Help! Held by production from a lease signed in 1973?

We signed a lease with shell on 11/08/2012 for 19.79 acres. We are supposedly an add-on to a unit. They sought us out for the lease!! Now they are saying that Vista holds our property from a lease my grandfather signed in 1973 for his 277 acres and this was in a pool of 3 other properties adjacent to me.

2 things about this are confusing me:
1. This property has always been on a separate parcel id. My dad acquired it in the 50's. (my dad traded his uncle 18 bred heifers for the property, but my dad was a teenager so it is possible that it was transferred in my grandpas name). So how is it even tied to my grandfathers parcel? The property was Transferred to us in 2004.

2. My grandfathers 277 acres were subdivided in 1989 when my dad sold it and the people owning those parcels are all leased differently, one is held by production from a vista well from 2010. One just signed with hilcorp and the third SAID he is leasing with shell also. So how were they able to lease again?

We leased with Vista in 2008 and were never drilled on so we were released in 2011. Man from Vista says we are not tied to them at all from what he can tell. Shell tells us that the burden is on us to prove we are not held by Vista. Vista is willing to release us but doesn't understand where the problem lies.

Another factor....We also own my father's farm nearby he purchased in 1969, which is also held by production from a 2010 well.....but, again, it was also always on another parcel Id. But I guess all 3 properties were once owned by my dad.....is that a factor??

My question is...... Is shell playing a game here? If they truly wanted us leased wouldn't they be trying harder to solve this conundrum? They have the pad, the road paved and are ready to drill. Hmmmmmm?

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Permalink Reply by Dion Warr on February 22, 2013 at 11:06am

Gas Heir:

Old HBP leases and identification of lands leased, retained and/or held by production from older wells has become more of a title curative nightmare as the plays have unfolded.  seeing as how some recent players that have moved into the area have been "burned" upon finding out that an older lessee/operator has alleged HBP claims that have subsequently proven out to be true, many companies have become risk-averse to acquiring a lease on lands that may be held by older leases or older production.  Where many of these new players have come from areas in which they have been used to fairly consistent reporting, the lack of consistent well history, production reporting (mandatory or voluntary) and other title vagaries has helped to create a climate where new players are just not willing to take a risk in paying significant bonus money for a lease on lands on which title may fail due to existing leases, wells, and/or production.

 

As several others have mentioned here, if the operator / purported leaseowner is willing to grant a release as to the purported "held" acreage, this seems like the most straightforward fix.  I would communicate this to Shell's personnel, lease broker or landman, and verify that if that release is forthcoming whether you would still have a deal.  Most large-scale operators seem amenable to that at present; some will even provide you with a form that will contain language sufficient to cure whatever potential problem that they have identified for execution by the purported working interest owners and/or lessees and/or sublessees.  If there are other title issues, have them brief you on those - some you may be able to fix, others you may need to retain legal counsel to see through - but you won't know unless you ask.

 

I would normally tell you in the areas in which I usually work the landowner or mineral owner does not have to be so proactive, but where the creation of a drilling unit and recovery of drilling costs and revenues is so incumbent upon the inclusion of established viable leases, and where the maintenance of leases (particularly older leases) can get so fuzzy, it would behoove you to work on your own behalf - many operators are much more willing to put off "potential problem tracts" at this time in favor of working on drilling their wells on tracts with clean title.

Permalink Reply by Gas heir on February 22, 2013 at 2:21pm
Thanks - our biggest problem is getting anyone to get back to us. We haven't gotten a straightforward answer from Long Consulting (the company doing the title searches for Shell) Vista doesn't see the problem so I need Shel/Long consulting to give us some specifics. Have considered calling Hilcorp because they were pursuing us also this fall. But we went with Shell because of the proximity of the new pad. When I talked to Shell landman the other day he said we were an add-on to the unit. what does that mean? And can't they change units up until the time of production? My thinking is....if we don't get this settled quickly they may not include us......
Permalink Reply by Gas heir on February 28, 2013 at 10:53pm
Update: this may affect many!

