Land Owner Takes a Stand - National Association of Royalty Owners

SEPTEMBER 2013
Royalty Owners Action Report
The Voice of the National Association of Royalty Owners
Land Owner Takes a Stand
by Curt Coccodrilli
NWPOA
For this month’s cover story, we have reprinted a letter to the Outdoor Life magazine editor from one of
our NARO-PA members. This is an excellent example of what each of you could/should be doing locally
when the discussion about development of YOUR minerals comes up in public forums. It is your
responsibility to speak up for YOUR rights. –Jackie Root, NARO PA President
Editor,
I urge you to put this in as a guest editorial from
the Northern Wayne Property Owners
Alliance (www.NWPOA.info). We represent
over 110,000 acres and close to 1,500 hard
working families in the Upper Delaware. Over
300 of our members are hunting clubs, many
more are hunters and fishermen, or land owners
that lease their lands to hunters. Does the
riverkeeper own any land? No! Ninety-eight
percent of the Upper Delaware is private
property and 75 percent of that was leased to
gas companies. That was until the lack of a
regulatory
environment
and inaction
by the DRBC
(Delaware
River Basin
Commission)
scared away
Hess Corp. who
left our region
without paying
our members
up to $187.5
million dollars
in unrealized
per acre bonus
monies. That
does not count the potential royalty monies
that certainly would have dwarfed that number.
That’s a lot of ATV’s, guns, ammo,
conservation easements and fishing gear that
won’t be bought, or land put into.
As a resident of the Upper Delaware, an avid
hunter, shooter and fisherman, I have serious
concerns about your article written by John
Haughey. Haughey used a single source
radical environmental activist named Maya
van Rossum and her anti-goose processing,
anti shooting, and anti-farming/ranching
group (the Delaware Riverkeeper) to advance
an agenda
that includes zero
development of any
meaningful
kind over
the entire
Delaware
watershed!
See here for
evidence
of both:
http://
www.philly.
See Stand on
page 4
www.naro-us.org
2 •Changes
Explained
4 •Standing
Ground
6 •Time is Near
FROM THE
EXECUTIVE DIRECTOR
Jerry Simmons
You guys are AWESOME!
Well, at least those of you that responded to the email blast NARO and the ROPE coalition sent
out about contacting Governor Perry’s office on his continuing to work with the five state group on
the Lesser Prairie Chicken. After we ask you to start calling, by the end of the next day, the
Governor’s office was saying no, the governor was not pulling out of the five state deal. So, once again
we have demonstrated what a powerful tool you guys can be. Again, thanks.
Last month I asked you to call the four U.S. Senators who had signed the letter to the Senate
Finance Committee on your behalf. I hope you did, if not, it is never too late to tell someone thank
you.
No new word on tax reform or what might happen in D.C. this fall. With Syria, physical cliff,
continuing resolution, etc., etc., it is anyone’s guess. We will keep you all posted as we get news.
I believe we have a great program set for the 33rd annual national convention coming up in
Columbus, Ohio. If you have not registered (form on page 6), I urge you to do so and watch the
October 8th hotel cutoff date as that is just about here.
NARO Board Members
and Officers
David Sikes, CMM
PrESiDENt
Linn Willers, CMM
vicE-PrESiDENt
James E. Leonard
trEASurEr
roBYN GuESt
corP. SEcrEtArY
Jeff Miller
iMM. PASt PrESiDENt
Bob Hart
NAro-APPALAcHiA PrES.
Terrel Shields
The annual conference is history now and we had an excellent presentation by
Jane Davis and Colin O’Beirne of Southwestern Energy. They introduced the
members to check stub changes coming from Southwestern (SEECO, ticker
symbol SWN).
They also introduced us to changes the company would like to see in state law.
State laws mandate the way in which gas royalty is calculated for the base 1/8th
royalty and anything over 1/8th is considered excess royalty. Thus, the operator
Terrel Shields
President
deals with the first 1/8th then collects the excess royalty from the party that holds
the lease and they pay the excess, often lagging by 30 days or more. The result is
confusing not only to royalty owners, but to the companies themselves.
