Is a “Subsequently Created Burden”, as mentioned in an Oklahoma pooling order, the same thing as a “Subsequently Created Interest”, as defined in the Production Revenue Standards Act? If not, how does it differ?
close. A subsequently created burden is similar to a subsequently created interest under a JOA. Its a burden, such as an orri, that is created or conveyed after the pooling order is issued, and when the respondent elects to participate. A subsequently created burden under the PRSA is an orri that is created. It could have been created prior to the well being drilled.
So can a royalty interest on a lease ever be considered a subsequently created burden? Am I not free to sign a lease with anyone I choose after the pooling order has been issued, even at a higher royalty than is being offered in the pooling?
You are free to lease immediately after the pooling order goes out, but you only have the 20 days in which to get it leased and the lessee gets it to the courthouse, so very short time frame and cutting it very close. If they don’t file in time, then you may get stuck with the minimum bonus from the pooling instead. The lessee also has to inform the operator that they own the lease by 20 days. Lots of places for the timing to go not in your favor. You had best get proof of filing if you want to go that route. Otherwise, stick with the pooling and get your certified letter of acceptance done within the 20 days. I usually try to get it done within 10 days.
Randy: You can have an agreement to lease to whomever you like as long as it is within 20 days of the date of the Pooling Order. The lease does not have to be filed at the court house. It doesn’t even have to be executed. In Oklahoma as long as it is what we call “an arm’s length transaction” it is valid. But the lessee must notify the operator that there is a transaction and must do so within that 20 day time frame set for in the Order. And at some point there must be notification to the operator of the lease burden so a correct division order can be issued. If the royalty on the lease is greater than anything provided for in the Order, the difference is a subsequently created burden, ie, created after the terms set forth at the OCC hearing. Should your lessee decide not to participate under the terms of the Order, your royalty will be reduced to the highest royalty set forth in the Order.
Thank you for the clarification about filing timeframe.
Todd, thank you very much for the explanation!
there may be some confusion about the point of a subsequently created burden. If A participates under the pooling order and fully partipates in the Smith no. 1 well, then creates an orri after that time to X. Subsequently, A decides he doesn’t want to participate in the Smith no. 2 or No. 3 well, and the interest is “turned back” to the operator. That orri to X is a subsequently created burden, and the operator takes this nonconsent interest free of the orri to X, because it was created after the pooling.
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