forfeited lease in a producing well(s)

Started March 10, 2017 at 11:33 am by @Perrylkeaton in Marcellus Shale

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03/10/17 11:33:34AM

would anyone have any insight into a lease that has been forfeited in producing wells,
would i then own 100% of my share ( working interest + royalty interest)
could i force the well to be plugged i would like to explore all the options

03/10/17 12:28:05PM @gh:

I'm not an attorney, so someone else may have a much better idea of what's going on here and the legal implications.  But here's my two cents.  If I am wrong hopefully someone will correct me.

Not sure I've ever heard of this situation.  My understanding is that, notwithstanding anything in the lease that may allow for this situation to occur (no idea what that could possibly be), they would have to stop producing.  Basically, in this case they are producing your oil and gas without legal rights to do so.  This is also assuming that you own the oil and gas rights that you leased, and your lease was not released/forfeited because they discovered you did not own the oil and gas.  I'm not sure what your best course of action is, but I would think you'd be able to stop them from producing the well, and also sue them for 100% of the value of any oil and gas recovered from your property while your property was not under lease.

03/10/17 04:42:07PM @pete:

well it is beginning to look like i will be the new working interest+ royalty owner for 100% of my minerals.
a-they were notified by registered mail
b- they chose not to respond within the 30 day period
c- register certified letter in court house to give public notice
d- sue them for stealing

Leo Schumacher
03/12/17 11:47:17AM @leo:

I presume you are the only mineral rights holder in the well.  If the well includes multiple persons, not sure you want to take on all the responsibilities of becoming a driller and the obligations to meet the leases of the other mineral rights holders, if that is even proper

Lisa McKenzie
03/10/17 12:41:40PM @lisa-mckenzie:

You  need a lawyer.  If the lease is forfeit and the operator is still producing, they are trespassing.  Stealing too, I guess, if they keep the working interest.  Our leases are written that if a payment default persists for 30 days after they receive registered mail notice of the default, then the lease is forfeited.   Your lease may have provisions that you can require the well to be plugged.   Good luck and keep us posted.

03/10/17 01:42:26PM @pete:

you are correct lisa, their 30 days have almost expired, so they will have to come to me with an agreement to keep operating the well then, i assume this will be the outcome, how ever if they wish to plug it they have to offer it to me for one dollar which i don`t think they would want to lose four

Lisa McKenzie
03/10/17 01:53:39PM @lisa-mckenzie:

My payment default notice was delivered on March 1, so I have a ways to go until I might be where you are now.

03/10/17 03:02:29PM @pete:

this will get interesting i do believe, since their current case involves 1900 flat rate royalty, the leases we signed we after deregulation and if they wanted deducts they should have been listed---funny how 2 companies before them read them as no deduction leases

Lisa McKenzie
03/10/17 03:53:59PM @lisa-mckenzie:

I have a payment default on a flat rate lease too, not just this EQT taking deductions on a no deductions lease.  Flat rate lease has paid less than $15 per year since 1894.  More than 30 years recently without production, but started producing again in 2012 before I was the decision-maker.  Haven't been paid in 3 years.  My lawyer is sending a demand letter today that gives them 10 days to sign a release.  It's over 18 months since I sent payment default notices.

03/10/17 04:22:09PM @pete:

§36-4-9a. Cancellation of oil or gas leases for nonpayment of delay rental; prohibition against maintaining actions or proceedings in state courts for enforcement of certain oil or gas leases; rebuttable presumption of intention to abandon well and well equipment.

Lisa McKenzie
03/10/17 05:15:59PM @lisa-mckenzie:

Yup.  It's in the letter.  Operator also took out a plugging permit in 2011 and miraculously found product down the hole when they got there to pull the pipes, so resumed production after at least 30 years (that's all I can see on DEP) of no production. 

03/13/17 09:32:49AM @pete:

do you think they could force pool you after they have forfieted
an existing lease ??? hard to tell what might be tried here, i guess
it depends on the value they place on a well/lease

Lisa McKenzie
03/13/17 10:22:48AM @lisa-mckenzie:

There is not currently forced pooling, so I don't expect that.  Perhaps they will sue to partition but my attorney thinks they would more likely try to negotiate a new lease with me.  I hope that they will simply sign the release.  My attorney says the only way they can retain this flat rate lease is if they can prove that every single payment owed to us has been paid.  Since we haven't been paid in the last 3 years, they can't and likely they don't have records all the way back to 1894 to prove it either.  I have another company that wants to lease the tract, who is doing due diligence now.  I hope that they will lease it without issue, but decided to see if the current operator will sign the release so there is no question about the new company being able to lease.

