Replies to This Discussion

Permalink Reply by Skip Peel - Mineral Consultant on May 25, 2011 at 6:25

Re:  Demand letters.  Experienced O&G attorneys do not agree to send demand letters for clients who are unwilling to commit to file suit if the demand is denied.  And attorneys, O&G or otherwise, who send demand letters and do not have a reputation for following up with suits are totally ignored.  The industry gets lots of demand letters and IMO has a set policy for dealing with them regardless of any facts pertinent to the specific case.  In other words, demand letters are a required first step but seldom get the job done by themselves unless sent by an attorney known and respected by the industry because they only take very good cases and then file suit if and when the demand is denied.

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Permalink Reply by P.G. on May 25, 2011 at 6:29

Aren't there laws on this that must be followed?

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Permalink Reply by Skip Peel - Mineral Consultant on May 25, 2011 at 6:38

The statutes provide a period for response by the lessee and a time frame for drilling to meet the demand.  However the lessee may ignore the demand letter in which case the lessor would have to file suit or the lessee may reply that they do not consider the formation demanded for development is productive in that location in which case good luck in a court of law where you have to hire expensive experts to put on your case and the industry have 5 experts for each one of yours that will say the opposite.

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Permalink Reply by Jack Blake on May 25, 2011 at 14:52

I leased to CHK but now SWEPI owns 50% and Encana owns 50% of my lease.  I've been getting royalty checks from Encana for 5-6 months.  SWEPI has me listed as a royalty owner and had already assigned me a royalty owner number when I called them. 

I think SWEPI may be holding out on paying me royalties because I put language in my initial lease that said I reserve rights from the base of cotton valley to the surface. 

I think maybe SWEPI knows the HS and BS are both present in my area and they will try to let the royalties they owe me build up to a large amount and then try to get me to sign an addendum that will grant them rights to more formations than what they got in the initial lease.  They'll say just sign this and we'll give you the 20-30k in royalties we owe you.  I'm not signing anything to alter my initial lease unless they pay me big bucks.

If that is the case I will just keep taking the checks from Encana and go UMI with SWEPI.  Could I do that?  Anyone ever heard of something like this happening?

 

I think it is something I have in my lease that is in my favor that they don't like.  I think the issue holding up my SWEPI royalties is something in my favor they don't like.

Thanks,

Jack

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Permalink Reply by HBP on May 26, 2011 at 4:36

Skip is correct but may be speaking more to development demands, the issue here is just about royalty being placed in pay - not a demand for development which is more complicated as described.  

Good communication with the operator (or non-op payor SWEPI in this case) is the essential first step.  If they choose to fail at that, then I would still stand by a proper certified/return receipt letter whether you want to classify it as a demand letter or not.  This is because that documentation at an early date helps if you ever do want to address the issue in court. I would find it rare in this specific scenario that SWEPI not address it.  I have handled this same scenario with them multiple times - all positive.  I cannot say the same for other operators.

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Permalink Reply by The_Baron on May 26, 2011 at 5:48

Don't forget that at this time you want to address any concerns as to non payment of royalties to your lessee, the lesee is ultimitly responsible NOT the Operator.

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Permalink Reply by HBP on May 26, 2011 at 6:20

Encana has usually assigned SWEPI 50% in the subject lease, then each operate different units.  Or that is the short version of their deal.

 Most of these assignments seem to be of record so in that situation you can go stratight to SWEPI, but it never hurts to contact both and cc the other in any letters. 

 

The situation Baron describes is different than Encana/Swepi, but is very common  - where you are leased to a company and they are just in the unit but not operating.  In some of those cases your Lessee may be getting paid by the operator, then paying you.   You should always check for assignments of your lease first, then contact the Lessee of record and confirm they  are the ones administering your royalty. 

 

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Permalink Reply by Shale Yeah! on May 25, 2011 at 6:55

In the same twonship and range. Both Encana and Swepi have been right on time with checks. about 50 days after well went into sale, I received Encana half of partial month mailed around 19th of each month and Swepi half comes on the 28th of each month. although differeances I dont understand. Swepi takes out Severance tax, Encana does not and $/MMCF may differ also. But all in all,  reliable. By my estimations I will have two more wells getting paid for partial months production the end of June. Hope pay plan stays the same.

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Permalink Reply by Bacon on May 26, 2011 at 3:58

As far as the severance tax, Shell did the same with us.  They did, finally, get around to applying for and receiving the severance tax exemption.  We were refunded whatever they withheld.  It was about 18 months after the well started producing.

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Permalink Reply by The_Baron on May 26, 2011 at 4:04

Office of Conservation requires that only actual well costs can be claimed. Invoices are required to back up the operators claimed cost. Therefore, Operators will, at the advice of Conservation, wait to apply until all associated costs are in, as the more they can add on to the application, the more they can save in severance.

 

And then it takes Consevation some time to review and approve the app.

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Permalink Reply by Crunchy on May 28, 2011 at 1:39

I talked to shell about the severance tax. They are taking it out while they have an application with the state of LA for a refund. It appears that they have to pay taxes in until the state approves the well for a refund of the first two years. At that time they will refund the taxes that were taken out.

I guess encana doesn't want to deal with it so they don't take out the taxes in the first place.

Your dates are right. Shell mails on the last Thursday of the month. Encana is about a week earlier. (CHK is at the end)

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Permalink Reply by tsledge on May 25, 2011 at 8:56

Call Page Campbell (swepi) 281 544 2131

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