Held by production?

I have a question that seems to get many different answers depending on who you ask.

What is it that actually holds a lease by production? Is it a lease with both a primary and secondary term also called a habendum clause that contains both a primary and secondary term for as long as oil and gas is being produced? Or is it the actual production that occurs during the primary term of the lease and it doesn't matter after that as long as they produce it is held?

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Permalink Reply by Pondage on December 31, 2015 at 2:28am

 David Allen Lilly you bring up a good and valid point. I would have to say its somewhere in the middle between the legal definition and the lease wording. I believe though that being able to argue and show intent is very useful.  

One other point is that the Oil and gas company is the party of the second that by the language in the lease offered the $1.00 to the party of the first to offer the lease up for modification and or termination.      

If I choose to pursue this legally I honestly will have to admit though getting the lease terminated is not a realistic option. I think a more reasonable approach would be to ask for the termination but settle for a new lease or more favorable terms.

There are other issues as well like not paying royalty's for oil and gas landowner not receiving free gas etc... that I think would bolster my position.

      

Permalink Reply by Barry D on December 30, 2015 at 4:46am

Pondage,

I wish I could see the leases.

Many Counties have records online. If I knew the state, County/District parcel # and any other info you might have. I might be able to see the leases online. That way I could give you a better answer.

Also if you know the API # or well #.

Permalink Reply by Pondage on December 30, 2015 at 5:27am

No records online yet but they are scanning them as we speak. I have done all the research title search etc. and for reasons you can surely understand I am not going to put that info online. But it is a very interesting situation to say the least. I have already taken into consideration most of the points all of the posters have posted here and fully understand HBP clauses and the likes but have never seen this situation before.

I have even tossed around the perception that maybe the gas lease reverted back to the original lease but that assumption would be negated by the terminology and intent in the other leases that did revert back. 

Keep in mind the oil and gas company that held the leases have changed hands due to bankruptcy and the likes 3 or 4 times since then, People have died the leases have been neglected.      

Permalink Reply by Tusc-county-man on December 30, 2015 at 5:18am
Barry. Is 30mcf. A month hbp? For a Clinton well
Permalink Reply by Barry D on December 31, 2015 at 3:11am

Pondage,

As I stated before, it is difficult to give a complete answer without seeing all of the "leases".

I suspect that the original (1907) lease is the actual lease of record. The subsequent documents are just modifications of the original lease. So, as long as the original lease contains wording similar to "as long as gas is produced" it does not matter if any of the subsequent leases contain the wording. (my opinion without seeing the documents).

The important matter(in general) in determining HBP is whether or not there is a well, on the property,capable of production.

If you are attempting to have the lease voided or modified, you probably won't get far arguing that the property is not HBP (again, my opinion without having all of the pertinent info).

As you stated, your efforts may be better served in dealing with issues such as lack of production, failure to pay royalty or other compensation etc. I would review each clause of the lease and subsequent renewals/modifications and look to see if there is a failure to comply in any of those.

Also, you will probably have to notify the current owner of the lease/leasehold and notify them of any failures to comply. Then, of course, the owner may be allowed to remedy the situation.

Does the state have records of production?

BTW - I am not an attorney, but my work deals with leases etc. and many of these types of situations. Just offering an opinion/educated guess.

Permalink Reply by Barry D on December 31, 2015 at 3:19am

Pondage,

You probably know this, but I'll state it anyway.

In order to resolve any issues you have with the leases etc. yo should consult a knowledgeable oil and gas attorney. I stress - oil and gas attorney.

Permalink Reply by Pondage on December 31, 2015 at 3:49am

 Barry D

Thanks for the response. You mention that it is an opinion without seeing the leases. I have looked over thousands of old oil and gas leases and believe me when I say there is no more to the wording of the leases that would differ my opinion. They are 1 to 2 pages long and are generic as they can be.

There is in the older oil and gas leases what I would call a level of understanding and morality. There was no need to fill the older leases with any of the newly discovered clauses brought on by litigation. It seems as though there was common sense used and the lease meant what it said nothing more nothing less.     

The original lease 1907, does have "as long as oil and gas is produced" and there is producing wells on the mineral rights leases. I do not deny those two facts.

So you are stating that as long as the words "as long as oil and gas is being produced" in the original lease even though the other three following agreements to modify and change the terms of the original lease removed the phrase and the fact that there are wells that have been producing, that the lease is HBP?  

I am playing devils advocate here to draw a best guess answer based on the knowledge of the conversation and the information I provided.

    

Permalink Reply by Barry D on December 31, 2015 at 4:46am

Pondage,

Yes, in general, this is what I am stating.

Caveat - my opinion is conditional. First, I am not an attorney and I have not seen all of the documents associated with your situation. I am basing my opinion on the information you have provided. Also, like you, I have seen many of these old leases and draw on that resource.

So my best WAG is that the lease is HBP.

However, if you are intending to "break" the lease and HBP situation, there may be issues that you may raise.

Permalink Reply by Pondage on December 31, 2015 at 6:30am

Barry D, 

Thanks for the opinion. I have beat this around with multiple attorney's and oil and gas representatives and so far there is about a 50/50 consensus.

I have tried to be impartial in my determinations and stick to the facts as legally possible Knowing the legality of the HBP issue changes with the wind as it seems almost daily.

It is a unique situation as far as lease terms go. Thank you.

If anyone else wants to add their two cents please do so all opinion are welcome. 

Permalink Reply by Barry D on December 31, 2015 at 7:55am

Pondage,

Your welcome.

I am curious, what is the reasoning of those that feel the lease is not HBP?

Permalink Reply by Pondage on December 31, 2015 at 8:37am

There are multiple issues with the leases that enter the conversation as it did here and i'm sure this tends to make a possible lawsuit more substantial and has some affect on the opinions but setting that aside and dealing with the HBP situation only, I would say the consensus on the other side is leaning more to what has been changed and or modified in the original lease from the lease agreements and to what extent.This Extent is what I feel is the key word.

The original lease terms are completely re-written Primary and secondary which does as the lease agreement is written change and rewrites those terms in the original lease as an agreement between both parties.

To that point the gas and the oil royalty lease has been split the oil mentioned in the original lease is still in force 1/8 but the gas side of the lease has indeed expired.The later agreements where only written on the gas. 

 

Permalink Reply by Barry D on December 31, 2015 at 8:49am

Pondage,

I've seen old leases where only oil is mentioned, Many are still in force today; causing issues with the new leasing for deeper formations.

Interesting stuff. Thanks for the discussion.

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