I have mineral rights in areas that have been leased since the 1930s and are producing between $10 and $200 a year in income. They are in counties (Payne, Creek, Pawnee) where there is a lot of leasing activity for horizontal drilling. What happens if someone wants to drill a deeper, more effective well on the property? Or pool the property for 640 acres? Would the company operating the lease as a "stripper well" sell my lease to some other company that wanted to drill? Would there be any opportunity for me to renegotiate the lease? Would they have to inform me if there was a transfer of the lease or pooling in the offing?
I inherited these leases and I do not have a copy of the lease, so I have no way of knowing what the provisions are (ie 1/8, 3/16 etc). In some cases I do not even know who the leasee is, only who pays me.
A company that wants to drill a deepen well can do a "farmout" with the company that has the stripper wells, and drill deep. The original company would not have to sell, but they could. There is no opportunity to renegotiate the lease unless there was a "depth clause" in the original lease. If it was written a generation ago, it is not likely. They will not notifiy you if there was a transfer of the lease or a farmout, but you would be notified in case of pooling.
If you have the legal descriptions, you can go to the county clerk offices and look up the lease. This information can be searched online (OKCOUNTYRECORDS.COM). The search is free, but a subscription is required if you want to look at the lease itself. If the leases are really old (> 20 years), it is likely they will not be found on the online search.
I encountered a very similar situation (in Texas). The original lease was signed in the 50's and no one had a copy. The operator had changed hands countless times. With a copy of the lease in hand and just a little bit of research, I was able to determine that the current operator really had no legal right to be operating the well(s) because the terms of the lease specified that the lease would terminate by its own terms if there was a period of non-production for 3 months, or 6 months, cannot remember the exact time frame. It was easy to find records that showed the well(s) had produced absolutely nothing for extended periods of times, many times over the years. So a lawyer filed the necessary papers to terminate the old lease. Of course it would have been a totally different situation if the wells had produced continuously, even minimally; and, it could be argued that by cashing the royalty checks the owners had in essence "extended the lease", but it was such a grey area that the operator easily gave up the lease and discontinued operation.
Thanks JW and Ron. That clarifies things.
Another question. Does a lease terminate automatically if there is no production, or do you have to file papers? If you have to file is there some boilerplate you can use, or do you need a lawyer? My properties probably are not big enough to justify a lawyer.
They don't terminate automatically. The best thing to do is to write the oil companies and request a RELEASE based on lack of production.
If they cooperate, you need to file the release in the county where the minerals are located. If they refuse to cooperate, you may need a lawyer, although there are possibly other options.
Mr Anderson,
It sounds like it might be a good idea for me to review our interests that were producing and obtain releases.
Can you expand slightly on the "other options?
Thanks!
Rick
Cleary, requesting a release is the first and best option.
If you get no response, it doesn't cost very much for a lawyer to send HIS version of the request, which is usually a little more threatening and more effective.
If there really has been no production, and they really have no case, but they do not respond to the lawyer's request, you can have the lawyer file a suit and include payment of all YOUR legal expenses.
If you don't feel you want a laywer, it's possible to file an "Affidavit of Non-Production" yourself on the property. I don't believe this solves the problem, but it does alert other oil companies, interested in leasing, that your property is not being produced and could be available. Perhaps someone else could comment on this affidavit and any benefits/limitations.
Thanks,
I was just wondering what options were possible as I think I have a dozen or so sections in that situation. If a letter from me did not get action, possibly one from our lawyer would prior to a suit.
I have one that was plugged late last year. Do you see any reason to bother with a release from the previous lease holder if it was subsequently leased to another party since it was plugged?
Yes, I would do a letter first, and if you get no response, get a lawyer to do the same.
Regarding the well that was plugged last year....if the previous owner ASSIGNED his lease to a new lease holder some time AFTER plugging the well, then I would object. (The terms may not be favorable, and you might do better, as well as collecting bonus money.) However, if you are saying that the new lease holder came to you, paid you bonus money, and you signed the lease, then I don't believe there is a need for a release.