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 John Goold on April 1, 2013 at 3:59pm

In my case I believe they had knowledge of the shale and its potential when they had great grandmother who was 88 at the time sign the lease, they had her sign leases in about 13 years before and they were utter failures with almost no production and were plugged.  Once the presence and the value of shale was discovered in the area in the late 1970s the first company came back again to promise my great grandmother great riches through oil wells.  She died without realizing more then $10/month.  The first company went bankrupt before they paid the driller and stuck us with the bill, the driller sued us and won.  Another company picked the lease up out of the carcass of the bankrupt company and the wells just about died, both had zero production even for at least a year during that period.  The second company gave the lease to a third company who happened to have the same owner and a bunch of falsified production began.  The falsified production was used to preserve what little production was left in the well so production could be demonstrated once it was necessary to do so.  Now that we are after them they started demonstrable production with the wells but I don't think they can survive the past track record of 30 years of minimal production.  An oil company is supposed to maximize production and income for a homeowner not baby it out to maximize the life of a well to hold a lease for speculative purposes.  This is going to be a bad fight because if that company can hold the lease on production they may get up to 1.5 million dollars by selling the deep rights and have land they can drill anywhere and even strip the entire land of its groundwater if they drill their own water wells because even that is made clear in the old lease.  No structures can even be built on the land because the oil company doesn't have to respect their existence if they didn't exist at the time of the lease.  We need to get out of this lease if for no other reason then the unfriendliness of its terms.  An 88 year old lady was duped and it has impacted three generations of elderly women in my family and it enrages me.  The company was so cheap that they didn't even falsify payable production probably to keep from paying taxes and from paying us a descent royalty.  If they would have falsified $15,000/year worth of production instead of $1500/year worth of production we probably wouldn't have a leg to stand on right now.

Permalink Reply by Tom R on April 1, 2013 at 3:55am

This is in Pennsylvania, from a lease on state forest lands. The whole document can be found with the following link,

http://www.dcnr.state.pa.us/forestry/samplepage/naturalgasexplorati...

Permalink Reply by John Goold on April 1, 2013 at 3:54am

That is fairly good language and it spells out payable production and what should happen.  The problem with a lot of the older leases is they don't define what production and payable production actually are so it has been left up to a lot of court interpretation which most state laws require an oil company to act prudently.  Generally a business doesn't maintain a part that loses money year after year after year unless there is some special reason.  The courts and the laws have frowned on oil companies that have held money losing wells for speculative purposes because for a lot of reasons the signatures were obtained on these by misleading landowners.

Permalink Reply by John Goold on April 1, 2013 at 5:21pm

I have a question.  If the well is showing pressure on the gage that is fluctuating rapidly between zero and ten is that sufficient pressure to provide gas service to a cabin?  The gage clicks when it goes to zero and then goes up to ten and then clicks back to zero.  Also is that good pressure?

Permalink Reply by John Goold on April 1, 2013 at 5:22pm

The other well has a chart drawer, probably to fight us in court.  It also shows pressure probably of around 8 or so.  Is that good pressure?

Permalink Reply by Gunner Ostergard on April 2, 2013 at 12:10am

I was told preasure from old gas wells from the early 1900 may be around a couple onces,  not a couple pounds.  And I was told that 8 pounds of preasure is commonly the actual preasure of your main company line,  not your well.  It is not uncommon for old gas companies to back feed gas from their main lines to the old wells.  This helps make the appearance of production and also extends the apparant life of the well so the operator does not have to pay for the expensive of capping in anytime soon. 

 

John,  in all those years,  were the lease terms ever changed and signed off by another member of the family?  Did the original lease have a unitization clause?  Do you have documentation of the time period when the well did not produce? 

Permalink Reply by John Goold on April 2, 2013 at 12:21am

So by photographing that chart I may have actually managed to photograph them feeding gas back into the well?  Nobody ever has signed off on the lease since great grandmother.  What is a utilization clause example?  The lease terms were never changed nor signed off by anybody in my family.

Permalink Reply by John Goold on April 2, 2013 at 12:42am

There are lots of witnesses who have never seen or heard or smelled anything at the wells through the years.  This land is a popular hunting area so there are lots of different people around.

Permalink Reply by Gunner Ostergard on April 2, 2013 at 2:56am

The term is unitization and the horizontal wells that are being developed almost always unitize surrounding lease parcels to make the most use of the well.  These old leases most often did not have a unitization clause,  so your lease as it stands is useless to the deep drillers as it stands,  Someone would have to sign an amendment to the lease and anytime someone needs you to sign something is when you ask for boatloads of money.  Do you have any documentation early in the lease when it did not produce for a year?

Permalink Reply by John Goold on April 2, 2013 at 3:05am

Yes we have documentation of zero production.  There is a utilization clause but the term it uses is pooling.

Permalink Reply by Gunner Ostergard on April 2, 2013 at 3:26am

Did you get see my link about a lease becoming "at will" when producion stops and later starts?  The case occurred in PA but it could be very promising to you.  States often look to neighboring states when they are dealing with something new.  Please read this link carefully.

 

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

 

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on April 2, 2013 at 3:13am

Nobody is getting boatloads of money for lease amendments.  And companies are now looking at downspacing individual units, so if you have a 160 acre unitization clause they can pretty much do what they want without amending your old lease.

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