Are you Held By Production?

Berk Bossard posted the following article on the Crawford Co page.  Thought it would be good for everyone to read.

http://www.hh-law.com/News/20111103-Non-ProductionDuringSecondaryTe...

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Permalink Reply by Billy Park Whyde on February 3, 2012 at 4:35pm

Ok here is a thought provoker.  Some individuals bought the oil wells on their property. When they di they thought that was the end of it without thinking about the lease. So what we have is the landowner bought the working interest only and not the lease. 

  If the lease read as long as gas or oil is produced then you pull the plug on it and you get the lease.  What do you think about those apples? However some leases  read as longer as oil and gas is found. Well if your the 100% working interest holder you decide as the lease holder has no working interest in the well you get the lease back by saying it capooey? What ya think of those oranges?

  Hmm what say the thinkers in here?

Permalink Reply by caualie on February 4, 2012 at 7:29am

 I say there's a lot of questionable situations out there. Here's another.  An Ohio landowner I know has 70 + acres they've owned for 20+ years. His property came with a 1960's lease & a pipe sticking out of the ground. The owners who signed the lease in 1960's also owned a 100 acres several miles away refered to as tract 2 in the same lease. Tract 2 has a producing well. The lease lists the units as 70+ acres (tract1) 100 acres (tract 2).  Fast forward to 2012. The 2 tracts have been owned by seperate parties for years, & on top of that odnr. lists the wells as being owned by seperate companies. The well on tract 1 was listed simply drilled with no production ever. The well on tract 2 has a production history through today.  Obviously this lease was split somehow at some point in order for 2 different unrelated companies to own the 2 wells drilled from the same lease. So is tract 1 in any way impacted by what happens on tract 2? Tract 1 has never received a dime from the well on tract 2.

Permalink Reply by Billy Park Whyde on February 4, 2012 at 8:05am

WOW and I thought I threw out a situation! The lease may have not been split but rather the working interest was reassigned. 

Permalink Reply by Gunner Ostergard on February 4, 2012 at 7:56am

Jim,, thanks for posting it here.  This is a very important case for the landowners and one everone should be aware of

Permalink Reply by caualie on February 5, 2012 at 4:25am

 Yes , thank you to everyone who shares good information on this site. I shall pass the recommendation along, though I personally have no knowledge of how you'd go about following a lease from it's initial recording through today. Here here to the good lease lanquage. I was just a kid when my Granddad signed a lease on the farm. The main topic of discussion was not having to bring wood & coal into the house anymore. That was probably the focus of many landowners back then who were getting on in years. I also recall that he was much more concerned about what the land man said than what the actual lease said. But a year later when the dozers showed up the land man was long gone, & they did whatever they wanted. There was no one to go to about problems & violations of the agreement. Today those wells turn out a pittance of royalty, they've changed hands more times than anyone can count. The seperator & tanks are rusty , surrounded by weeds, & sit on rotted out timbers,held upright only by the piping, I suppose until that too rusts off. But be sure if the horizontal guys come around they'll be there to cash in. If they haven't already & his heirs just don't know about it. One thing I'd suggest just from those memories, is insist on a contact name & number be in your possession at all times, & that it be someone with authority over the operations, & put that requirement in the lease. All my Granddad ever got was "I just work here & doing what I was told"

Permalink Reply by Jim Litwinowicz on February 5, 2012 at 5:36am

caualie and all HBPd;  If you are held under a lease of an old well, you can go to DEP (in Pa) or the ODNR (in Ohio) and get the well's production reports.  See if the well ever went a few years without producing.  That may give you an out.

I have friends that did just that and found out the well didn't produce for three consecutive years and never paid any shut in fees as required by the lease. They have now retained an attorney to see if they an get out of the lease on a breach of contract issue.

No guarantees but worth a shot.

Permalink Reply by Gunner Ostergard on February 5, 2012 at 12:05pm

Jim is right.  Going to the Dep is a nice free way to get production information on old wells.  Look at your old well and there should be a tag with some numbers on it,  then take those numbers to the DEP and they should be able to provide you with production reports.

Permalink Reply by WLW on February 5, 2012 at 5:13pm

Our case drug on in court for 4 1/2 years. Won twice locally, but got overturned at the appellate level on a procedule error, not the evidence. They dropped the case 2 days before their third try when I found new evidence that blew them out of the water.

The appeals judges wrote: a dizzying array of evidence was adduced concerning the chain of title for the mineral rights and operational history.     What a mess.

Permalink Reply by WLW on February 7, 2012 at 4:06pm

Mark

I would have to know more about the way the arbitration system worked before giving a good answer to that. If you where to set down with your attorney's and a neutral party to work things out,  I would say yes. But again, I have never been in front of an arbitrator before.

I sure learned a lot the hard and expensive way.

Permalink Reply by Billy Park Whyde on February 7, 2012 at 6:18pm

I have been through a arbitration if your attorney can make a buck it is a win for him . You never know what can transpire a attorney can say hey they offered say $20K and they will pay for my expenses well you say hmm what you do not know is they would offer a lot more but your attorney is going to pocket it for him self as his fees.  

Permalink Reply by Billy Park Whyde on February 7, 2012 at 6:50pm

If the attorneys are doing their jobs it should never have to go to arbitration or court.  A court might be a better route depending on the money involved as a jury can sometimes stick it to a company. When a company agrees to arbitration in most cases it is to prevent a jury from being involved so you can hold a bit harder for a settlement. But as I said juries can be something an attorney can worry about. 

Permalink Reply by Jim Litwinowicz on February 8, 2012 at 2:54am

There are professional arbitrators and an organization of arbitrators.  You don't have to use your attorney. Most arbitration clauses I have seen either call for a single arbitrator agreed to by both parties or three arbitrators where each side picks one and then those two agree on a third.

The advantages of arbitration are that it is a much shorter process instead of lawyers gaming the system for years. And time is money so it is also much cheaper meaning a gas company cannot just outspend the landowner to a win.

The disadvantage is that if you lose its all over (assuming the clause calls for binding arbitration).  So make sure the arbitrator is knowledgeable on the matters at hand and fair.  And do your homework beforehand.

I don't which is really better.  The gas company has deep pockets and the best attorneys. But juries will tend to be for the little guy once you get to a jury.

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