My family has a 1/5 ownership in about 468 acres of mineral rights in ND. There are four other parties, which are all relatives of my family. All parties were contacted by Chesapeake Oil/Blanca Peak Oil with the intention of signing a mineral lease for our 468 acres. When it was all said and done, Chesapeake/Blanka only signed with two of the parties who have 1/5 (partial) ownership of these mineral acres. But before actually making payment, Chesapeake cancelled one of the two leases, leaving only one of the 5 parties with a signed lease. The question is, all of our leases contain the same land description for the same 468 acres. Is this this a leagal lease? And can the other 4 parties still lease their portion of the mineral acres, with the same land description to different Oil Companies? I say this because Chesapeak has told two of the other partial land owners they are no longer interested.
My feeling on this is, they already have a lease with the description of all 468 acres, why would they lease from the rest of us? Unless we (the other 4 partial owners) have the ability to lease the land to another Oil Company? Not sure how that works, as we all have the same land descriptions. Meaning companies that have a lease can drill whereever they want? Seems to me that there are two ways to do this. As we all have the same land description, we all have to lease to the same Oil company. Or, we need to come up with 5 different land descriptions to lease seperately?
Mr. Fisher, most likely you all have an undivided interest in the 468 acres, which means that all of you have a small interest in each and every acre. Each of you have the right to lease to different companies your interest in each of the acres or to not lease at all, you in no way deprive the others of the right to lease their interest. Blanca Peake/ Chesapeake will likely not be drilling any wells with over 370 acres unleased. I have to ask you if you gave Blanca Peake executed leases which they may have recorded ? If you did and the leases were recorded you will not get any lease offers because to the world your acres appear to be leased.
John:
In addition to what rw stated, if you find out that Blanca Peake has "cold drafted" you and others, you must take immediate action to get this corrected if it means hiring legal assistence. I hope this is not the case and if so, you and others are free to lease to whomever you choose. As rw states, the chance of this company drilling on these unleased acres is very slim.
John, sorry to hear about your experience. Blanca Peak is a shell company and as you know working on behalf of Chesapeake Energy. From the old posts on this website they are not honoring their leases - not paying the sign bonuses. I am sorry that you got connected with Blanca and CHK they are pulling stunts like this across the country.
To learn more about Blanca Peak, please go to the upper right corner of this website and enter blanca into the search window. You'll read a lot of garbage they and Chesapeake have been pulling. I would expect by now they are long gone from the region. There are likely even lawsuits, seems I recall reading about an attorney getting involved, but it has been a while. You'll find posts from a landman named Kevin Koonce who was doing a great job of making people aware of what Blanca and CHK were pulling. He even reported them to the ND AG.
in your case of the 5 leases (5 partials to make a whole), I can tell from the story that 4 are dead and then the 5th is a question. We are suspecting that lease is being cold drafted (not paid). Nonetheless, what these scams sometimes do is to file the unpaid leases with the county recorder so even though they haven't paid you it appears they have leased your minerals. As someone asked, I hope the signed lease wasn't provided - but of course it was, that is the procedure these guys walk you through. Now some companies are honest and that procedure works, but these days sadly there are many landowners getting burned (I got burned in MI, but CHK and a shell company). I will note that CHK's MO on this scam is not to file the leases, they just determine they are not interested in the play and cancel leases. while they are leasing they are also drilling test wells - depending on results they bail (cancel) or hype the lease (after they have a huge holding) and sell to a JV (look at their Utica activity in OH).
Anyway, back to where you could be in trouble; if they filed your lease (or a family members lease) you need to take action immediately to get that released/removed and it may take an attorneys involvement. If it has been filed then it puts a "cloud" on your title making it impossible to lease to anyone else (even if it is bogus). To verify this you'll have to check with the courthouse - easy.
I want to share with you a wonderful article that Reuters did on 12/28/2011 about Chesapeake and the use of these shell companies. The article focuses on what happened in MI, but it has happened in many other states including ND. http://www.reuters.com/article/2011/12/28/us-energy-giant-idUSTRE7B...
Good luck and keep us posted.
Wilson
MR Kennedy,
I'm still a little confused with your response, so I'll try to fill in some of the blanks for you. All 5 members have undivided interest in the 468 acres. Meaning, that if we negotiate a lease to an oil company, all five members are negotiating the same exact 468 acres (same land description). How could we each lease to a different oil company?
There is a recorded "paid up" lease which I have a copy of from the Stark County Recorders Office, which is signed by only one of the five mineral owners. Is this a legal lease, if only one of the five owners is signing it and getting paid? Essentially, Blanca has leased all 468 acres, but only had to pay one of the five owners. Your quote that confuses me, "Each of you have the right to lease to different companies your interest in each of the acres or to not lease at all, you in no way deprive the others of the right to lease their interest." How is this possible if we all have the same land description? We would be leasing the same 468 acres to 5 different oil companies? Doesn't seem very organized, as the five oil companies could try to drill in any unspecified portion of the 468 acres?
Thank you for the reply RW, it is appreciated.
r w kennedy said:
Mr. Fisher, most likely you all have an undivided interest in the 468 acres, which means that all of you have a small interest in each and every acre. Each of you have the right to lease to different companies your interest in each of the acres or to not lease at all, you in no way deprive the others of the right to lease their interest. Blanca Peake/ Chesapeake will likely not be drilling any wells with over 370 acres unleased. I have to ask you if you gave Blanca Peake executed leases which they may have recorded ? If you did and the leases were recorded you will not get any lease offers because to the world your acres appear to be leased.
