Hello,
I received a Ratification of Unit Designation to sign in front of a notary for a unit that is already producing in Howard County. The accompanying letter says that once I sign and return the form, I will be put in pay status for royalties, but I want to ensure I’m not signing anything away. Are they standard forms or should I have an attorney look at it before I send it back?
Units are necessary to put together sufficient acreage to drill horizontal wells. The oil company will have recorded a DPU (Declaration of Pooled Unit) which governs the acreage, depths, and other terms. You are being asked to ratify the DPU. You should read the terms of both the DPU and the Ratification carefully as they may alter and amend the terms of your lease. For example, if you have a market value or cost-free royalty clause in your lease and the DPU states that all royalties will be proceeds or market value at the well, then you will have amended your lease. In the past, DPU were more limited in depths to specific formations or fields. Recently most units have no depth restrictions. So a shallow 5000 foot well could hold then entire unit in place. Many even contain provisions that state that the leases are amended to conform with the provisions of the DPU. You can limit your ratification to the specified area and field, excluding other depths. Or state that the royalties must be paid in accordance with the terms and provisions of your lease. You have asked a good question as this is not an area or issue that there is much discussion about. It is a legal document and you should understand what you are signing.