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  • Owner has interest in a quarter hbp and a quarter not hbp. Purchased from separate individuals after the base lease was taken. Is his interest open in non-hbp quarter?

Oil/Gas/Owner has interest in a quarter hbp and a quarter not hbp. Purchased from separate individuals after the base lease was taken. Is his interest open in non-hbp quarter?

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Question
In the S/2 of a section, where the SW/4 is held by old production and with spacing the SE/4 is open; however, I have an owner who owns interest in both the SE/4 and SW/4. The base lease of production is in 1977 (a 1 year lease). The party who I'm asking about purchased the interest in the SW/4 in 1979 and the interest in the SE/4 in 1980. He purchased the interest from two different parties. The person he purchased the SE/4 had not been under an active or held lease at the time of his purchase, unlike the interest in the SW/4, which is still reporting production.
Is his interest in the SE/4 held by the production from the SW/4 lease that was taken before he purchased his interest?

Thank you in advance,

J.B.

Answer
Not really enough info here to answer property, but I'll just assume it's an Oklahoma lease you're talking about, and thus Oklahoma law would apply. If not Oklahoma, then you'll need to resend your question with a proper legal description or contact an expert in your state and ask them.

If the 1977 lease included the SE/4 in its legal description, AND was executed on or prior to 5/25/1977 then yes, both the SW/4 and the SE/4 would be considered HBP for as long as there are wells capable of production in paying quantities in either tract.

If the 1977 lease did not include the SE/4 in its description OR was executed after the above date, then the SE/4 would not be HBP from the well in the SW/4.

The 5/25/77 date has to do with Oklahoma's statutory Pugh Clause, which applied to leases executed after that date. Specifically, in 52 OS 87.1(b) it states that "In case of a spacing unit of one hundred sixty (160) acres or more, no oil and/or gas leasehold interest outside the spacing unit involved may be held by production from the spacing unit more than ninety (90) days beyond expiration of the primary term of the lease."

Hope this helps you out.
Frederick M. "Mick" Scott CMM RPL
www.mineralhub.com
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Frederick M. Scott

Expertise

Oil and gas leasing, lease negotiations, how to best deal with the oil and gas companies or their representatives, buying/selling mineral rights, forced-pooling, correlative rights, deeds and conveyances, and "post-production" costs. I am most experienced with Oklahoma properties and laws, but am able to answer questions concerning other oil and gas producing states in many cases.

Experience

I am a Certified Professional Mineral Manager (CMM) certified by the National Association of Royalty Owners (NARO) in Tulsa, OK. I am also a Registered Professional Landman (RPL) with the American Association of Professional Landmen (AAPL). I have managed my family's oil and gas properties in Oklahoma for over 10 years and have dealt with many landmen, title analysts, attorneys and other oil and gas professionals in the process. I have written several articles which have appeared in various oil and gas industry magazines and newsletters. I have negotiated and drafted leases, prepared deeds, affidavits, and other legal instruments relating to my own minerals, as well as performed title, legal research, and curative work for same. I have acquired a good deal of knowledge on the subjects of oil and gas law, mineral appraisal, and landwork over the past ten years, and also worked as a professional landman and lease buyer for a time. I've seen the business from "both sides" and therefore feel confident I can help out most of the folks who ask questions in this forum.

Organizations
National Association of Royalty Owners (NARO); American Association of Professional Landmen (AAPL)

Publications
National Association of Royalty Owners "Action Report" (ROAR); NADOA Magazine, The Mineral Hub, Landman Magazine, and several royalty owner association group's newsletters.

Education/Credentials
Certified Mineral Manager (CMM), Registered Professional Landman (RPL)

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