Mr. Fisher, sorry, I will get very basic trying to clear this up. There will be only one orerator in the spacing, the operator who has the largest interest in the spacing is almost always the one who operates the well/s. If Chesapeake/Blanca Peake does not have a majority in the entire spacing, they may pay their proportionate costs and participate in the well drilled by someone else or assign their interest to the company that operates the well for cash, and usually retain an interest in the production. A lease with a single party [they actually only leasing their 93.6 net acres] covering the GROSS acreage, will not prevent others who also have an interest from leasing their net interest to anyone they wish and those leases will have the same legal description. The four of you who are unleased may lease to anyone you choose. If you inherited these rights and properly probated in ND, your names should be on a recorded deed and landmen can find your unleased interests that way, although the landman may call the owner of the leased acreage to find the rest of you as that's easier. I also think you should file a statement of claim if you have not already done so, it will make you very easy to find. There can in extreme cases be 100 leases with the same legal description, it would be poor landman work to miss 370+ unleased acres. Collectively, all of your leases will have the same legal description, it is common. I have a 1/42nd interest in 400 acres, there are many leases, all with the same legal description, it did not stop landmen from finding me and making lease offers. The recorded lease by one party of your 5 is legal. The recorded lease in no way stops the other 4 of you from leasing. I hope this helps, if not we can try again.
John,
Was the lease that is filed (1/5th share) paid for (sign bonus paid)?
Regarding leasing the other 4 shares (assuming the 5th was paid, otherwise you have 5 of 5 shares that could be leased). But is there anyone leasing? My understanding was the CHK/Blanca pulled out and created a vacuum. Do you have other leasing opportunities currently?
Where in ND is your mineral rights located?
Wilson
Thanks for the follow up, I get it this time. I think...To my understanding, the operator with the largest leased interest (acrage) is generally the one who drills. The rest just get paid per their owned/leased interest. What if the other for minerial partners never lease their share of the mineral acres, and drilling/production of oil starts? Is this where pooling comes in? Or is that a whole different can of worms to open. I think I need to study more...
r w kennedy said:
Mr. Fisher, sorry, I will get very basic trying to clear this up. There will be only one orerator in the spacing, the operator who has the largest interest in the spacing is almost always the one who operates the well/s. If Chesapeake/Blanca Peake does not have a majority in the entire spacing, they may pay their proportionate costs and participate in the well drilled by someone else or assign their interest to the company that operates the well for cash, and usually retain an interest in the production. A lease with a single party [they actually only leasing their 93.6 net acres] covering the GROSS acreage, will not prevent others who also have an interest from leasing their net interest to anyone they wish and those leases will have the same legal description. The four of you who are unleased may lease to anyone you choose. If you inherited these rights and properly probated in ND, your names should be on a recorded deed and landmen can find your unleased interests that way, although the landman may call the owner of the leased acreage to find the rest of you as that's easier. I also think you should file a statement of claim if you have not already done so, it will make you very easy to find. There can in extreme cases be 100 leases with the same legal description, it would be poor landman work to miss 370+ unleased acres. Collectively, all of your leases will have the same legal description, it is common. I have a 1/42nd interest in 400 acres, there are many leases, all with the same legal description, it did not stop landmen from finding me and making lease offers. The recorded lease by one party of your 5 is legal. The recorded lease in no way stops the other 4 of you from leasing. I hope this helps, if not we can try again.
Yes, the lease was filed and bonus paid. So the way I understand it, 1/5 of the 468 acres are leased, and the remaining acres are unleased to date. Right now, there seems to be very little interest in the area we own mineral acres. T137 R96 Sec 4&5. Hopefully there will be some interest in this area this summer or next. We also have interest in Billings county that is currently leased, so we are hoping to see some activity in this area soon.
Thanks for all the information.
Wilsontownship said:
John,
Was the lease that is filed (1/5th share) paid for (sign bonus paid)?
Regarding leasing the other 4 shares (assuming the 5th was paid, otherwise you have 5 of 5 shares that could be leased). But is there anyone leasing? My understanding was the CHK/Blanca pulled out and created a vacuum. Do you have other leasing opportunities currently?
Where in ND is your mineral rights located?
Wilson
Mr. Fisher, if there is drilling in your spacing with the 468 acres , you will get a lease offer and or an offer to participate. If a well was drilled you would receive the weighted average royalty that everyone else in the spacing leased for or 16% whichever the operator selects. Likely it would be 16%. You would receive this 16% from the very first barrel. Your other 84% would go to pay the cost of the well, operating cost [ very low ] and a 50% of the actual cost of drilling the well penalty. The 50% penalty does not apply to surface equipment or operating costs. When the expenses and penalty are recovered from the 84% you become a full working interest in the well and receive 100%, but you are responsible for your portion of the bills of the well. If you went this route I would put back 20% of what you receive after taxes for well expenses, treasury bills or something you could liquidate at will to cover your part of a major bill from the well. This is pretty advanced stuff but if you want to learn about being a carried interest and possibly participating in a well at what I consider low risk, you can look up the law on force pooling in ND, it should be ND Century code 38-08-08. Many internet landmen evidently have never read this law so read it for yourself and don't take anyones word for it, not even mine.
Mr. Fishcher,
If the one recorded lease that is filed of record has all parties named on it and only one signs, the lease is not valid, UNLESS there is a provision for counterpart execution.
If there is, then the remaining parties may do what they want to with their minerals -- lease to Chesapeake, lease to anybody they want. Totally their decision.