We were contacted in October 2014, and signed leases for landman with Antero Resources. Two wells started producing in August 2014 and we still have not received a D.O.. There are four other wells "in some stage of drilling" on this same property. We have called the Denver office and are always told to call back the first part of 2015. Guess we'll call again next week.
Anyway, the landman has told us that he believes that we have some non-participating interests in property(ies) that may have already been drilled and producing. How do we go about finding this out for sure? Does Antero ever inform inform you of a non-participating interest?
Interesting to hear about the bonuses and negotiating the lease terms. We were not told about these things from the landman. However, if we are asked to sign additional leases, we will check into it a bit further.
I have also been told that I have some "non-participating interests" but when I asked for an explanation I was told..."Trust me, it's a good thing." I also will be calling Denver around mid-January to check on some wells that had first sales in July 2014, but would like to know if anyone has a non-participating interest and what that means!
As I understand it, a Non-participating mineral interest is when you own mineral rights but not leasing rights. Maybe someone owns land and sells surface and half minerals with the rights to lease and collect bonus going with the surface, the seller retains half the minerals but no rights to lease. When the buyer, the guy with half minerals and the leasing rights, when he leases and a well is drilled and produces, the first guy gets his royalty payment on his half mineral interest. I think there is no requirement for the one with the leasing rights to tell the other guy when leasing occurs.
Thank you for your response Nancy. From what I have read your answer makes a lot of sense. I still wonder how we can find out about any such agreements for NPI that may have been made in the past. I guess the questions I have now are:
(1) How do you find out if an NPI agreement was made giving you an interest?
(2) How do you determine if a well is producing on the property?
(3) What steps do you take to receive NPI payments?
It seems as if it would be a breach of contract if the one with the leasing rights does not tell when the leasing occurs. For instance, if the party that negotiated the NPI loaned money to them for the right to receive the NPI, then they should have a duty to notify the NPI holder of drilling activity, etc..
As I understand it, a Non-participating mineral interest is when you own mineral rights but not leasing rights. Maybe someone owns land and sells surface and half minerals with the rights to lease and collect bonus going with the surface, the seller retains half the minerals but no rights to lease. When the buyer, the guy with half minerals and the leasing rights, when he leases and a well is drilled and produces, the first guy gets his royalty payment on his half mineral interest. I think there is no requirement for the one with the leasing rights to tell the other guy when leasing occurs.
Hey Jacqueline, I think Nancy's response hits it on the head. I also found the following explanation, but, still have questions:
Applying NPRI Calculations to Real Life
So, what does a basic non-participating royalty interest look like in real life? Say Rancher Smith has a good hunch that there is plenty of natural gas underneath his ranch. Smith knows that natural gas prices are low, but he thinks that they’ll go up in a year or so. In the meantime, he really needs a new tractor. So, Smith sells a 1/32 NPRI for $25,000 to Farmer Jones, who was retiring and looking for a steady source of income down the road.
One year later the natural gas market was still a little low, but after another year Smith leases his oil and gas rights for a large bonus and a 1/8 royalty. Jones, then, gets 1/4 of the royalty (1/4 x 1/8 = 1/32) and Smith gets the other 3/4 of the 1/8 (or 3/32 of the total royalty). As you can see, Smith made the decisions on when and to whom he leased the rights, and Jones gets his cut without doing anything more than buying in up front.
That is the best we can do to explain basic non-participating royalty interests, but keep in mind what we said earlier – the mineral rights laws in each state dictate how NPRIs are handled in that state. Be sure you have good legal advice when participating in one of these complex financial transactions.
Jacqueline Gum said:
I have also been told that I have some "non-participating interests" but when I asked for an explanation I was told..."Trust me, it's a good thing." I also will be calling Denver around mid-January to check on some wells that had first sales in July 2014, but would like to know if anyone has a non-participating interest and what that means!
1) How to determine about your NPRI interest? You need to do a search of the records finding how you acquired title. Ask the landman for as much information as he can give about it, including deed book citation of where your ancestor either bought the NPRI rights or sold the rights to someone else including the right to lease, retaining the royalty rights as NPRI.
When you have as much information as the landman will give, you can search the names in the Doddridge deeds and leases database Doddridge County Records link and see what you find. Somehow you need to get back to where the rights to lease were separated from what your ancestor had.
2) How to determine if well is producing: first step is finding out exactly where the property is, with the District and Tax map and Parcel number. The landman should have this information. The landman should also be able to tell you if there is a permit(s) issued for this property, and if so the permit number(s).
Then go here WV Office of Oil and Gas website and look to the left side, Look for Database and Map Information. Then select Search Oil and Gas database, then select Search for Oil and Gas Permits. Put in the API number (ask again if you get this far and can't make it work). That should give the status of the well. If it is producing, you might find it in the part Search for Oil and Gas Wells. Production information always lags behind. The most recent information is for 2013. However the companies are required to report 2014 production by March 31 of 2015, and some report it earlier, so keep checking.
3) How to receive payments: I think you just have to wait for the company to send out division orders and then checks. Read on this forum about that. There is a big lag, for most people, from production to check. Again, the landman might have some information for you, or not.
Keep asking questions. Some of us know at least some of the answers! This is a complicated business.
Greg Watt said:
Thank you for your response Nancy. From what I have read your answer makes a lot of sense. I still wonder how we can find out about any such agreements for NPI that may have been made in the past. I guess the questions I have now are:
(1) How do you find out if an NPI agreement was made giving you an interest?
(2) How do you determine if a well is producing on the property?
(3) What steps do you take to receive NPI payments?
It seems as if it would be a breach of contract if the one with the leasing rights does not tell when the leasing occurs. For instance, if the party that negotiated the NPI loaned money to them for the right to receive the NPI, then they should have a duty to notify the NPI holder of drilling activity, etc..