Understanding an unleased mineral owner well report from Chesapeake


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I am an oil and gas attorney. I practice in Texas.  I retired some years ago as vice president and general counsel of the largest upstream company in the United States.  I am also a non-operating working interest owner in north Louisiana.  Your issue concerns one aspect of a matter about which I am currently working.  First, the devil is in the detail and as you have noted, you do not have and will not get that detail.  Second, as a small interest owner in a single tract it is unlikely that you have, or are perceived by the operator as having, the resources to challenge the operator's misconduct.  Third, not that it is any comfort, your issue is very common and often deliberately so.  In essence the operator co-opts the unleased mineral interest owners share of production.  

The laws of Louisiana are very clear on your rights.  You can easily find the specific statutes and commentary online.  I assume from your description that you are an unleased mineral interest owner.  If so you are subject to a set of rules different than a leased non-participating interest owner. You would not be subject to a risk penalty, but would be liable for your proportionate share of the cost of drilling and completing the wells and the cost of supervision and production.  You are also entitled to the exact, itemized amounts of these costs.  I suggest you send Chesapeake demand letter to such effect, copy their general counsel (available on line) and the oil and gas division of the Louisiana Conservation Commission. Send all of that certified, return receipt requested.

Finally, I suggest calling the oil and gas division.  Numbers are available on their website.  You will have to work at ultimately connecting to the right person, but will eventually succeed.  Hope you succeed.  The issue I am focused on is the overhead fee being charged on older, marginal wells.  The fee being charged by many operators produces a profit far in excess of the value of the hydrocarbons produced.  It is literally an issue of first impression any where in the United States. I believe the same issue applies to unleased, force pooled interest which are subject to a supervision charge.  This is particularly egregious as those parties did not agree to an unfair, inequitable fee that, in effect, rendered their property worthless.

Best wishes.



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