Be aware of the following language in a top lease. This may not stop a current operator from drilling, but the operator you sign a top lease with can file a lawsuit and WILL result in holding your royalty payment until it’s settled. Any legal experts out there tell me if I’m wrong, but this is happening as we speak in Cass County, TX.
The Lessor understands a legal action may be filed on the mineral owners’ behalf seeking a judgment that the prior or existing lease to (XYZ Company) has expired, or in the alternative that (XYZ Company) has pooled the lease to them in bad faith. Lessor appoints Lessee as their special agent with full and complete power to take all necessary steps to obtain a release or judicial termination of the lease to (XYZ Company) on the leased premises. Said power of agency shall include the power to hire and retain counsel to file the litigation in the name of the Lessor; and the power to pursue such legal action in the courts of the State of Texas in the name of and on behalf of the Lessor
They were trying to toplease even after the current operator was building a pad. They are about to start producing within the next 2 weeks. Some of the people that signed a toplease with the new operator are already names in a lawsuit. Word is that their royalty payments will be held up while the lawsuit is going on. Just sounds like dirty business to me.
There’s a fairly new found field in cass county tx between lone star and linden called hidden rock cotton valley lime. I’m just trying to reach out to mineral owners to be careful when negotiating these leases and to get an oil and gas attorney to review. There are two main operators leasing up this land and they are cutting each others throat anyway they can, with no care or regard to the mineral owner. That’s what it seems in my opinion.
Sometimes the situation is that the lease had expired due to lack of production or that the old lease has a Pugh clause which terminated lower depths or acreage outside of a unit. Many operators refuse to file either a whole or partial release, banking on the fact that mineral owners do not realize the lease has expired in whole or in part or do not have the financial wherewithal to force the release. The operator does not want to pay new bonus or higher royalty rate for a new lease. There are some valid companies which will pursue getting the release, but only where they have a top lease. It is expensive for them to pay those legal fees. Mineral owners need to stay on top of their leases, well production and operations so they can evaluate the status of the lease and what will benefit them the most.
I agree. It is always best if a mineral owner consults an oil and gas attorney to review the language in both the top lease and the disputed lease, as well as all related facts.
Even if the top lease didn’t have that clause in them, the operator would be justified to hold the royalty until they figured out which lease is valid, what the royalty is, who is responsible for paying the royalty…
This clause just tells you what the lessee can do, which they could do anyway.