I have 30 acres with a HBP well on the property. I own the mineral and surface rights but because of this they are only offering me $1000 per acre at 12% royalties. Now out of the blue they send me a check for just under $1000 for estimated royalties from the old well. I owned property since 2001 and never got a check. They claimed they did not know property transferred. They said no good records were kept so they had to estimate the royalties. Then they send me some production statements. In the last year they claimed between 0 and 71 MCF per month. Beyond that they just sent me a sheet from the Ohio Division Of Geological Survey that goes from 1984 to 2010 that shows production from 620 to 5400 per year. I am not sure if that's in MCFs or not. Just sounds kind of fishy. Does this look like a valid HBP lease or am I getting the shaft. If they claim no detailed records then how can they prove production?
From the court case Gardner v. Oxford Oil, 7th district court of appeal:
"The Ohio Supreme Court's seminal decision defining the phrase production
in paying quantities is Blausey v. Stein
, 61 Ohio St.2d 264, 400 N.E.2d 408 (1980):
The term "paying quantities," when used in the habendum clause of an oil
and gas lease, has been construed by the weight of authority to mean
'quantities of oil or gas sufficient to yield a profit, even small, to the lessee
over operating expenses, even though the drilling costs, or equipping costs,
are not recovered, and even though the undertaking as a whole may thus
result in a loss."
1. See a lawyer, do not cash the check.
2. Check ODNR records like the others said, see what was reported to the state.
3. Since they stated they have no accurate records, you should have a good court case to claim no production.
Also note, In the same court case mentioned above, gas provided from a well for the benefit of the homeowner to use, does not count towards production.
"In Yoder I,supra, the Fifth District held that non-commercial use of free domestic gas by a landowner did not constitute production in paying quantities pursuant to the habendum clause of an oil and gas lease."
Thanks for all that info. The only detailed records I got as far as production from the company holding the old lease was from may 2012 to July 2013. One month showed 0 MCF for production and the others ranged from 35 to 79 MCF per month. I think these were estimated based on pressure and orifice size and temperature as the meter does not seem to have worked for a long time. I know one house on the property gets free gas so that does not seem like income producing production, Sheesh the home I live in now uses about 30 MCF per month in the Winter. They also sent me a well summary from the Ohio Division Of Geological Survey that shows annual production from 1984 until 2010 that shows gas production that varies but the description of the well was for 20 acres which now they claim was for the whole 140 acre farm that my 30 acres was part of.
Most shallow wells like this is in a 20 acre unit, but that one well holds all the land in the lease. Well reports should be from ODNR(Natural Resources), not Geological survey.
find your well on this map:
you can pull up the ODNR production numbers either from the link on the map or by using their well database
If you know and can prove the meter does not work (take pictures of the readings over time) you have an even better case.
Get a lawyer.
Do you have a copy of the lease that holds your acreage? If not, get one ASAP. Where is the well located? I will look up the records and send them to you if you'd like.
any update on this.....
My HBP wells are producing 50-60MCF/month.....I can't belive there is a profit from that.
Don't trust what has been turned in to the odnr database as to i have found out that some producers just have been turning in numbers to show production if there wasent any as in my case and some have been falsifing them even if there was production and of course there is your ocasonal honest one.