What happens in a situation where an exploration company enters into a lease with 9 of 10 split-estate mineral owners to develop those minerals but one refuses to lease?
Can the exploration company still pursue development of those minerals, and if so, how are the mineral interests of the individual who refused to lease treated?
The answer depends upon the wording. Are all of you on the one deed together or did each of you inherit individually and signed individual leases? In many cases, the persons or entities that did not lease are then force pooled and business goes on as usual if a well is pending. The person keeps their mineral interests, they just have a pooling order instead of a lease.
Looks like Wyoming changed the Forced Pooling rules in 2020 to be less penalizing for non-consenting owners. These rules do vary by state. Previously, a non-consenting owner would not receive anything until the well had paid out 300% of the construction costs, but it looks like now the percentage has been reduced and the owner still receives some royalty.
In some states like OK, the pooling is a list of bonus/royalty choices that reflect the highest offers in the section of interest and the contiguous eight sections within the last 12 months. No penalty on payout until you get bonus. Other states have more onerous clauses that say you don’t get royalty payments until some percentage of the drilling costs are recovered.
Thank you for your response, M. I’m thinking of a situation where the various mineral owners of those same minerals are entirely unrelated. For example, four individuals with a 1/4-interest in a mineral right, and 3 of them enter into a lease with a producer, (completely independent of each other), but the 4th refused to lease their 1/4 interest. Is that 4th person forced to enter into the lease “pool”, and if so, what lease terms must they accept if the other 3 owners all negotiated different lease terms with the producer?
They would receive what the judges or commissioners would determine was “fair” at the order. Depends upon the state rules.
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