We were pleased to have both our national director and our national
president in attendance. President David Sikes gave a good pep talk to
the members and Executive Director Jerry Simmons laid out our
legislative goals and accomplishments in addition to encouraging
members to make the national convention in Columbus. They also
encouraged members to write or call Sen. Mark Pryor and thank him for
his support to keep the intangible drilling cost and depletion
allowance for royalty owners and investors.
Jane Davis, Southwestern Energy
Your president also chimed in his two cents noting that Arkansas has
passed incentives for conversion of automobiles to propane and natural
gas in addition to tax breaks for building natural gas refueling stations. We hope to see a lot more NG
and propane dual fuel cars on the road soon.
Rodney Robbins provided an overview of the 2013 Legislative session and discussed several bills that
were introduced and acts that were passed. Rodney has been vigilante in monitoring the bills that are
introduced that impact the royalty owner and the surface owner.
The meeting was closed with the election of officers and the addition of a new board member, Margie
Irbe. I will remain as the president with Steve Smith being reelected vice president and Wilma Stewart
continuing as our secretary-treasurer. Until next time.
The National Association of Royalty Owners (NARO) does not explicitly or implicitly endorse third parties in exchange for
advertising. Advertising in our monthly newsletter (ROAR) does not influence editorial content, products or services in any way.
2 i royalty ownerS action report September 2013
NAro-ArKANSAS PrES.
Lynn Higginbotham, CMM
NAro-LouiSiANA PrES.
Nick Schoonover
NAro-NEW YorK PrES.
Dean Zaderaka, CMM
NAro-NortH DAKotA PrES.
Mason Mungle
NAro-oK PrES.
Jackie Root, CMM
NAro-PENNSYLvANiA PrES.
Michelle Smith
NAro-rocKiES PrES.
Terry Retzloff
NAro-tx PrES.
At-LArGE
Tina Bonner
Candice Brewer, CMM
Curt Edmondson
Janice Bennett Good
Bill Sinclair
Emily Wagner
To Contact NARO:
Jerry R. Simmons
ExEcutivE DirEctor
(918) 794-1660 or
(800) 558-0557
(918) 794-1662 (Fax)
[email protected]
15 W. 6th Street
Suite 2626
Tulsa, OK 74119
Brett Moore, Rockies lobbyist, is
contributing to our newsletter this
month with the following updates:
Michelle Smith
President
2013 Legislative Recap
• NARO tracked 18 of 613 total bills
introduced in the 2013 Colorado
General Assembly that had direct
impact on royalty owners.
• NARO actively opposed five bills including HB 1269 and HB
1316, disastrous bills for royalty owners. All bills NARO
opposed were killed.
• All in all, it was a very successful session, with NARO
collaborating with the rest of the Oil and Gas community to
combat bad legislation, but standing strong with an independent voice on the issues that matter most to our members.
O&G in the News
NARO Rockies continues to work with our partners in
Colorado in the public and private spheres to ensure mineral
owners in Colorado have a proactive voice. Following a
successful legislative session and an informative, well-attended
NARO Rockies annual meeting in June, oil and gas issues have
continued to be in the news. With Gov. Hickenlooper often
looking at both sides of the issue (http://www.aspendailynews.
com/section/home/158682), and other more radical legislative
members actively attacking the oil and gas industry (http://
www.denverpost.com/opinion/ci_23546388/enforce-oil-andgas-rules), NARO Rockies remains committed to
supporting responsible energy development policy that protects
the property rights of mineral owners and the natural beauty of
Colorado.
We are currently engaged in providing political support in
local fights in Broomfield, Longmont, and elsewhere, while
continuing to support expedited permitting in areas where
over regulation is bogging down production. We continue to
stand in support of the robust new Colorado Oil and Gas
Conservation Commission rules, derived from a lengthy
stakeholder process in 2012 and implemented in 2013. This
process has yielded some of the most stringent air and water
testing quality standards in the country, while supporting
continued robust development, and we will continue to engage
at all levels to ensure this balance is maintained.
