Proving production

Has anyone seen any case law regarding whose burden it is to prove production on an older shallow well?

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Permalink Reply by Finnbear on February 29, 2012 at 4:25am

A lot depends on the lease language for the well in question so this must be approached on a case by case basis. What may be defined as production in one lease may be entirely different for the next.

Permalink Reply by paleface on February 29, 2012 at 5:05am

 Are you being paid a royalty every year ?

Permalink Reply by Gunner Ostergard on February 29, 2012 at 5:19am

Actually most older leases just use the word production,  and in most cases,  production in paying quantities is assumed.  The payment of royalties is irrelevant.  The question was on actual production,  royalties can be paid with out actual production as easily as me sending you a check because you are so darn cute.

Permalink Reply by Jim Litwinowicz on February 29, 2012 at 5:38am

So I guess my check is in the mail???

Jim ShoosPermalink Reply by Jim Shoos on February 29, 2012 at 5:40am

Your question is...whose burden is it to prove production.  That would depend on whether or not you plan on filing suit against your producer should you not like his answer.  If you are the plaintiff you will have the burden of proof.  You can safely assume that 99% of the time a producer is going to tell you that they are producing in paying quantities (which in virtually every jurisdiction is the requirement).  Paying quantities merely means that the well generates revenues to cover the ongoing operating expenses on a monthly basis.  A producer is the only one that knows what his monthly operating expenses are for a given property and they aren't likely to share that information with you unless compelled to do so in a legal action.  Every property is different and every well is different in terms of what it costs to operate it.  You can make some assumptions as to the costs and you can extrapolate what the revenues are and derive a general sense of what revenues and expenses are.  If you think it's questionable as to profitability then you would likely have to file suit if a letter to the operator fails to produce the desired effect.

Permalink Reply by Gunner Ostergard on February 29, 2012 at 5:44am

Jim Shoos,  do you have case law to back up your claim that the landowner has the burden of proof?  I read somewhere otherwise,  but I honestly can not find it again.

 

Jim Litwinowicz - it's a nice big fat one !

Jim ShoosPermalink Reply by Jim Shoos on February 29, 2012 at 11:01am

Yes, its called the American Jurisprudence System.  The plaintiff in any civil action bears the burden of proving the allegations contained in the petition. 

Permalink Reply by Jim Litwinowicz on February 29, 2012 at 11:50am

Just for the fun of arguing...say Gunner has a lease that he wants out of and non-production his cause of action.......he would file either with the agency of jurisdiction or a civil action to break the lease. He would have to have some evidence that production has ceased...but the oil/gas company would then have to show there is production. Thus the burden of proof would fall on the company. Since they have to keep pretty good records, lack of proof of production would constitute lack of production.

Jim ShoosPermalink Reply by Jim Shoos on February 29, 2012 at 12:06pm

There is no "agency" that would resolve issues such as this as far as I am aware.  You would end up in the court having venue over the matter.  Mind you this all takes place after you have made your inquiry/allegation directly to the operator of the well and he either told you to go screw yourself or he provided you some proof of production and profitability that you do not consider as being legitimate for some reason. 

So you're in court after having filed your petition.  In civil actions the plaintiff presents his evidence as to why he/she believes that the well in question isn't producing in paying quantities.  If the plaintiff doesn't present any evidence to substantiate the claim then the operator/defendant merely demurrers to the evidence and the judge (assuming he/she agrees) dismisses the claim with no need for the operator to present any evidence whatsoever.  You don't get to just stand up and point over to the operator and say "you don't have any production or that the production you do have isn't in paying quantities".  You better be prepared to substantiate your allegations otherwise you're going to end up paying court costs and attorneys fees of the operator. 

Permalink Reply by paleface on February 29, 2012 at 12:26pm

When a gas oil company stops paying on production doesn't that void the lease ?

Jim ShoosPermalink Reply by Jim Shoos on March 1, 2012 at 5:13am

Short answer... NO.

Long answer... it depends on why they stopped pay royalties.  Perhaps the operator elected to shut in the well due to low gas prices in which case he would eventually owe the royalty owners a "shut in royalty payment".  Alternatively, a well could have a mechanical problem in which case the operator would have a reasonable period of time to resolve the issue.

Permalink Reply by oildude on March 1, 2012 at 6:13am

Jim

My neighbor has a well on his land that was drilled in the 40s. His royalty checks stopped coming about five years ago. He thinks the lease has been voided because they stopped paying. Last month his neighbor told him that a few years ago some of his neighbors bought interest in his well. A few weeks ago those neighbors recieved checks for back pay on the well but my neighbor who owns the well has not got a check and he has not even been contacted by the oil company. What do you think?

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