The Oklahoma Corporation Commission has been regulating on the fly as to rule changes on multi-unit horizontal wells. One of the recent changes is that applicants now must offer a formation election if the applicant desires to force pool more than one common source of supply. Berlin thinks that this effects the unleased Oklahoma mineral owner more than the commissioners had originally intended...
Bruce was a bit pissed when he called up Berlin today. Apparently, his fence line weaning efforts cost him about 6 hours of sleep after he found the fence knocked down and the calves back with their mommas. After he calmed down a bit, he asked why so many operators are spudding their wells before a forced pooling order has issued and what his options are as an unleased Oklahoma oil and gas mineral owner named as a respondent in the pooling proceedings...
The Oklahoma Corporation Commission (the "OCC") plays a large, but often misunderstood role in the Oklahoma oil and gas industry ecosystem. The OCC is the regulator of almost all (less Osage County) oil and gas production in the state. Jack "Show me the" Money (a name destined for fame on the business desk) at NewsOK wrote a column regarding the proposed fee changes at the OCC...
(This post originally appeared on www.oklahomaminerals.com on November 8,2016)
Landmen are no busier than most professionals during the work day, but it is often stated that company landmen never return the calls of mineral owners. While this might be true of the bottom 10% of the profession, most landmen know that by placing a single call to a mineral owner, he could spend 30 minutes explaining knowledge that could easily be obtained throughsimple internet research. An informed mineral owner, who asks a poignant question, is much more likely to receive the answer he needs than the owner who calls to ask the difference between a spacing application and a well proposal.
Admittedly, if one owns a single tract of minerals or maybe just inherited the minerals, then the inaugural process of leasing and receiving the regulatory paperwork while the company is assembling the drilling and spacing unit would surely baffle most.
In general, there are four key pieces of correspondence that an Oklahoma mineral owner will receive from the landman. These occasions are detailed in brief below.
The Offer to Lease
Often, the first time an Oklahoma mineral owner will be contacted by a landman is when the landman’s company is assembling a prospect. The mineral owner will be contacted by phone and/or mail with an offer to lease their mineral interest. Most landmen will offer at least two options which will differ in the amount of cash bonus per net mineral acre and the royalty.
The Well Proposal
After the landman has made a bona fide effort to reach an agreement with all owners who own the right to drill a well in the proposed unit, he will send a well proposal to the parties with whom he has not yet reached an agreement. The well proposal will offer final terms in lieu of participation in the well and details of the well to be drilled such as location, proposed depth, target formation, estimated depth and cost of the well in the event the party would like to participate. It is important to note that in Oklahoma, an election to participate in the well is not binding until the party elects under the pooling order.
Oklahoma Corporation Commission Applications
Initially one of the most confusing aspects of being an Oklahoma mineral owner is the receipt of Oklahoma Corporation Commission (“OCC”) applications and orders. Some owners ask why they are being sued and others ask to be removed from the mailing list. Owners receive the applications and orders because Operators and applicants are required by law to provide notice of their activities to the owners who their activity affects. These applications are orders are mailed from an attorney who represents the applicant in OCC matters. The three most common applications that an owner will receive are the spacing application, location exception application, and pooling application. These applications will be discussed in detail at a later date, but the pooling application will be the application that will have the largest effect on the mineral owner’s rights and pocketbook. The OCC publishes a handbook for mineral owners that can be found http://www.occeweb.com/og/PubAsst/WebRoyaltyOwnersHandbook3-2015.pdf
The Division Order
If an operator successfully drills and completes a well, the next correspondence the mineral owner will receive from the company is the division order. A division order is an instrument which sets forth the proportional ownership in the produced hydrocarbons. The proportional ownership is communicated to the owner on the instrument in a decimal form. After the division order is signed and curative title issues are completed, the mineral owner should receive their first check within six months from the date of first production from the well.
In conclusion, the four key pieces of correspondence that an Oklahoma mineral owner will receive from the landman and the company, are the offer to lease, the well proposal, Oklahoma Corporation Commission applications and orders and finally, the division order. All four of these topics will be expanded upon in future articles. If there are any other topics you would like to discuss, please mention your ideas in the comment section.
More to follow,
There are many reasons why one would want to protest another's applications at the Oklahoma Corporation Commission. Protests serve a purpose, but at the end of the day both oil and gas companies and Oklahoma mineral rights owners make more money if wells are drilled.
Protesting just to protest is uncivilized. Frivolous protests waste both money and time. Cases without merit will eventually be dismissed or ruled against by the ALJ and all that the protesting party has accomplished is the production of economic waste. The Applicant's show will go on.
It's a small club, and irresponsible action at the OCC is not easily forgotten. The shoe will be on the other foot some day in the future.
More to follow,