Timeline:
1. My grandfather signed lease in 1973.
2. lease was pooled with several other properties 1982.
3.well was drilled 1983, but never went to production.
4. on 9-1-1995 there is a violation recorded on PA eFacts that the well was not installed in a permanent manner.
5. 1-30-1996 was a permit to put the well into production by a local individual selling the gas to Elder's sales and service(farm implement) and the church next door. They both PAY for the gas. Talked to both of them.

I, nor, anyone on my family have received any money from this well.

What is my next step??

Just found out Chesapeake bought the well as of 2-13-13. Have been playing email tag with them.

Any FREE help would be appreciated. Will take it to a lawyer if I don't get a resolution in the next week, but exhausting the free help first!
Permalink Reply by ShaleAdvice (Steven C. Townsend) on March 1, 2013 at 3:49am

First, do not sign any document or cash any checks received.  By cashing checks you could be agreeing to extend the purported lease.  Second, you need to demand an accounting.  This will demonstrate the lack of payment in producing quantities.  Third, you should hire an attorney to resolve your situation, but I doubt you will need to spend anything close to $4000 to get your answers.  They can always change units, but if the lease is invalid it cannot be placed in a unit.  I haven't read the entire thread, so if I missed something I apologize. 

Permalink Reply by Gas heir on March 1, 2013 at 4:06am
Thank you. That was very helpful. Waiting to hear from Chesapeake........
Permalink Reply by ShaleAdvice (Steven C. Townsend) on March 1, 2013 at 4:10am

Also, if it wasn't producing and it was orphaned, the operator can face fines for failing to plug it.  Don't let CHK or Longt trick you into believing anything until you get documentation and have it reviewed by someone qualified.  What county are you in?

Permalink Reply by Gas heir on March 1, 2013 at 4:27am
Mercer county. New Vernon township. Apparently from talking to the locals, the well was drilled by someone, my cousin thinks it was Atlas. He lived on the farm at the time. It sat there until 1991 when his parents filed an affidavit of non production. ( I have that) then repasky enterprises bought it and opened it up in 1996. That permit is on record. Then Elders started buying the gas in 2005. There are about 5 of us that were in this (supposed)pool that are being held up. I don't know how we, my father or myself, never knew about it. I guess they don't have to notify anyone when things transfer owners. Now somehow Chesapeake owns it.

Now my next question is for my friend who lives in the house of the original property that the well was drilled on.....she has free gas but does not any longer have the property that the well is on....her uncle owns the property that the well is currently on, he gets a pittance of royalty money every 6 months or so......is she held by production also, or does she have any hope of getting a shell lease?
Permalink Reply by D Thomas on March 1, 2013 at 12:26am

Better get a good attorney to search your property deed title and all at the courthouse.. there's too much at stake to lose the game.

Permalink Reply by Gas heir on March 1, 2013 at 12:52am
Already searched. Results are as stated. How to proceed in fixing.....is the question. Attorney will charge my $4,000 to find what I found doing my own research. I have all the documents!
Permalink Reply by Nancy Mosley on March 1, 2013 at 3:36am

You could call the Attorney General's Office in your state. They might have some ideas.

Permalink Reply by Willi West on March 1, 2013 at 4:23am

I'm having trouble understanding.  You say you have done a title search and have all the documents.  But you say in the original post that your father acquired the property in the 1950's but maybe actually it was your grandfather that took possession.  This is a key question--exactly when and how did your father acquire it?  And did your grandfather own it when the lease was signed in 1973?

Second problem--you say Vista is willing to write a release.  So why not just do this?  Wouldn't this solve everything?  Seems like you could pay whatever Vista asks to get this, and be way ahead.

Permalink Reply by Gas heir on March 1, 2013 at 5:30pm
Willi

Not that hard to understand.....when I first posted one week ago I didn't know when the deed was transferred. Now I do... It was transferred to my dad in 1974 after my grandpa signed the lease with royal resources.

Secondly......last week vista owned the well. This week Chesapeake does! They bought vistas interest in these old shallow wells. Things are moving quickly in the gas and oil business!

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