Question about a mess

 Here's the deal a tract of land of land  about 100 acres was leased and a well was drilled upon that land. The land was then chopped up into smaller parcels, the lease was reassigned to a  company registered in Ohio as a LTD with fictitious names and later was voided by the Ohio Secretary of State.  The lease recording ends there with that now defunct LTD. However one of the individuals bought the parcel of land where the oil well is located  then bought the well upon his tract of land and is still a producing well.

  A biggie here, he thinks he has the lease but there is no recording of the lease ever being assigned to him. No mention of mineral rights was suggested in any of the chopped up parcel that were sold.

  So whats the answer? Does he get the whole full tract under the original lease that was never recorded as being transferred to him? Will he get 20 acres surrounding the well only freeing up the other parcels to the other land owners?  Other outcomes?

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Permalink Reply by Kathleen on June 23, 2012 at 6:44pm
If it was voided by the state I wouldn't think it would matter if he found it or not. Each deed for each landowner would not show a lease either so my guess is each new landowner has the rights to the minerals beneath the land they purchased out of the tract.
Who did he buy the well off of. If it was still producing wouldn't someone have received royalties or is it just producing for the home?
Permalink Reply by Billy Park Whyde on June 23, 2012 at 7:18pm

He bought the well from an attorney , the attorney connection I have no knowledge of, the attorney could have bought the well himself without the mineral rights . At present time land owner is getting the royalties, but in lease transfers there was a 1/32 override kept. I guess paperwork isn't the greatest thing oil and gas companies are not good at. 

Permalink Reply by Calla on June 23, 2012 at 11:23pm

When there is no mention of mineral rights, Ohio assumes that they transfer with the property to the new owner.

I know this for two reasons. I bought 10 acres that was a 100 acre tract with a well. We were all told that the mineral rights were already sold. It turns out that the seller didn't know the difference between selling and leasing. Nothing was mentioned in any of our deeds about mineral rights.

After some research, we are all now receiving our share of the royalty checks. The rights transferred with the sale.

The second reason that I know this is because my kid is in law school. She just learned about Ohio law in contracts, and leasing class.  

 

Permalink Reply by Billy Park Whyde on June 23, 2012 at 11:35pm

If you did not get the parcel  that had the well upon it  you still received a royalty? If you would be getting a royalty then the land would have to be under lease then. 

Permalink Reply by Calla on June 23, 2012 at 11:42pm

Yes, the well is on a 10 acre tract behind me. I receive royalties for 10 acres. Some neighbors get a check for 15 acres, others for 5.  We are held by production with the original lease from 1976. We were not able to get in on the new leasing boom.

If the mineral rights  had been sold, there would have been a separate mineral deed. There isn't one for us. 

We also just learned that it is the land owners responsibility to contact the oil company to claim the royalties. If you don't do that, they continue to send the check to the previous owner. 

  

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on June 24, 2012 at 12:16am

If royalties are being paid it is held by production.  The mineral rights being sold has no bearing on the fact that the well is still in production.  If the old lease exists and is recorded the operator has a right to continue producing that well.

Permalink Reply by Billy Park Whyde on June 24, 2012 at 12:56am

Let me try to throw the question the LEASED LAND regardless of being split into different parcels places those parcels under the lease as the entire leased acreage is still one lease. 

 As long as the whole original 100 acres is being held by production of that one well. However the question remains as to who actually has the lease, since the last recorded leasee is not in existence? 

Jim ShoosPermalink Reply by Jim Shoos on June 24, 2012 at 9:00am

It's called "merger of title".  The guy who bought the tract with the well, and who allegedly "bought the well" more than likely has a "bill of sale" from the company that previously owned the well.  Defunct or not, the previous lease owner who owned the well has to be the entity that sold this property owner the well and that bill of sale more than likely has language that served to transfer the lease to the property owner/well purchaser.  When the property owner who presumably owns the mineral rights acquires the lease/well the title merges into him.  It is of no consequence whatsoever that the bill of sale or other transfer document was never filed of record, other than the fact that when this current owner goes to sell the property (assuming the well is still producing) he may have trouble establishing his ownership to the well since nothing of record was ever filed.  There is also the potential that the defunct Ltd company could sell the well to somebody else (fraudulently).  If this NEW buyer is without knowledge of the prior transaction then he would qualify as a good faith purchaser and if he gets to the recorders office first with a valid transfer document he could possibly displace the current property owner in terms of a claim of ownership to the well. 

Since all well operators have to be registered with the State and bonded in order to operate a well it would be interesting to see what the ODNR shows on their books in terms of the well ownership/operatorship.

Permalink Reply by Billy Park Whyde on June 24, 2012 at 9:47am

Ok Jim but does this mean the well owner would have the mineral lease control of the whole 100 acres since he has the producing well. Could he not lease the whole 100 acres for say the Utica formation if so, what would those that bought parcels of the tract be entitled to if anything? 

Jim ShoosPermalink Reply by Jim Shoos on June 24, 2012 at 11:23am

That would depend entirely upon what type of document he obtained from the prior lease owner.  My guess is that the current owner of this producing well is not paying royalties to any of the other owners of the original 100 acres, other than himself.  The poster doesn't state when the lease was originally entered into and thus we don''t know when the primary term expired.  If the original lease had some type of Pugh clause then any portion of the lease outside of the "producing unit" would expire.  If the lease had no type of Pugh clause then it could get interesting.  I suspect that the owner of the well has absolutely no clue as to what he/she might possibly have in terms of lease rights as to the remainder of the 100 acres... nor do the landowners of that remaining 100 acres since none of them would have access to reading what the well buyer has in the way of a transfer document.  That's the problem with unrecorded documents.

Permalink Reply by Billy Park Whyde on June 24, 2012 at 11:58am

Your correct "My guess is that the current owner of this producing well is not paying royalties to any of the other owners of the original 100 acres, other than himself. "

  Original lease a boiler plate lease  Pugh clause = none. As long as gas or oil in paying quantities is the original lease. 

Jim ShoosPermalink Reply by Jim Shoos on June 24, 2012 at 12:03pm

I'll take your word on what the original lease language provides... that being the case then in all likelihood the entire lease would be perpetuated.  Going back to the discussion, whether or not the owner of the well is the owner of the entire lease covering all 100 acres would depend on what the document transferring ownership states.  Some lawyer is going to charge somebody a whole bunch of $$$ to sort this out.

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