J. Mark Gresham, CMM, CDOA
Carol Kughn Gresham
GRESHAM ROYALTIES
PURCHASERS OF OIL & GAS ROYALTIES SINCE 1977
Fax: (979) 282-9880
P.O. Box 662
Wharton, Texas 77488
(979) 532-1485 Office
(979) 282-9802 Home
Recall Elections
Most recently on the political front, mineral owners will benefit
from Sept. 10th Recall Elections, where Senate President John
Morse (Colorado Springs) and Sen. Angela Giron (Pueblo)
were removed from office by the voters of their districts.
Former Sen. Giron voted multiple times to advance anti-royalty
owner legislation out of committee, including the onerous HB
1269. With two new members replacing them, the margin in
the Senate is now likely a 19 to 16 pro-oil-and-gas majority, up
from a razor-thin 18 to 17 margin in the 2013 session. This will
likely lead to a lower number of environmental activist bills
having a chance of reaching the Governor’s desk.
CU-Boulder Economic Study
The Business Research Division of the University Of Colorado
Boulder Leeds School Of Business recently released a report
detailing the huge economic impacts of the oil and gas industry
in Colorado, including the substantial contributions derived
from privately held mineral rights.
Some highlights:
• In 2012, Colorado’s oil and gas industry recorded $9.3 billion
in production value, accounting for some 29,300 direct
drilling, extraction, and support jobs with average annual wages
in excess of $101,000.
• Coupled with the oil and gas supply chain within Colorado
transportation, refining, wholesalers, parts manufacturers, and
gasoline stations direct employment totaled more than 51,200
jobs, with average wages over $74,800, which are 49 percent
higher than the state average for all industries.
• In addition, $614 million went to private land owners in
2012, assuming private land owners capture royalty and lease
terms similar to those of the government.
Michelle’s updates this month:
There has been a lot of hush-hush talk lately in the oil and gas
community about a possible frac ban on the ballot in 2014. No
one wants to say the words out loud for fear they may come
true. A frac ban (which in reality is a no-drill ban) isn’t just
about halting oil and gas development statewide under the
guise of protecting the environment, it would have a devastating effect on our state’s economy. See Brett Moore’s link to the
CU Boulder Economic Study above. The potential threat to our
state’s economy isn’t any more important than the loss of your
ability to develop your personal property rights, which leads to
you being denied the right to determine your own economic future.
Now more than ever is the time to stand up and fight to protect
your interests. The 2014 legislative session with the new anti-oil
and gas bills along with a looming threat of a frac ban on the
ballot will be a pivotal year in determining the future value of
your minerals. What else can you do besides being a
valuable NARO member and paying your yearly dues?
Membership dues cover about 20 percent of our annual
expenses. The remainder of funds need to be donated. Most
of us are deluged with requests for money to support someone
else’s cause. Now is your chance to support See Rockies on page 11
September 2013
Royalty Owners Action Report I 3
Stand from cover
com/philly/blogs/pets/DelawareRiver-Keeper-files-suit-to-stopPhila-Gun-Club-pigeon-shoots.
html, http://naturalgasnow.org/
Jackie Root
why-is-outdoor-life-twerkingPresident
landowners/.
Her idea of economic stimulus includes only kayaking, hiking
and catch and release trout fishing. None of which can sustain
anybody who lives here for any length of time. Her group has
planned and carried out tactics and offered classes for stopping pipelines, well pads and royalties using story over fact–the
“demonization” of us the landowner–and “community” over
private property rights. Her group is anti farming, and anti
landowner as evidenced here with their anti-manure spreading
campaign (manure in fact helps the wild turkey population)
:http://www.pewenvironment.org/news-room/other-resources/organizations-urge-president-obama-to-protect-ournations-waterways-85899493020.
Yesterday, I took my 13-year-old son and my two nephews
dove hunting for their first time at our shooting range and farm.
A poor sweet corn crop has been left in the field and is an ideal
spot for teaching them the craft of the wing shooter. If it wasn’t
for my saving of a
few dollars from
our lease monies
a few years ago,
this experience
may never have
happened, as I
used that money to
care for the fields!
