Replies to This Discussion

Permalink Reply by Henry on September 8, 2014 at 13:00

Check your lease, It should say.

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Permalink Reply by Kevin Raybourn on September 9, 2014 at 1:43

I thought it was an issue of State Law which may be the same thing when it comes to proposing and Permiting.......I was just wondering if the Operators make a Proposal and Permit  for a Unit and just let it sit idle ...Is that holding up the Lease Payments.........I Think once you are participating in a Unit  They don t pay lease payments after that.......Is this True.????

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Permalink Reply by Skip Peel - Mineral Consultant on September 9, 2014 at 3:27

Leases are held in force according to the terms contained in the lease.  A unit does not "hold leases" in and of itself.  Unit production holds all leases pooled in the unit.  Building pads or roads or pipelines or any other infrastructure has no relevance regarding a unit.  Those and other activities may be defined in a lease as "operations" and a lease may allow operations to hold a lease in force, short of actual drilling, for a limited and defined period of time.  It's a lease issue, not a unit issue.

Once again let me emphasize that when asking questions about units or any other aspect of oil and gas development as it impacts the rights and assets of TMS mineral owners, It Is Imperative That We Be Clear About Which STATE We Are Referring To.  LA and MS are significantly different in numerous and important ways.  It is far too easy for misunderstandings to occur if we are not consistently referencing the subject state.

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Permalink Reply by Kevin Raybourn on September 9, 2014 at 12:12

Sorry...I agree there are a lot of misunderstandings  ,which is why we are here ....To clear those up..    I am .In Louisiana    ....Locally we have discussed with confusion that when a Unit is formed then leased land is not being paid lease money as long as they are in a Unit...for what ever the defined period...... Is this Correct ???     Keep in Mind I am Green  and these Confused discussions are sometimes Café talk over a Chicken dinner talking with several people who are always Right.....

 

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Permalink Reply by Skip Peel - Mineral Consultant on September 9, 2014 at 12:48

I have no idea what lease money you are referring to.  Land owners receive a bonus payment when they execute a lease and they receive royalty income after a well is turned to sales.  Kevin be careful with Cafe` talk and confusing things by posting on two separate sites.  This one is TMS for LA and MS but has slightly more of a LA focus because most of the regular pros that post work in LA and know LA law and regulations.  The other site includes LA but is predominately MS.  The reason GHS is organized into groups: Tuscaloosa Marine Shale (LA) and Mississippi Mineral Owners (MS), and further divided into parish and county groups is a conscious effort to keep discussions separated and to avoid confusion as much as possible.  We can not state strongly enough that mineral laws differ greatly between the two states.  Since you are in LA I suggest that you stick to LA sites and groups and avoid getting confused by the situation in MS.

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Permalink Reply by Kevin Raybourn on September 9, 2014 at 14:46

I guess I should have asked this ..In Louisiana.  When you sign a 3 year lease with a 2 year option and get that bonus payment....Before 3 years are up you are brought into a New Unit....are you Now participating in production with no more bonuses.....Will the 2 year option be paid ???

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Permalink Reply by Skip Peel - Mineral Consultant on September 9, 2014 at 14:57

The three years is called the primary term and in a Paid Up Lease such as you describe the bonus paid holds the lease in force for that period of time. If a well is not drilled in the primary term on the lands covered in the lease or on lands pooled with the leased lands in a unit, the lessee has the option to exercise the extension clause for two additional years for the price per acre stated in the lease.  The lessee can also decline to exercise the extension which effectively terminates the lease at the end of three years.  The option to extend the lease is solely the lessee's right.  The lessor has no say in the matter having agreed to that lease term as part of the lease agreement.  If production is established prior to the expiration of the primary term the lease is said to be HBP (Held By Production).  No additional bonuses paid but royalty paid on production as defined in the lease.

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Permalink Reply by Kevin Raybourn on September 9, 2014 at 15:20

No Café talk there ..Thanks Skip..

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Permalink Reply by doty on September 16, 2014 at 5:59

I have a question, If only a small part of my leased land in Tangipahoa parish is in a producing unit what happens to the remaining acreage after the three year primary lease runs out?

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Permalink Reply by Skip Peel - Mineral Consultant on September 16, 2014 at 6:24

That depends on the language in your lease.  If you have a horizontal Pugh clause in your lease it states that any lands covered in the lease that are not included in a producing lease well or in a producing unit at the expiration of the primary term are released from the lease.  It's a good idea to send a certified notice/demand letter to the operator directing them to file a Release of Lease for the subject lands in the public record.

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Permalink Reply by doty on September 16, 2014 at 6:33

Thank you

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Permalink Reply by Skip Peel - Mineral Consultant on September 16, 2014 at 6:39

You're welcome.  If the rock is good in your part of Tangi you are unlikely to end up with any leased lands not in a unit.  And most modern lease forms contain some version of  the clause addressing this issue.

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