Hi All :)
I have been reading about various companies testing out the lower layers of the Bakken - the Three Forks, etc. Have you or anyone you know/have heard of recently renewed leases and have the leases included wording/bonus $ that adds these layers below the Bakken? I am wondering if this will be addressed by the drilling companies in future leases/renewals or if it is something that will need to be requested by the lease holder?
Thanks :)
Dan:
If and when I start negotiating new leases, I will have a pugh clause inserted in the lease in order to protect the Three Forks or zones lower than the Bakken. If the lessor insists on the leasing all zones, the bonus amounts will also be adjusted to reflect this additional zone (s). To answer your question, I have not heard of any recent renewals containing this type wording. I am not sure how many lease renewals are taking place at this time. All I know is mine is expiring starting in December 2013 and in April and June of 2014. Lot's of leases in the Roosevelt and Sheridan County areas should be expiring this year and next so leasing, especially in the hotter areas should be on the increase. We as mineral owners need to be doing our own independent research in order that wise decisions can be made in the final negotiating process.
Thank you for your response :)
This brings up another potential issue- since much of the acreage is pooled, those that hire professionals to make sure their contracts include a Pugh Clause will be covered and those that dont will not? That is why I originally wondered if the drilling companies would handle the insertion of their own accord. I realize we shouldn't trust that they will but it just seems that it would be less paperwork, confusion, and problems for them if they handled it from the get-go.
Dan:
Negotiate your new leases on your own terms. You own the minerals so lease them on your terms.
Dan, you can't trust the lessee to put in a clause. There was a lady a few months ago who supplied the clause to be inserted into the lease for shut in, her version said no more than 2 years CUMULATIVE shut in and what actually was inserted was 2 years CONSECUTIVE. It changes the whole meaning with one word. With cumulative, the operator would have to get his ducks in a row, market and continue to market within 2 years after the primary term, or the lease would expire and some renegotiation could occur. With the word consecutive the operator need only produce the well 1 day every two years after the primary term to hold the lease forever, with no renegotiation. Operators can be a bit slippery, I doubt they would even operate the well for the day every two years but just say they did and send you a few dollars. There have been stories recounted here of the operator claiming 1 barrel of production when the valve was rusted shut and the well could not produce, just to maintain a lease. I would recommend an exhibit A added to the lease to prevent any "typos" or "mistakes" in the lessees favor.
Dan Huel said:
Thank you for your response :)
This brings up another potential issue- since much of the acreage is pooled, those that hire professionals to make sure their contracts include a Pugh Clause will be covered and those that dont will not? That is why I originally wondered if the drilling companies would handle the insertion of their own accord. I realize we shouldn't trust that they will but it just seems that it would be less paperwork, confusion, and problems for them if they handled it from the get-go.