This is what gets
lost in the fracking debate. The
hype, storytelling
and baseless fear
mongering are all
geared towards
mythical industrial
accidents where
frack fluids are
“leaching into
creek and aquifer,”
the probability of
which is very slim. Water withdrawals will never lower the river
depth and water quality.
People should be more concerned with the permitted point
source pollution that gets discharged daily downstream and
the rock snot (didymo), that careless fishermen carry into other
high quality streams in our area. Fracking jobs require less than
one percent of the known chemicals you are so fearful of. van
Rossum’s arguments against hydraulic fracturing is like screaming “copper poisoning,” after shooting a single BB from a Daisy
kids gun into a five acre, 30-foot-deep farm pond! The rest is
4 I Royalty Owners Action Report September 2013
soap, sand and water, most of which gets recycled as flowback
brine and reused. This industry has aided countless hunting,
fishing and outdoor clubs like mine, in ways you can’t imagine.
It’s helped us buy seed spreaders, allowed for non-commercial
TSI’s (when logging used to be the only answer), allowed my
hunting club to purchase 95,000 bees in 10 hive systems, etc.
We bust our tails to conserve our properties and we hate to
be under moratorium when such a beneficial resource can be
harvested safely.
All your magazine is doing is helping spread misinformation.
I will not buy it on the newsstand again if this is the type of
hype you are spreading. van Rossum and her radical friends are
hardly “conservationists,”–we are! Those that plant for wildlife
and food, hunt to eat, live on our lands, pollinate with our
bees, cut our own trees for heat, etc., don’t like to be told what
to do with the lands we pay taxes on! She and the DRBC have
garnered control without ownership and that is simply
un-American!
The proposed settlement in the Demchak Partners LLP
and others v Chesapeake Applachia LLC case warrants
close scrutiny if you are a Chesapeake Lessor in PA. Lessor
beware. We all have received a “Notice of Class Action
Settlement” in the mail, a toaster you purchased had faulty
wiring and now you are entitled to $1.29 or a coupon for
free bread, the document is 20 pages of small font printed
on tissue paper. Your decision whether or not to participate
is inconsequential. Not so with this proposed royalty
owner settlement.
This is still a proposed settlement. If and when it
moves forward, each class member will receive an official
notice with three options; 1). Remain a class member (if
you do nothing this applies); 2). Exclude yourself or opt
out; 3). Object or comment on the proposed settlement
(it is unclear if there is an opportunity to opt out once you
choose this option). If you receive a court authorized
notice regarding this case you must not ignore it.
Seek advice from your attorney, a wrong move will
affect your royalty stream for generations. You may
view the entire proposed settlement at www.naro-us.
org/Pennsylvania.
Premium Offers on Royalties &
Producing Minerals
918-392-4151
www.hissopenergy.com
Our thorough, technical evaluation considers future
drilling potential to ensure that we place the
highest value on your interest!
Some more good news for New York from
the top court will hear arguments in a pair
of cases that challenge whether towns, cities
and villages can ban natural-gas drilling
within their borders. The state Court of
Appeals agreed to review appeals against the
Nick Schoonover towns of Dryden (Tompkins County) and
President
Middlefield (Otsego County) despite unanimous rulings upholding their drilling bans by a mid-level court
earlier this year. The court’s decision to take on the appeals
gives new life to the cases, which are expected to set a statewide
precedent as Gov. Andrew Cuomo’s administration weighs
whether to allow large-scale hydraulic fracturing in New York.
Both Dryden and Middlefield had passed zoning laws in 2011
that officially prohibited natural gas development based on their
ability to exercise a zoning law ban.
Like many other states, the authority to regulate oil and gas
development was never given to any NYS towns but rather was
vested in the NYS Department of Conservation (DEC). Since
the state’s Environmental Conservation Law under Article
23 gives all regulatory authority to the state, when it comes to
oil-and-gas development, the municipal bans are in violation of
state law.
