Intersting bill impacting UMO
Replies to This Discussion
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Permalink Reply by Kat Bloomfield on
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Sorry, Les B. Yes. HB 1128, which is uploaded in a previous post, did pass back in first quarter of 2008. It increased the risk penalty from 100% to 200%.
I wasn't sure what bill GD was speaking to. Burns' 2010 proposed revisions to 30:10, the proposed bill (HB 1329 of the 2010 legislative session) posted by this discussion, has not passed, but it hasn't died either. It was referred to committee.
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Permalink Reply by Henry on -
Les,
Thanks again. I always get nervous about any possible change in the UMO laws.
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Henry---the 2008 bill increased the penalty from 100 to 200%, which penalty DID NOT AND STILL DOES NOT APPLY TO UMOs
The purpose of the "penalty" is to punish/prevent "freeloading" by a person who undertook an obligation to explore for minerals for purposes of producing minerals. The UMO is not a "freeloader;" the UMO does not have an obligation to explore/to produce. The UMO simply owns mineral rights, whether by virtue of owning the land with minerals or otherwise. Contrast that with the company or other person, who takes an oil and gas lease on land located within a unit. That lessee, by signing that lease, promised and obligated itself to explore for minerals for purposes of producing the minerals. The mineral code itself also imposes an obligation on the lessee to explore for minerals. If that lessee has a lease on land located within a unit, but is not the operator of the unit, that lessee still has that obligation to explore for minerals. But, because it is not the operator, it cannot drill its own well on that leased land. However, it is obliged by law to participate in the unit well the operator drills. If it chooses NOT to participate in the unit well(s) that the unit operator drills, that lessee is shirking its obligations. That's unfair to the unit operator. It's also IMHO a violation of the lessee's lease obligations. (That last sentence could cause a firestorm reaction, but its MHO). So, the justification for the penalty, which used to be 100% was increased to 200% because apparently, it was happening too often. It keeps monied lessees in the game; prevents hangers-on from taking advantage of those with the money to drill and who truly do honor their obligations to drill.
For some background, companies, like CHK, got its start by leasing up small parcels within units held by other companies, and riding the wave of the other companies' money and work. I think they call it leasing corners or something like that.
While a penalty should be imposed for the freeloading lessee, IMHO, the 200% penalty is outrageous and possibly subject to challenge, because it is punitive in nature. At 100% penalty, the freeloading lessee is "dinged" with 100% of its share of actual costs times two. At 200% penalty, the freeloading lessee is "dinged" with 100% of its share of actual costs times three. Because that's a stiff fine, it can be argued the penalty is out of proportion to the damage, which is the very reason the US S.Ct. seriously cut the punitive damages awarded in cases such as the Exxon valdeez.
I hope the above helps.
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The proper "penalty" IMHO is to cancel the lease of the freeloading lessee.
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Permalink Reply by Les Bamburg on
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Caliente, the good news is the royalty owner gets paid even if the lessee non-consents the well.
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As it should be. Once "captured," UMO owns his/her/its share of production, NOT the operator. And, once "captured," royalty owner owns its royalty share.
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A little about how Henry Burns thinks: According to the article at this link, http://tpmlivewire.talkingpointsmemo.com/2010/05/louisiana-house-to...,
"Louisiana state Rep. Henry Burns (R) has introduced a bill in the Louisiana House that would allow churches to institute a "security plan" enabling congregants with concealed weapons permits to carry guns into churches and temples.
According to a Burns spokesperson, "we buy fire extinguishers in case there's a fire," and allowing churchgoers to carry concealed is just the "final stage of security" for places of worship.
House Bill 68 would allow a church or temple to authorize an unlimited number of congregation members to bring their guns into church, according to the individual church's own guidelines."
Thankfully, the bill did not pass. "The House failed Thursday to pass a bill to allow those who have qualified to carry concealed weapons to tote them to their places of worship as part of a sanctioned security detail." http://www.nola.com/politics/index.ssf/2010/05/armed_church_securit...
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Another bill to watch is HB588
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Permalink Reply by Les Bamburg on
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Caliente, on first read this would seem to be a good addition for royalty owners and others.
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I agree. But for one deletion of the omission of reporting of windfall profit tax deducts.
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Permalink Reply by Les Bamburg on
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Caliente, I believe the windfall profits tax would be excluded because (a) no longer applicable and/or (b) not an allowable deduction in calculating a royalty payment.
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