I’ve been sent division orders on a well. All the filed documents with railroad commission state it is a pooled unit, such as the w-1, the drilling permit, the certificate of pooling authority etc etc. But they are calculating my interest as an allocation well. In this case, that lowers my revenue interest. I’m not sure if the RRC even knows that this is being considered an allocation well. Would you take their word for it, or ask for your interest to be calculated based on how all the paperwork was filed?
Reply to the DOA or owner relations and request an explanation. In some cases things change and filings are not updated promptly on the RRC website.
I did bring it to their attention months ago when they first sent the division orders. They basically said thank you for pointing out the discrepancy, we are working to rectify it. Since then, they have refiled permits, changed the acreage, and filed their W-2 completion report, which officially closes the permit to changes. Even the newest filed permits still have attached certificates of pooling authority, and state on the permit and related documents that it is indeed a pooled unit.
ALWAYS ALWAYS ASK for proof
The RRC does not really care about this and it will not be corrected. RRC cares about whether there are unleased minerals and whether the wellbore is too close to lease lines for related acreage and violates spacing. Your question is whether or not there is a recorded unit agreement covering your minerals which applies the formation depths where the well is drilled. If there is no unit covering your minerals, then the well is an allocation well for your DOI calculation. Check the deed records to see if a unit agreement has been filed for your lease. If it is an old lease which was held by vertical wells, then there may be an older unit agreement which will still apply to your interests. Filing a P-12 does not create a unit.
1 Like
This is where I would disagree. As the regulatory agency, the RRC is the only way a mineral owner has to “audit” an oil company. If they are filing one thing, and telling something different to the mineral owner, which happens to be at great cost due to diminishing nri greatly, why would a regulatory agency not care? I do know that filing a P-12 doesn’t create a unit, but it does indicate pooling authority. And by and large the purpose of allocation wells has been to allow the extraction of minerals when pooling is not an option. But they have filled everything else out as if a unit has been created. Through the paperwork, in the RRC’s eyes, a unit HAS been created. The W-1 states it has been pooled/unitized. The permit indicates that it has been pooled/unitized. The p12 states that there is no unleased or unpooled mineral owners. The only thing that has ever indicated allocation is the division order, and only when I questioned how they calculated my nri.
So given all of this, the main question is, do you just sign it and take your mailbox money, or push a string uphill. The difference in NRI between the 2 different calculations is striking.
The DOA should be able to provide the calculation of your NRI and the supporting references. I would also ask for a current tract plat for clarity. Do not rely upon the permit tract plat since I have found that tract descriptions and names can change with time. You are requesting non-public and non-confidential information that is required for you to determine that the issued DOI related to you is correct. I would hold on any execution of Division Orders until you have a resolution.
The RRC considers disputes between oil companies and mineral owners to be a civil matter and to be resolved between them, through litigation if necessary. RRC does not act or intend to perform an audit function for you. I have seen numerous permits with incorrect data, including about units (some state no unit when there is a unit). Contacting the oil company or third party filer does not get a correction filed. When you have more experience filing protests with the RRC, you will find that many are routinely dismissed. As an example, RRC has never denied a saltwater disposal well permit, and takes the position that if the SWD damages surrounding shallow well production, then that is to be resolved later in legal claims. The question here is whether your minerals have or have not been pooled. Contact the landman responsible for the area and ask about a unit.
James, the DOA has clarified and provided the calculation, it’s just incongruous with the filed paperwork. I have the as drilled plat, which shows both acreage and feet of wellbore per track (which was not on the permitted plat). The core of my issue is quite simply that the only thing in this entire situation that says anything about allocation is the oil company in it’s correspondence with me.
TennisDaze, “audit” might not have been the correct term, but the RRC published production totals are the way we all double check production from out wells, correct? I guess it comes down to, is this a mistake? Did they fill out the forms wrong? Or are they reporting one thing to the RRC, and another to mineral owners? Also, if they indeed have pooling authority, why are they not pooling? Allocation was only ever meant to be used to get around anti dilution clauses in OGLs so that the minerals could be extracted economically, and without waste. So why go allocation when you have authority to pool? What motivation is there for that?
The permit plat will rarely agree with the “As Drilled” plat. If your primary concern is a fair application of the DOI, then the “As Drilled” should provide this information along with the tract contribution. I would suggest you address further concerns to the Landman on the Pooling vs Allocation issue.
The production volumes reported to RRC are not verified or audited by RRC. It is a self-reporting system and volumes are generally in the ballpark. More and more operators are using centralized collection facilities where oil and gas from many wells are measured in total and then allocated back to wells, rather than measured at the individual well or lease level. If allocated volumes are based on periodic well tests, perhaps once every 8-10 months, then the volumes do not reflect the monthly production variations between wells, due to differing decline rates and mechanical issues. From company and RRC viewpoints, 100% of total production in the area is accounted for in total. From mineral owner viewpoint, individual well allocated volumes are not exact. Some well get extra and some wells get too little.