The resolution of this issue may determine the future of
oil and natural gas development in New York State. Specifically, it could decide whether the oil and natural gas resources
underlying vast portions of New York proceed in an orderly
and efficient manner according to a comprehensive regulatory
scheme required by Article 23. For more than thirty (30) years,
development has been regulated by the DEC with the technical support, knowledge, expertise and skill developed by doing
the job safely with efficiency. If the court does not overturn the
town bans oil and natural gas will be haphazard and subject to a
checker board of narrow-minded interests, without the benefits
of statewide regulatory economies of scale. This would create
an environment making development in NYS difficult if not
impossible.
Petroleum Engineering Services
Francis W. (Frank) King, Licensed Professional Engineer
*Regulatory and Court Testimony *Appraisal of Oil & Gas Interests
*Bank Loan Reports
Tel: (405) 348-2562, Fax: 866-818-4362
Email: [email protected]
ND Legislative Session
It is often said that observing a
legislative session is like watching
sausage being made. As to this past
2013 legislative session, watching the
making of sausage would have been the
NORTH DAKOTA
more pleasant experience. Controversial
Dean Zaderaka, CMM
bills that were first defeated would often
President
reappear several other times as
amendments to other bills.
Extraction Tax
After a lot of wrangling with several extraction tax bills failing
to pass, the legislature did enact HB1234 primarily granting
some relief for non-Bakken/Three Forks wells. Additionally,
the bill removes a stripper well exemption loophole and changes
the definition of a “stripper well” differentiated by depths. The
bill further provides for changing the tax allocation agreement
with the Three-affiliated Tribes.
Additionally, for non-resident royalty owners, a section of the
bill resurrects a previous tax commissioner’s requested bill that
failed, to require withholding at the source for state income tax.
There are some exemptions, including for remitters producing
less than 350,000 barrels of oil as certified by the tax commissioner, and a royalty owner can seek commissioner forbearance
for royalties of less than $600 in a reporting period or $1,000
annualized.
Title Disputes
Some assistance for title disputes between a mineral developer
and mineral owner is provided by HB1352. A mineral developer will be required to furnish the mineral owner with a description of the conflict and a proposed resolution or with that
portion of the title opinion that contains the disputed interest.
Other bills
Several bills were enacted pertaining to gas flaring incentives,
and related to surface issues, including set-back requirements
for well sites and facilities. Additionally, a bill amends the states
Marketable Title Act to include mineral interests.
Always noteworthy when looking at enacted legislation is
to review failed bills. The legislature defeated the bill defining
“drilling operations” in an oil and gas lease.
Supreme Court Appeal
A recent Northwest Judicial District Court Partial Summary
Judgment opined that the minerals between the ordinary high
and low watermarks, commonly referred to as the “shorezone,”
was issued in favor of the State of North Dakota. The question
is whether the riparian landowner or the State of North Dakota
owns the shore zone minerals. The judgment was recently
argued on appeal to the ND Supreme Court. This ruling has
significant meaning for riparian landowners and related mineral
owners.
See NARO ND on page 11
September 2013
Royalty Owners Action Report I 5
HOTELCUT
OCTOB
CONVENTION REGISTRATION
Name ____________________________________________________________________
Company _________________________________________________________________
Other Names Registered on this form:
Book your room
NARO conve
___________________________________
___________________________________
___________________________________
Address ___________________________________________________________________
City _________________________________________ State _________ Zip ___________
Telephone (______) _____________________
Email __________________________
For reservations at The Hyatt Regency Columbus:
• Online: https://resweb.passkey.com/go/NAROColumbus2013
• Call: (614) 463-1234
Ask for Special NARO Room Rate of $134/night + tax
• Or visit www.naro-us.org, click on Events and book your room on line
IMPORTANT NOTICE! Cut-Off Date for the sleeping room reservation is: October 8th
All-Events registration includes all meals, special event, meetings, seminars and printed materials.
EARLY BIRD ALL EVENTS Registration (before Oct. 1)
Qty.
