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Question
Hello Marsha,
I recently found out that we have an oil well operating on heir property and has been for seven months without our knowledge.

The well is in Wayne county, Mississippi; Waynesboro address; Diamond Field Project. Township 9N, Range 7W, Section 1.

The Reasons for these questions are:
We, (I mean our family members, who are heirs of this property), were advised in July, 2013, of a well that has been producing since December, 2012, (seven months after production started). This information came as a result of the accounting office asking for Tax IDs (Form W-9). In August,20, 2013,checks were mailed to "their" list of heirs. We do not know just who is on their list for distribution. I called their offices to inquire of the validity of their listing, and got nothing, An Analyst in Hattisburg, and an Accounting Specialist in Laurel. I was accused of wanting more money, but all I wanted was information on this overall operation, especially who's listed as recipients.

I was told that they are not required to advise the owners of such information, such as when a well start producing or who is on the list of recipients. If I wanted to know, then get a lawyer.
My comments was: "Lady, I am 70 years old, worked in the business world for 38 years, been retired 11 years, hold a MBA in Business Management, and I know business is conducted on paper and based on sound practices and proper communications. You could have been producing for years without anyone of us knowing it. (The lease was signed back in 2012). My point is that we know nothing.

Questions: 1. Is there a state law requiring operators to advise the property owners of their success? If so, what is the time table and what format or procedure?

2. Is there a regulation that requires someone to validate the list of people receiving payment from their activities? No one here has seen their final list.

If I need to address the Mississippi Oil and Gas Commission I will indeed.

Thanks for your reply.

Tom

Answer
Tom,

Thank you for giving me the opportunity to help you with this problem.  I understand the issue, but now I need to identify the well(s).  I went to http://gis.ogb.state.ms.us./MSOGBOnline/ and found that there are 20 wells in Sec. 1, T9N-R7W, Diamond Field, Wayne County, MS.  We need to find out which of these are producing from your land so we can identify the current operator and contact the operator of the well, so I will need more information from you.  Once I have more information, I can give you specific instructions on how to proceed and help you get this resolved.

Please post a follow-up question for me, to give me the following information:

1.  What is the specific legal description of the land inside Section 1 that you own?  It will be expressed in "calls", for example: NW/4 of the SW/4; Lot 3; S2NW, N2SW.  This will help me identify which wells are producing from your land, and which operators are involved.  There actually could be more than one.

2.  What is the name of the company that you called, to speak with that rude employee?

Meanwhile, let me answer the general questions you asked.

1.  Yes, Mississippi law requires that an operator make good faith, diligent effort in locating the owners entitled to receive royalties from the well when it begins to produce.  But it sounds like they have current addresses because your lease is less than 2 years old, so locating you shouldn't be the problem.  It sounds like there might be a title problem.  It's common for an oil company to find a place in the record title where it's not certain who inherited the rights of a deceased owner.  It happens more often than people know.  Anyway, if that is what happened to you, the common practice in the industry is to take an oil and as lease from everyone who just might be the right owner, just to make sure the rights are covered by a lease.  The company will sort it all out using a title attorney to review all of the courthouse records after the leases are all signed.  When the title attorney decides which of all of the signed leases are valid, and which ones are not, the leases that are signed by people who don't really own any interest are called "protection leases" and written off as a routine business cost.

2.  Yes, there is a law requiring the operator to sort-of "validate" the royalty ownership in a well.  They do this by hiring a title attorney to review all of the documents filed in the courthouse that are associated with the lands from which the well is producing.  But please understand that the company pays a lot of money for a title opinion from a title attorney, and it is a special kind of legal contract between the well operator and the title attorney.  The company is not required by law or regulation to disclose any information in the title opinion to any royalty owner.

So first, let's try to determine if the lease(s) your family signed was a "protection lease."  That means you will need to be able to prove that your lease is the valid lease, and that's going to require courthouse research by someone who knows what they are doing, like a landman.  You can hire a landman to do that work for you, to find and get a copy of every document proving that YOUR lease is the good lease, and the other "heirs" lease is the bad lease.

Marsha

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Marsha Breazeale, M.Ed., CDOA, CPLTA

Expertise

All questions regarding division orders; ownership decimal calculations; title ownership and payer record changes (testate/intestate inheritance; deed; assignment; court order); oil and gas lease analysis for record-keeping and purposes of payment by operator or payer; pooling, horizontal wells, horizontal well allocation units; unclaimed property reporting; royalty owner relations questions. All questions concerning administration of surface land contracts and payment questions, such as for Surface Right-of-Way, Sub-Surface Right-of-Way, Easement, Surface Use Agreement. All questions regarding industry-standard and company-specific policies that affect land owners.

Experience

Sr. Staff Division Order Analyst. Certified Division Order Analyst (CDOA, National Association of Division Order Analysts) and Certified Lease Analyst (CPLTA, National Association of Professional Lease and Title Analysts) with 35 years of experience as a combination division order analyst and lease analyst in exploration and production in the oil and gas industry.

Organizations
National Assoc. of Division Order Analysts (NADOA), National Association of Division Order Analysts (NALTA), American Association of Professional Landmen (AAPL), American Society of Trainers and Developers (ASTD)

Publications
"How an Oil & Gas Exploration & Production Company Operates" and "Principles of Oil & Gas Lease Analysis: Standard Clauses", Oil Patch Press; Articles in NADOA Magazine; LandFocus EDU Professional Training Manuals

Education/Credentials
B.A.in Management from Our Lady of the Lake University in San Antonio; M.Ed. in Instructional Design from WGU Texas.

Past/Present Clients
Past 15 years: GeoSouthern Energy Corporation; Contango Oil Co./Crimson Exploration & Operating Inc.; Apache Corporation; BP America; Marathon Oil; Newfield Exploration

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