Billy Park Whyde
03/10/17 12:43:24PM @billy-park-whyde:

The closet situation I can think of in this case would be the CHK Buel well where CHK had drilled a well upon the Buel property where the lease they had drilled upon had already expired. 

03/10/17 01:43:01PM @pete:

thanks i will read up on that situation

Gabby C.
03/10/17 06:04:51PM @gabby-c:

I am no expert, but We had a similar experience and were told, the government can take what ever money they do not claim. Not sure if this is right, It sounds like what the government would do .

03/12/17 05:06:20PM @jon7:

If they do that, then wouldn't you own the well? In that case if something goes wrong with it, it's your fault now?

03/13/17 09:29:04AM @finnbear:

Any idea what it costs to plug an old well these days? If you own it, you're responsible for maintaining it.

03/13/17 09:35:38AM @pete:

if you bond it with the state and you are unable to do so then it becomes the states responsibility---I think the current bond is 5000

03/13/17 02:50:45PM @finnbear:

You would need to be very good at disappearing if you think you'd get away with walking away and having the state take your forfeited $5000 bond and plug the well. It can cost 3-4x the bond amount to properly plug one and if you have any assets, you'll be losing enough of them to pay for the plugging.

David Allen Lilly
03/13/17 06:52:03PM @david-allen-lilly:

A fascinating thread, please keep us all apprised, I wish you the best of luck.

Kyle Nuttall
03/28/17 01:05:50PM @kyle-nuttall:

I'm a little late to the party, sorry about that.  The details are a little sparse, but based off what you've said here and in the additional comments it looks like you will end up being the sole owner of the minerals.  Additional facts might change that.

I think you could force the well to be plugged.  West Virginia's abandoned well regulations would require that.  It should be the company's responsibility.  However, there are tons of abandoned wells in WV, and the DEP prioritizes those that are leaking or hazardous in some way.

Additionally, and probably the way you'll want to go, you should be able to work with the county inspector to force the company to plug the well once the lease has been released.  This would not rely on the abandoned wells regulations.

03/29/17 11:24:33AM @pete:

should i notify them again that the lease has now been forfeited and any production
would be considered stealing and trespassing ??

Kyle Nuttall
03/29/17 11:37:23AM @kyle-nuttall:

It's probably best to get in touch with the county inspector for the DEP first, let him know that you consider the lease to be forfeit, and you'd like him to come inspect the well.

He'll probably tell you you're going to need a release of lease or an affidavit stating that the lease is forfeit filed in the courthouse before he can do anything, but he'll probably have some good advice for you.

He'll have dealt with the company a lot and will be able to tell you what their reputation is like, and he may be able to tell you who to talk to at the company.

Also, all this advice is based off the assumption that your lease has a forfeiture clause in it.  If it doesn't, having the lease declared forfeit is actually pretty hard.  Courts prefer to keep contracts alive, regardless of whether they are oil and gas contracts, construction contracts, sales contracts, or any other kind of contract.  It's just the way our body of law has developed over the centuries.

03/29/17 11:40:02AM @pete:

the lease does have the forfeit clause, this is a marcellus well and is only 5 years old

Kyle Nuttall
03/29/17 06:27:08PM @kyle-nuttall:

Then you have a good argument.  I'm shocked that the company would allow part of its unit to go into forfeiture.  Those Marcellus wells aren't cheap.

03/29/17 08:30:53PM @pete:

I am debating suing for the money owed or for the forfeiture not sure which would
yield the most, as it is my understanding you can`t have both

Kyle Nuttall
03/30/17 04:02:06PM @kyle-nuttall:

You might be able to sue for forfeiture and then sue for the back royalties.  Just because they have lost the lease doesn't mean that they don't owe back royalties.

03/30/17 04:18:02PM @pete:

I sent out a certified letter today notifying them that the lease was forfeited
and to stop all operations and production. Don`t think I will here anything from them
but they have been put on notice that they are stealing and tresspassing

Kyle Nuttall
04/03/17 01:54:04PM @kyle-nuttall:

It'll be interesting to see if they respond.  Keep us updated!

04/03/17 01:57:43PM @pete:

received the certified receipt back today--i will update with any responses




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