Total
❑ NARO Member $350
____ $_________
❑ Non-Member $500 (includes 1-year NARO Membership)
____ $ _________
ALL EVENTS Registration
(after Oct. 1)
❑ NARO Member $405
❑ Non-Member $555 (includes 1-year NARO Membership)
ONE-DAY Registration (Friday)
❑ $275 (DOES NOT include a NARO Membership
and only a flash drive of convention materials)
____
____
$_________
$ _________
the techy amenities you can wish for – iHom
desk with Wi-Fi, plus extra amenities like Hy
wait, there
Other cool stuff to explore: Columbus Museum
Galleries • The Santa Maria • The Ohio Stateho
Market • Jeni’s Ice Cream •
____
$_________
TOTAL REGISTRATION $________________
Thomas Candy Company C
Columbus Blue Jackets • Ja
more details on all, visit Expe
– No refund of registration fee after October 1. Refund less $75 processing fee before October 1 –
Method of Payment:
❑ Check Enclosed
❑ Visa/MasterCard
❑ American Express
❑ Discover
Credit Card # ________________________________________ Expires: ___________
Signature: _____________________________________________________________
Will you attend the Friday night Zoo dinner? ❑ Yes ❑ No
Will you attend the Saturday brunch? ❑ Yes ❑ No
Four Ways to Register:
1. Mail payment* and the completed form to: NARO Convention, 15 W. 6th Street Suite 2626, Tulsa, OK 74119
2. Fax to: (918) 794-1662 with Credit Card information
3. Call: 1 (800) 558-0557
4. On line at: www.naro-us.org and click on “Events”
* Make checks payable to: NARO Convention.
For more information contact Rhiannon at: [email protected] or 1(800) 558-0557.
6 i royalty ownerS action report September 2013
and don’t
Friday Night Dinner at the C
ColumbusZoo.org
TOFFDATE
BER8th!
m now to get the
ention rate!
SCHEDULE OF EVENTS
You won’t want to miss out on educational seminars that will make you a wiser and
better mineral owner!
Wednesday, October 30
9:00am-5:00pm
1:00pm-5:00pm
CMM Review (prior arrangement with NARO office)
Board of Directors
Thursday, October 31
8:00am-9:30am
8:00am-5:00pm
8:00am-5:00pm
CMM Exams (prior arrangement with NARO office)
Registration
Exhibits
Unique format with 6 Educational Speakers all within Three Hours!
RAPIDFIRESHORTCOURSES
Views of the downtown city skyline or
Ohio State’s scenic campus welcome
you to the Hyatt Regency Columbus–
Luxurious rooms with large flat-screen
TVs plus generous work spaces with all
me stereo with iPod® docking station, work
yatt Fast Board™ , Concierge Services, etc.
e’s more...
m of Art • Franklin Park Conservatory • Hawk
ouse • The Brewery District • The North
Kelton House • Anthony-
Co. • German Village •
ack Nicklaus Museum • For
erienceColumbus.com.
t forget...
Columbus Zoo & Aquarium
GEOLOGYLEASINGESTATEPLANNINGFRACING
SITECONSTRUCTIONTITLEPROBLEMS
GASPRICINGDIVISIONORDERSMYTHBUSTING
PLANNINGAHEAD MM101CHECKSTUBS
LEGALISSUESWATERUSAGEAGREEMENTS
ANDMORE...
6:00pm-8:00pm RECEPTION
Friday, November 1
7:30am-9:00am
8:00am-5:00pm
8:00am-5:00pm
8:00am-9:00am
9:00am-10:00am
9:00am-10:00am
9:00am-10:00am
10:00am-11:00am
10:00am-11:00am
10:00am-11:00am
11:00am-Noon
11:00am-Noon
11:00am-Noon
NOON-1:30pm
1:30pm-2:30pm
1:30pm-2:30pm
1:30pm-2:30pm
2:30pm-3:30pm
2:30pm-3:30pm
2:30pm-3:30pm
3:30pm-4:00pm
4:00pm-5:00pm
4:00pm-5:00pm
4:00pm-5:00pm
6:00pm-9:00pm
CMM Exams (prior arrangement with NARO office)
Registration
Exhibits
Continental Breakfast
The Geology of Appalachia Shale: Larry Wickstrom
MM 101- David Sikes, Tina Bonner
Mineral Asset Protection “Get on the MAP” - Michelle Smith
Panel to discuss current Legal Issues in Ohio - Dick Emens, Alan Wenger
U.S. Production Overview - Kirk Edwards
AAPL Working with a Landman - Don Key
Myth Busting - Rhonda Reda
Natural Gas Pricing - John Harpole
Auditing for non CPA - Jim Leonard
LUNCH
Shale development in Ohio - Mark Finley
Anatomy of a Lawsuit - Curt Edmondson
Gas Usage on Your Lease - Tom Williams
Ohio Severance Tax: Current and proposed - Tom Stewart
Financial Planning - Dan Simonsen
Municipal Home Rule & Bans on Oil and Gas Drilling - Scott Kurkoski
BREAK
Midstream: What happens to “wet gas” and the future of pipeline
development
Expert Panel - Bob Hart, David Sikes, Jim Leonard, Jackie Root
Foundation Giving - Glenn Smith
Dinner with the Critters at the ZOO!
