural gas prices tumble a bit. Yeah, no one likes them; at least, not those of us who stand to profit immensely from higher prices. In any event, back to the point. Exemplary of the childish name-calling include "parasites, goats, and freeloaders." Hmmm. Bullying is distasteful not only in school yards, but also when it arises in my adult world. It assails my sensibilities, as a hard-working landowner.

Bullying always masks what's really going on. Insecurity. On the playground, that large seemingly over-indulged fat kid who always found someone smaller to pick on seemed tough; seemed to have it all together. BUt we always learned; he did not. An overbearing father or mother. But always the child of someone whom he desperately wanted to impress, but never ever could. Usually the product of a very unhappy marriage. Sometimes divorce. Often alcoholism, whether in the open or hidden in a proverbial brown paper bag, resulted in a very unhappy childhood and produced a miserable bully of a child. There's an extraordinary book on bullies. When I remember the name, I'll post it. But, it is a scientific, psychological look into the childhood of the bullies. Put simply, it ain't pretty.

Lesson number one from the playground bully is this: never ever explain anything to a bully; never justify yourself. Waste of time. You're not dealing with a secure rational grown-up. You're dealing with an insecure child who makes no sense and is incapable of rational thought.

Bullies get older; they never grow up. They're everywhere in our adult lives. And, now, it seems, many of them are in the industry; often as middle men or hanging onto the fringes of the boy's club. But, just as they never ever saw the gleam of pride in their father's eyes; they really aren't "in" the club. They tag along. Starting out as not much more than errand boys, doing dirtier and dirtier deeds over time for their "masters," they may acquire some minor working interests. They may amass a minor leasehold area, not after diligent research, geology and thought; but simply upon direction to do so. And, they do. And, are paid with a minor working interest. They grovel at their masters' feet. And lash out at everyone else.

The simple response to a bully is to ignore him. Don't feed the troubled insecurities of the bully who just wants attention, even if negative. The same that worked on the playground; works in business, as well. In this scenario, the bully is not a co-worker or a boss. So, you don't have to finesse things to keep your life happy. It's simple. You just don't deal with a bully. You don't have to. And, you never should.

E&P is a business. Being unleased is a business decision. It has nothing to do with the hysterical whinings and accusations bantered about by the bullies. My property has been force pooled-- I cannot drill my own well; that right has been taken from me with the blessing of the Office of Conservation. So, when the bully says: go drill your own well, my response is two-fold. No thanks. I'm not a driller and in any event, I can't. When the bully says I'm freeloading or calls me some other name: my response is simple: That's nice; it's just business.

The fact of the matter is I am not a parasite or a freeloader. My land will pay its fair share of the costs of production plus a "supervision fee" to the operator. The fact of the matter is I was not offered a fair lease deal. It is my choice to lease or not to lease. That I make a choice either way does not render me a parasite or any other guttural term. That the operator made its choice to force pool my land is his choice. The office of Conservation is the operator's whipping boy: operator wants unit, operator gets it.

The nature of the business has changed in this particular play, the Haynesville Shale. The value of natural gas that this play holds is enormous. I know it. The bully knows it. The operator knows it. It would be an act of utter irresponsibility to my family, present and future, to let the bully browbeat me through half-truths and insults, to enter into a lease that simply is not fair in light of facts.

So, in the end; remember your playground lessons: the Bully is insecure; he is not an adult. This is business. It has nothing to do with biological and animal world references. The response is always: it's just business. Then, move along. Find an adult to do business with.

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Tags: force, forced, interest, mineral, owner, pool, pooled, pooling, unleased


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Comment by Iris on March 20, 2009 at 12:05pm
From another UMI you said it right! However I did not pay much attention to the name calling..my property has been owned by my family much longer than the namecallers or even their grandparents.
Comment by Bob on March 18, 2009 at 2:45pm
If I'm a leased owner in unit which unit gets dismembered to disinclude me, nor will I get my royalty. So what's your point, if any?
Comment by Bob on March 18, 2009 at 2:03pm
If and when a unit order is rescinded or modified, the UMi remains force pooled and the operator of that unit is bound to follow the law. The operator, in my view, holds the position of a mandate, negotiorum gestio, by operation of law. Whether the operator sells the production at the highest price or the lowest price, the operator's in charge; the operator holds the keys, it's got the production. Only it can sell it unless by some freakin' miracle I or any other UMI can devise a way to sell our own share. If the operator engages in discriminatory chicanery, whether vis a vis a UMI or a royalty owner, it would seem he does so at its peril.
That said, I cannot tell you what to do, what not to do. I have simply posted my decision and how it came to be. YOU have to decide what is best for YOU. YOU have to do YOUR homework and seek YOUR counsel. I am not a substitute for what YOU need to do to make YOUR decision.
Comment by Boardwalk on March 18, 2009 at 1:43pm
My question does the operator have the choice to market my gas whichever way that is most cost effective for them? Why would an operator sell my gas at the highest price.

Also, I know they can divide a section and if you are UMI and they break the 640 acre section into smaller drillable units. If nothing is drilled in you specific section, then you get nothing.
Comment by Bob on March 18, 2009 at 12:17pm
I am not a royalty owner. I am a landowner who owns the bundle of mineral rights, subject to the taking by operation of the unit order my right to drill.
Comment by Bob on March 18, 2009 at 12:16pm
The code states that if the operator sells production, he must pay the UMI its share within 180 days.
Comment by Boardwalk on March 17, 2009 at 10:43pm
So if you are a 100% royalty owner, what guarantee do you have that the Gas company will market your gas or even produce your minerals. If they do market it, I would assume that they would market your gas in the cheapest part of the country? Why would they look out for my interests?
Comment by Bob on March 17, 2009 at 8:28am
Sweet: No one can do your homework for you. You need to pull the information regarding production of the wells located around where your 2 acres are located. Study it. Look at the production. Study the public companies' releases for costs. Evaluate the difference between UMI and leasing plus bonus, factoring in various bonus figures and always taking into consideration the size of your tract. Contemplate what you envision for your land, your family. Look at your needs and desires. Is your tract located in the midst of the drilling? Is there even a well in site? Consider the many issues discussed. If no well is in sight, maybe you can lease now on a short term lease anticipating leasing again. If you decide to lease, decide what you want in terms of $, lease terms, etc. Then, make your own business decision. There is nothing wrong with asking for help and there are many on this site who will help. But, in the end, this YOUR business so YOU must do your homework so YOU make YOUR decision; no one can make the decision for you.
Comment by Bob on March 17, 2009 at 7:11am
Sweet: I know of no such calculator. An unleased tract that has been force pooled into a unit on which a unit well is drilled and produces is due its percentage share of revenue less percentage share of costs. The percentage share is determined by putting the acreage of the unleased tract in the numerator and the acreage of the unit in the denominator. If the unit is 640 acres and your tract is 64 acres, the share is 64/640 or 10%. Thus, the 64 acre unleased tract will receive 10% of the unit well production revenue less 10% of the costs of the unit well. Whoever told you that each unleased tract within a unit bears the costs of the entire unit either misspoke or was lying.
Comment by Sweet Tea on March 16, 2009 at 10:46pm
KB, I've heard so many things about UMI, that it's hard to tell what is fact. In #8, you say that the
UMI will bear it's share of costs only for that UMI tract. (I was told that UMI will the share of cost for the 640 acre unit as a whole). So it didn't look like 2 acres would produce enough income, even
at 100% to "Break even" in a timely manner-- especially if the UMI has to pay that type of share for any future work done on the well. Is there a calculator (like the royalty calculator) that one could view to help get an idea on what the break even or profit level would be for UMI?

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