Unleased mineral owners with Chesapeake production and no payments

I'm looking for Haynesville Shale unleased mineral owners, with Chesapeake production on their section, who are not being paid, and are not receiving well reports.

I recently discovered I have a tract where Chesapeake has not paid me, nor forwarded well or production reports.  The wells in question are way past payout.  Title to the land is clear and it is clearly unleased.

I've been told that Chesapeake will frequently just stonewall the small unleased owner who has well production, even where money is clearly owed, since the cost of litigation is frequently greater than the potential recovery.

My contention would be that CHK alone knows whether 100% of the lands in a given section are leased or unleased, and whether the owners have been paid or not.  If all of the tracts that are small and unleased, have unknown ownership/title questions, etc. are not being paid and the funds were just kept by Chesapeake, the amount could be considerable.  Based on my experiences, it appears that the accounting practices are conducted without requiring that all of the funds be properly disbursed to 100% of the owners.

Please note that my reference to unleased mineral owners is only towards owners with Chesapeake wells drilled and producing on their unit.  If you fit this category, please reply as quickly as possible.  The Chesapeake bankruptcy is moving swiftly towards confirmation.  Contact me at steve at ptprop dot com or reply to this submission.

Second question, on another tract (different circumstances) Chesapeake paid, but withheld about $10,000 for IRS withholding funds, but I have never received credit from the IRS for this withholding.  Anyone else had this experience?

Third question, has anyone had experience with Chesapeake actually remitting funds to the state as unclaimed property?

Considering the tremendous diversity in land title circumstances, I would expect a great amount of filings by Chesapeake to the State of Louisiana, as the law requires.  Specifically on my tracts, where funds are owed or were withheld and not apparently disbursed, the funds have not been remitted to the prior owner, to me nor to the state.  Has anyone else experienced this?

Thanks, Steve

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Permalink Reply by Bob Zimmerman on December 14, 2020 at 10:25

Someone is spinning you, Lester, and getting just the effect they are looking for.

Stall and evade until you give up as most people eventually do when faced with the peculiar legal quandary of an UMO.

Do yourself a favor, get an attorney specializing in oil and gas law or you are likely to collect nothing from the well. 

Permalink Reply by Lester G on December 14, 2020 at 10:49

It is very true that the O/G will spin you to no end.  I have an atty and have sat in district court, appeals court, and the Supreme Ct of La.  In 2010 I sent a request in writing, notarized the letter, and sent it certified mail to Chesapeake to send all well data on one well pursuant to 30:10.  In 2 weeks they sent me a 20 sheet packet back in certified mail accounting for every nut, bolt, pencil, and  roll of toilet paper for that well.  I guess they respond better to this type of request.  I may have to go this route again.

Permalink Reply by Bob Zimmerman on December 14, 2020 at 11:02

If you were never notified by the Commissioner of Conservation of pending permit and other well related hearings, go see your District Attorney. Mineral trespass might support a criminal felony charge of theft. An arrest is probably not beholden to the bankruptcy court. 

Permalink Reply by Lester G on December 14, 2020 at 11:10

Bob, I received division orders on these wells and I have been receiving UMO revenue.  My request for well data was so I could extrapolate the math back to first production for each well to see when each paid out, when my pro rata share went through the well, and when/what I should have been paid.   I wanted to look at the math because of Johnson vs Chesapeake.

Permalink Reply by Skip Peel - Mineral Consultant on December 14, 2020 at 11:16

There is no notice required by statute for a well permit, from the commissioner or the unit/well operator.  Reasonable due diligence is required to identify "interested parties" for the purpose of sending a notice letter for an application to create a drilling and production unit or to drill alternate unit wells.  I've reviewed dozens of IP lists and they are full of typos and omissions.  I am unaware that any unit applicant has been censured much less penalized for a faulty IP list.

When a mineral tract is force pooled in a unit, I don't think there is recourse for subsurface trespass.  Use of the surface for unit operations would constitute trespass.

Permalink Reply by Skip Peel - Mineral Consultant on December 14, 2020 at 11:08

Lester, much is on hold with CHK during the bankruptcy proceedings.  Suggest you communicate with them by email so you have a record.  You might also want to have a copy of your deed or other conveyance instrument handy to provide evidence of your mineral ownership if needed.  Have you checked to see if CHK has filed a unit survey for your section/unit?  It would be a good idea to review one if it is available in the SONRIS database.  When the bankruptcy is discharged, start hounding them again.

Permalink Reply by Lester G on December 14, 2020 at 11:51

Thanks Skip,  I will follow up after the bankruptcy.  Is there a way to listen or see the court bankruptcy proceedings via zoom or conference call?

Permalink Reply by Skip Peel - Mineral Consultant on December 14, 2020 at 11:58

You're welcome.  Not that I am aware of, Lester.

Permalink Reply by Bob Zimmerman on December 14, 2020 at 18:24

Skip wrote:  "When a mineral tract is force pooled in a unit, I don't think there is recourse for subsurface trespass.  Use of the surface for unit operations would constitute trespass."

LRA 30:10(A)(b) states "The portion of the production allocated to the owner of each tract included in a drilling unit formed by a pooling order shall, when produced be considered as if it had been produced from his tract by a well drilled thereon".

I've been looking for a use for that legal fiction as statutory, and now I have found it. 

Analysis:  It's a UNO's oil and gas produced by it's well on  his own property, the operator has intentionally conspired to retain the UMO's share of well proceeds and at this point obviously does not intend to pay out those proceeds. The clincher in criminal law is the intent not to pay those funds. There may well a cause of action grounded in tort. In the alternative a UMO may just be another in a long line of unsecured creditors in another long line of bankruptcy proceedings.

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