Replies to This Discussion

Permalink Reply by The_Baron on November 28, 2011 at 5:57

Better to pay up than fight it out in court. Its always hard to say how things would be interprted, it would be nice to see some movment to clarify the mineral code. So much has changed since the code was adopted... The operator may have felt it was just easier to sign a new lease than cloud their title for who knows how long (years maybe).

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Permalink Reply by Spring Branch,mineral owner on December 4, 2011 at 19:13

This actually happened to me.  My old lease with Petrohawk already contained a 25 % royalty rate.   I suggested a 6 month lease extension, to which Petrohawk agreed in an abundance of caution.  In exchange for the 6 month extension, we were able to negotiate a small bonus and a no cost royalty, which is what I most wanted.

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Permalink Reply by The_Baron on December 6, 2011 at 5:39

I guess no one wants to be the test case. I don't blame tham.

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Permalink Reply by Andrew on December 8, 2012 at 9:30

Baron,

You raise an excellent question that I have wondered about myself. My personal view is that prescription is not interrupted until the unit boundaries are breached, but there really is no way to tell how a court would rule on this issue if it ever got litigated.

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Permalink Reply by Dion Warr, CPL on November 28, 2011 at 6:09

James:

 

Virtually all mineral leases contain after-acquired title provisions.  So the OGML on MO1 simply becomes applicable to the entire mineral interest, including the 1/2 interest that prescribes from MO2 to MO1.

 

MO2's OGML is of no effect after the minerals prescribe, as the lease cannot burden an interest which has prescribed.  This is not the same as purchasing minerals that are subject to a lease, as the pruchaser would acquire the interest subject to the OGML.

 

 

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Permalink Reply by Henry on November 28, 2011 at 8:53

Dion,

I want to make sure I understand the first sentence of your last paragraph....  Let's say I have mineral rights that prescribe in 6 months, and there is no interest in drilling my land right now.  But let's say I can find someone who would be willing to take a 5-year lease on my mineral rights.  If I lease my minerals under this 5-year lease, is the person who gets the minerals 6 months from now burdened by this lease or not?

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Permalink Reply by Dion Warr, CPL on November 28, 2011 at 13:34

Henry:

 

In a word, no.

The conditions that created the mineral servitude (sale of the surface with a mineral reservation) occurred prior to the establishment of the lease.  This makes the owner of the mineral servitude a conditional owner (as referenced in the Mineral Code).  By operation of law (prescription), if the servitude is lost to due to nonuse, your rights to explore, to capture and/or reduce the minerals to possession are extinguished.  An oil, gas and mineral lease taken from such an owner would likewise terminate at the point of the extinguishment of the servitude if no use of the servitude is made prior to the date of prescription.  See R.S. 31:117.

 

In other words, you can lease what you don't own, nor can a lease apply to something that is no longer owned by the lessor due to a loss of conditional title.  This is not the same scenario as someone who being subject to a prior lease becomes the owner of such a reversionary interest (after-acquired title applies here), or someone who subsequently conveys a property to another that is subject to a prior lease to which the successor-in-interest is not a part (which is what is addressed and remedied under R. S. 31:144, et seq.)

I'll leave it to the lawyers in the group to comment on the particulars (because I'm not one).

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Permalink Reply by Henry on November 28, 2011 at 14:09

Dion,

Thanks for your insight.  It was most helpful.

Sorry to James for getting his discussion off track.  I'll be quiet now, so we can get back to his issues.

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Permalink Reply by Andrew on December 8, 2012 at 9:38

I want to underscore Dion's comments to emphasize that is the after-acquired title provision (kind of a catch-all) of MO1's lease that would cause his newly owned minerals to be subject to a lease. If the landowner receiving the minerals by prescription did not have an existing lease covering the same property, he would receive those minerals unburdened by any lease.

This is relevant to James's scenario because the terms of MO1's lease would govern those minerals, NOT MO2's.

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Permalink Reply by James on November 28, 2011 at 10:35

I have a letter showing how this section is pooled.  I must be looking at it wrong.  I'm out of town now but will be back Sunday and post the letter so maybe someone can interpret it for me..... Thanks for all the replies....

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