Maybe you all can help me understand if I have recourse or not. Midyear in 2012 I was contacted to sign a lease from EoG as they were looking for heirs to my father who had passed away a few months before. They did locate me and after negotiating a lease and signing it Oct 2012 I found out that they had been producing from the units (three of them) for months already (and the vast majority of output had been in the first six months and before I signed the lease). I naively think that since I owned the mineral rights (royalty) they would have had to pay my portion of the previous production. They informed me that I was out of luck. So my question is when one signs a lease (two year lease in this case) and there was already production, is one entitled to royalties and or any compensation on previous production? And if not then who gets the royalties that were not paid on my portion?
There may be circumstances in your situation upon which EOG based their claim, or this may vary depending on which state it's located in. Yet in general...
Where a mineral owner hasn't been located or identified the producing company is required to set aside that portion of the production proceeds. These are to be held "in suspense" pending the identification/location of the proper owner. That owner would then receive those fund after they've been identified. In your case, you may need to contact an attorney if there was a meaningful amount produced prior to signing your lease. Though start by asking EOG to clarify exactly why you are not entitled to those funds which should have been accruing and being held in suspense. Good Luck.
Thanks. State is TX and they indicate that according to state law they don't have to pay.
Oh, they definitely DO need to pay somebody if they included the tract of land underneath which your father owned minerals in their drilling unit without leasing him, and then drilled a well or wells that is/are producing. But I feel like there is some information missing here. When they said that you were "out of luck," you should have asked them "Why am I out of luck?" When they said that they did not have to pay you under state law, you should have asked, "WHICH state law?" Surely the Lease was not backdated, was it, or did not contain an Effective Date that went back in time to before the began production?
Dear Mr. Ditto,
Good thing that your lands are in Texas, because that is my long and strong suit.
Although lands and interests under which you owned a mineral interest were pooled, your mineral interest was not pooled since no voluntary pooling transaction (like a pooling clause in a lease) existed. Texas does not enjoy equitable pooling.
If the wellbore did not have a take point on your lands or within 330' or 467' (depends), then you have no claim to production. If the wellbore did have a take point as described above, then you have a claim for production.
Texas law is clear that you are entitled to receive production going forward from the date of ratification of an unit, or inclusion of your mineral interest in a pooled unit.
The law is also pretty clear on who gets the production. The operator is entitled to production less burdens. In this case, I guess you can say that what you are being paid on now, is the same interest that they kept.
This is real bad form for an oil company to exhibit. If the VP of EOG were aware of this situation, he could override (if he chose) the decision that his people have made.
Many will say that this is not just. Well, when you go to court, you go to a court of law, not a court of justice. There is a huge difference. With all of its built in problems, our judicial system is still the best one in the world.
This is also a warning for those who sign without knowing all of the facts.
So, there are still some items to know to find the truth on your particular situation. You might want to get an attorney involved. There are some things that an attorney can do that normal people simply cannot get accomplished. I do believe that this is one of them. Be prepared that the attorney will likely want to take this on a retainer basis if there is enough money involved.
Your last option is a MIPA action, which could be long and very expensive. Sadly, MIPA does not take care of already produced hydrocarbons, only production going forward. Therefore, it is an useless option.
Here are a few links that rudimentary describe Texas pooling.
http://www.mineralrightsforum.com/profiles/blogs/rule-of-capture-re...
http://www.mineralrightsforum.com/profiles/blogs/the-basics-of-pool...
http://www.mineralrightsforum.com/profiles/blogs/pooling-in-texas-p...
The last thing to look at that I can think of is the Division Order(s). Were they effective as of date of first production or some other date? If dated effective as of date of first production, then maybe a lawyer can argue that on your behalf.
Buddy Cotten