North Dakota - McKenzie Co Twnsp 146N Range 98W
Section 11 POJORLIE 21-2-1H
Last Royalties Received 12/23/2022 because I placed the Owner Account In Suspense
My family was previously receiving royalty payments from Continental Resources through my late fathers Trust. The monthly amount received was not only around $50 to $60.
I put the Owner account into suspense so that I could transfer the mineral ownership to the individual trust beneficiaries. Prior to the transfer however I found out that the Trust did not actually have an Oil & Gas Lease with Continental Resources. This was a surprise to me. I was advised to obtain a lease before transferring the ownership.
When I reached out to Continental to try to obtain a lease for the Trust they declined. I was eventually able to obtain a lease from Phoenix Capital Group Effective 12/18/2023. Subsequent to signing the lease the ownership of the minerals has been transferred. Continental Resources was provided all documentation regarding both the lease & the new ownership.
It has been 2 years since any payments have been received. When I reached out to them I was told that their records have been updated & that I now have my own individual owner account. Several months ago I questioned why I have yet to receive any royalty payment from current production or my share of the Trust funds that were placed into suspense. I was told that my owner account has not reached the $50.00 minimum balance. As I continued to try to understand how this could be based on the fact that it has been 2 years since a payment was made I have now been told that the oil & gas lease with Phoenix Capital Group would not be credited until the well hits 150% payout threshold. They cannot tell me when this will occur.
Has anyone had experience with this type of situation? Any input anyone could offer would be greatly appreciated.
ND has statute dealing with unleased mineral owners. It appears that unleased minerals are entitled to divided parts of (1) royalties (weighted average or 16%) and (2) cost bearing interest. Cost bearing seems to be working interest (WI), so either you pay drilling and well costs up front or you are delayed until payout (well revenues exceed costs). Here operator says payout was set at 150% of expenditures. So your father was in pay in part for royalties. His royalties would decrease as well production volumes decline, in addition to being subdivided among the heirs. By signing the lease, your status has changed from unleased to leased mineral owner. It may be that the lessee has opted not to participate by paying the well expenses and your royalties are being applied against those costs. And since you are no longer unleased, you may no longer qualify as an unleased mineral owner under the statute. These are only guesses as I am not familiar with ND law. This is really a question for the ND oil and gas attorney who advised you on the lease terms. https://codes.findlaw.com/nd/title-38-mining-and-gas-and-oil-production/nd-cent-code-sect-38-08-08/
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Solid information from @TennisDaze. If the Trust was a UMO (unleased mineral owner), then the proportionate mineral interests could have been distributed to the beneficiaries without the need of an OGL to Phoenix Capital. Who advised you to enter into an OGL prior to the transfer? What was the benefit that you believe or were told to expect from entering into an OGL? This is a small amount of revenue, but the discussion may prove valuable to members of the forum.
Not knowing much about royalty income I had assumed that we had an OGL with Continental Resources since we were receiving payments. The statements indicated the payments were Royalty Interest on Porjorlie 21-2-1H. I was surprised to find out that we did not have an OGL. I was working with an attorney in North Dakota and he indicated to me that I should try to obtain an OGL on all the mineral acres that were currently producing income prior to transferring the ownership to the Trust beneficiaries. His firm however does not provide input on the terms of any OGL’s. I asked Continental to provide an OGL & they did not want to do so. Phoenix Capital Group had contacted me & offered the Trust an OGL on 16 mineral acres owned in Twnshp 146 N, Range 95 W Sections 10 & 14. As far as I know there is not current production in these 2 sections. Since these other 4 NMA were in the same area I asked Phoenix Capital if they would also include the 4 MNA in Section 11 on the OGL and they did so. Once the OGL was in place and the Bonus was paid I transferred these last 20 NMA to the Trust beneficiaries so that I could finally be done with all ownership transfers. When I contacted Continental to ensure the OGL was in place they questioned if I had an OGL. After more inquiries is when I was told about the 150% payout threshold & delay of the OGL. I wanted to receive a payment from them before closing the Trust. After inquring about the status of my account Continental recently told me that my personal Owner Account balance was under the threshold to pay out. I asked them to make an exception. On 12/24/24 I received a payment of $37.68. The check indicates it is for Interest Type RI01. This payment is based on my 1/8th share of the income on 4 NMA going way back to September 2022. I can only assume that this well has very little production at this point.
Much better information on your situation. @TennisDaze addressed most of the forced pooling issue. By leasing you producing mineral interest you transferred the after payout position to Phoenix and retained only the royalty. This may not matter since there is only minimal production, but is something to consider in the future. You may want to ask the attorney the basis for his advice to lease your producing interest. Sharing any of that advice with the forum may prove to be helpful for other ND mineral owners. Good luck.
It is not wise to put two dfferent tracts or sections on the same lease. They need to be independent. An attorney is a good idea since they work for you and can hopefully get more mineral friendly terms. The leasing agent does not work for you and has their own agenda.