Falsifying Production?

I think that the oil company that is holding our oil rights on production may be falsifying their production.  Is there a way to check that?

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Permalink Reply by James Brink, Esq. on March 28, 2013 at 6:46am

I believe the case you cite is Washington County, Pennsylvania.  I am certain that Ohio has a similar line of cases stating that the lease can remain active in the secondary term only if oil and gas are produced in paying quantities.  While the landowner may be receiving nominal payments, the question is whether the well is operating at a loss.  During this Marcellus/Utica boom, many of the old shallow HBP leases suddenly became profitable because then they became a commodity that could be assigned to another operator. 

Permalink Reply by Gunner Ostergard on March 28, 2013 at 7:00am

Esq.  really !  "lease suddenly became profitable because then they became a commodity"  A well becomes profitable when it produces more oil or gas then it costs to produce it.  You are either a moron wanna be lawyer or a genius lawyer who works for the gas companies. 

Permalink Reply by Farmer John on March 28, 2013 at 7:05am

or maybe you just misinterpreted what the gentleman stated,  Let's give him a chance to clarify it.  Mr. Brink?

Permalink Reply by James Brink, Esq. on March 28, 2013 at 8:07am

I guess Gunner cannot understand irony.  The statement "suddenly becomes profitable" does not imply that the well becomes a gusher overnight.  What it means is that marginal wells that would ordinarily be plugged are kept online in order to hold a lease by production. I would submit that numerous wells are not profitable but royalty payments are made nevertheless in order to maintain HBP status. In fact, I have assisted landowners to nullify leases when only token payments were tendered.  I hope Gunner can understand this now.  By the way Gunner, maintaining civility is the mark of a gentleman.

Permalink Reply by Greg K on May 16, 2013 at 9:09am

I got it!  ( the irony that is )

Permalink Reply by John Goold on March 28, 2013 at 7:22am

The two wells, one holding each parcel are paying a royalty check of around $150/year.  They have also refused all requests for us to hook up a gas line to the dwelling which it states in the lease that we can have all gas produced by the wells on the property free of charge to power one dwelling unit.  To my memory there aren't even any gauges at the wells.

Permalink Reply by John Goold on March 28, 2013 at 7:24am

The company does make sure they go out there on a regular basis and do very visible housekeeping work such as fixing leaks etc. which I don't think even exist because there is no gas to leak.  They don't even have access roads built to the wells and when the first large truck in the last 15 years went to the well it tore our property up badly.  That case is Washington County PA.

Permalink Reply by John Goold on March 28, 2013 at 7:36am

The question based on the theoretical production numbers there is around $1200 worth of revenue per year with the two wells.  Is that enough to be a payable production amount.

Permalink Reply by Gunner Ostergard on March 28, 2013 at 8:58am

"Esquire"

You can write some one a check for $1 a month or $1000 a month,  that does not mean that  a well produces gas or oil.  And you can call the check a royalty but it you can not back it up with viable production data then it is just a vain attempt at extending a lease which has terminated under it's own terms.  Writing a landowner a check every month does not hold a well by production,  it only muddies the water a little bit and enable the over staffed legal profession an opportunity to make a buck.

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on March 28, 2013 at 9:45am

?????

Permalink Reply by John Goold on March 28, 2013 at 11:34am

And you can report all the production you want to the auditor's office and that doesn't mean it is producing or even producing in a payable amount.

Permalink Reply by Billy Park Whyde on March 28, 2013 at 11:58am

I would say yes many older wells only produce perhaps a tank per year. In some cases older wells were bought buy landowners to keep free gas. So in my estimation they would be producing as no law to my knowledge dictates how much nature must do to shove a quantity of oil or gas to the surface.

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