Replies to This Discussion

Permalink Reply by Aubrey C. Sanders, Jr. on July 31, 2012 at 12:16

Shirley, Thank you for sharing your info. Certainly the laws in AR and LA are very different, as pointed out by Les B. Your info will be helpful to me as I own land in LA and Ar.

About 10 years ago i went non-consent with Fina and I did not recieve any royalty payment until well paid out. After payout I started to collect as a working interest owner. Had the well not paid out I would never have recieved any compensation at all. This type arrangement is often referred to as 100% penalty.  Fina only recovered what I would have to have paid for my share of drilling costs upfront and risked  paying for my share of a dry hole.

I think you did GOOD! Congratulations.

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Permalink Reply by Aubrey C. Sanders, Jr. on August 1, 2012 at 6:07

Shirley,

No one has mentioned a Joint Operating Agreement which may have been signed by your late Father.

If a JOA exists you should be able to get copy from operator. If one exists this is the place to start to untangle this. There are too many possibilities to sort out without this document. Rarely I have seen cases whre no JOA was ever drawn up and signed. If you are lucky you may find there is no JOA. BTW, you do need good lawyer.

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Permalink Reply by Spring Branch,mineral owner on August 1, 2012 at 9:11

One does exist and R. Michael McPhetridge, V.P. of Land  with Bonanza Creek Energy, Inc. would likely be happy to send her one if she requests it, which I did several years ago.  All of the coorespondence Shirley has received from Bonanza Creek has been in line with the JOA, because I receive the same coorespondence and have a copy of the JOA that her grandfather would have signed  probably 40 years ago.

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Permalink Reply by Oklahomachic on August 1, 2012 at 10:13

Great!

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Permalink Reply by adubu on July 31, 2012 at 10:17

shirley---- there are several thread on this site that discusses ULMO. Just type in ULMO in this sites search and you can read through them for some additional information

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Permalink Reply by Andrew on July 31, 2012 at 12:29

Shirley,

Spring Branch appears to be most in tune with your predicament. The unleased mineral owner (which you are apparently not) is entitled to a 1/8 royalty before payout. The non-consent WI owner (which you apparently are) is entitled to receive a 1/8 royalty to pay royalties due under the terms of their leases. If you are receiving royalty on these wells I would be wary about spending it, because it appears to me (I am not an Arkansas attorney, btw) that you should be paying that money to your lessors. 

Where did you get the 300% penalty from? That would be true if you were in Louisiana (actually a 200% risk fee plus 100% cost recovery), but in Arkansas there is not a statutorily-fixed risk charge of which I am aware. The applicable Arkansas statute (pasted below) merely says the recoupment would have to be an "amount equal to the share of the costs that would have been borne by the nonparticipating party had he or she participated in the operations, plus an additional sum to be fixed by the commission." Did the commission assign a 300% penalty in your integration order? These questions are probably best answered by an attorney familiar with Arkansas Conservation and Oil and Gas law.

§ 15-72-304. Integration orders

 

(a) All orders requiring integration shall be made after notice and hearing and shall be upon terms and conditions which are just and reasonable and which will afford the owner of each tract or interest in the drilling unit the opportunity to recover or receive his or her just and equitable share of the oil and gas in the pool without unnecessary expense and will prevent or minimize reasonably avoidable drainage from each developed unit which is not equalized by counter drainage.

(b) In the event the drilling of a well has not been commenced or, if commenced, the well has not been completed as a well capable of producing oil and gas in commercial quantities on the lands comprising the drilling unit on the effective date of the order requiring integration, the order shall:

(1) Authorize the drilling or completion and the equipping and operation of a well on the drilling unit;

(2) Provide who shall drill, complete, and operate the well;

(3) Prescribe the time and manner in which all owners in the drilling unit who may desire to pay their share of the costs of such operations and participate therein may elect to do so;

(4) Provide that an owner who does not affirmatively elect to participate in the risk and cost of the operations shall transfer his or her rights in the drilling unit and the production from the unit well to the parties who elect to participate therein for a reasonable consideration and on a reasonable basis which shall be determined, in the absence of agreement between the parties, by the Oil and Gas Commission. The transfer may be either a permanent transfer or may be for a limited period pending recoupment out of the share of production attributable to the interest of the nonparticipating owner by the participating parties of an amount equal to the share of the costs that would have been borne by the nonparticipating party had he or she participated in the operations, plus an additional sum to be fixed by the commission.

 

(c) In the event there is a well capable of producing oil or gas in commercial quantities on the lands comprising the drilling unit on the effective date of the order requiring integration, the order shall:

(1) Authorize the operation of the well;

(2) Provide who shall operate the well; and

(3) Provide that within the time stipulated in the order any owner in the drilling unit who did not participate in the drilling of the well shall either reimburse the drilling parties in cash for his or her share of the actual cost of drilling, completing, and equipping the well or shall transfer his or her rights in such drilling unit and the production from the well to the drilling parties until those parties have received out of the share of production attributable to the interest so transferred an amount equal to the share of the costs that would have been borne by the transferring party had he or she participated in drilling, completing, equipping, and operating the well, plus an additional sum to be fixed by the commission.

(d) In the event there is an unleased mineral interest or interests in any drilling unit, the owner thereof shall be regarded as the owner of a royalty interest to the extent of a one-eighth ( ⅛ ) interest in and to the unleased mineral interest. This royalty interest shall not be affected by the provisions of subsections (b) and (c) of this section.

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Permalink Reply by tony allen on July 31, 2012 at 17:23

The AOGC hands out 300-400% penalties on every non participant in every forced integration. RI and WI included. It is like candy at Halloween. Just look at their site.

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Permalink Reply by Andrew on August 1, 2012 at 8:56

WOW. I never did THAT well on Halloween. That's pretty stiff. Seems like no consent is probably not the way to go in AR. if you own working interest, it pretty much never is.

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Permalink Reply by Bobbie Feeler on September 20, 2012 at 7:04

I am Shirley's Sister. Spring Branch and I have already had a conversation about this before. It was inherited from our Father and GrandFather. It is working interest in this County in Arkansas. She is getting a payout. I am not as of yet because I did consent. As far as her payout she is getting is coming from the previous wells that have already been producing and we were getting revenue from those particular wells before they started opening up all of the new ones the last 3 years or so ago. If I am correct she will still keep getting that revenue from those wells, but not the ones that she went non consent. She will have to pay the penalty from each well that was recently opened. That would mean say for instance.. Well #66.. She will not see revenue from that well until her penalty is paid, which they would only penalize her for that well and the money to pay back the penalty would only come from that particular well, which is why she will probably never see in revenue from it.

 Not the other ones that she had producing before. That is why she is getting her revenue checks. Am I correct?

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Permalink Reply by Terry L. Antee on September 21, 2012 at 3:41

Penalty is put in a operating agreement to keep people in or to get them out. It can be 100% or 500%.  If there were no penalty and a working interest owner went non consent and the other working interest owners had to carry him with no benefit to them selves there would be a lot of non concent working interest owners, thus the penalty.  Bobbie you are right.

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