What % must be leased to apply for permit?

Shales Cline Shale
1

Hoping one of you smart folks can answer this:

Assuming there are multiple mineral owners for a tract. I've been told that if the operator can lease 2/3 of the tract upon which they want to drill, that they can then apply for the permit from the RRC (they don't have to get leases from ALL the mineral owners). If they get the permit, and then a producing well, then the UNleased mineral owners get paid royalties ONLY after all the costs have been covered.

Is all of this accurate? If so, what would the royalty % be (assuming different royalty rates for different leases)?

Thanks for your help!

Paige

2

Glad you posted that question. Was just discussing that very thing the other day. i heard if you don't sign the lease... you are S-O-L if that oil/gas company drills and produces. But those unsigned had/have the option to lease to another operator. then the operators fight it out. not sure this is correct... but it sounds like a mess. jhh

3

The way I have heard it explained is------ in the event of any unleased mineral acreage in a producing well, the royalties of that unleased portion go to an account in Austin and is held for a period of time and the owners of the unleased minerals must pay their percentage (from the division order) of all the cost of drilling and producing the well to start receiving their royalties. And if they do not act in this time period, their royalties go the State of Texas. John Cundieff

4

here a thought I have heard that only a mineral owner can keep a oil co from drilling on a lease what is the rule or law and where can we find case history of such law? this is something that I have not been able to get very few people to talk about. what if you were not offered a lease. and you know it. they say get att most dont want to fight the oil co not enough money for most situation.

5

Mineral ownership has dominance over surface ownership (in Texas) and a surface owner without the majority of the mineral interest has no say about whether his land is drilled on. It is possible for the surface owner to collect damages from the oil operator up to a point. Most oil companies want to be a good neighbor and extend common courtesies in repairing roads, fences, gates, and crops but there have many instances where a land owner went overboard with requests that wind up in the courthouse where they usually lose. I have had three pipelines cross my property and two seismograph surveys and would have some erosion to occur along the pipeline easement or some trash left behind but with a phone call and a civil request to fix the problem , they have quickly responded.

6

Thanks, guys, for your responses!

7

I'm not sure of the correct answer, but if the unleased mineral owner was required to pay their share of the well costs it would seem they would be buying a working interest in the well. If the unleased mineral owner owned 10% of the tract and paid his 10% of well costs I would expect him to receive 10% of all oil and gas less his share of operating costs.

8

Larry, I agree with your thinking. The unleased mineral owner would indeed have a working interest and with that he would also pay his share of other cost like taxes ,transportation, maintenance ,salt water disposal ,production expenses etc.. And I have know of a couple small operators gamble by deliberately refusing the bonus money and betting on the well paying more in the long haul for their working interest.