Saturday, November 2
8:00am-9:00am
9:00am-10:00am
10:00am-Noon
State Caucus–Texas, Oklahoma, Appalachia, New York, North Dakota
State Caucus–Rockies, Pennsylvania, Arkansas, Louisiana
Brunch & Prize Giveaway
Convention schedule subject to change.
September 2013
royalty ownerS action report i 7
Tuscaloosa
Marine Shale
Back in 2008, we heard about a
new oil shale play in the mid
section of Louisiana. The
Lynn Higginbotham
Tuscaloosa Marine Shale (TMS)
President
play was going to be the next rival
to the booming Haynesville Shale gas play in northwest
Louisiana which was drawing all of the attention. TMS has
been described as a 5,900 square mile area stretching from
Texas through central Louisiana on into eastern Mississippi.
Portions of at least 22 Louisiana parishes were identified in
the play area. Researchers estimated TMS could produce up
to 7 billion barrels of oil. The biggest drawback was that the
oil would be “hard to get.” TMS and the Eagle Ford Shale in
south Texas are similar in geologic age. The Eagle Ford Shale
was proving to be a successful oil play, along with the Barnett
Shale play in the Dallas area and the Bakken Shale play in North
Dakota. The TMS formation is approximately 100-200 feet
thick with typically low permeability and low porosity lying
approximately 10,000 to 17,000 feet below the surface. Being
so deep it is under high pressure and would require a horizontal
drilling technique using hydraulic fracturing to release the oil
from the formation.
Several companies were leasing hundreds of thousands
of acres across portions of the Baton Rouge area and central
Louisiana. DJ Energy, Amelia Resources, Devon Energy (just
to name a few) were changing lives in small Louisiana communities with bonus payments, employment and the prospect of
future production revenues. The bonus payments per acre were
not outrageous compared to the Haynesville Shale bonus
payments, but no-one was complaining. It was great to
contemplate the activity in the area. Before we knew it,
Encore was drilling in Mississippi and in the Florida parishes of
Louisiana. Oil prices had declined a bit but that would not stop
the progress. In 2011 there were several companies partnering
up and leading the race to drill (Goodrich Petroleum, Indigo,
Devon Energy, Encana, Denbury, EOG, Newfield).
Today there have been 20 TMS wells drilled in Louisiana
with 16 producing. There currently are no TMS wells drilling
in Louisiana. Much of the well data is closely held, but what
we do know is that it is a very costly process. Well costs reportedly reached as high as $20 million. As an incentive for drilling
in Louisiana, the severance tax has been waived for two years
or until well costs are recovered, whichever happens first. The
formula for drilling economically in the TMS play has been
harder to crack than expected. The complexity of the formation
and dealing with a softer rock (spongy clay instead of a brittle
rock) that doesn’t release the oil as easily has presented quite
the challenge. The experts are still hard at work though to make
it happen! If you are a member of the NARO-LA Chapter, go
to our website to see a map of the Louisiana parishes involved
in the TMS play. If you are not a NARO-LA Chapter member
you can contact me at: [email protected].
8 i royalty ownerS action report September 2013
NARO National
Convention
If you haven’t yet made
your plans to attend
the upcoming NARO
Bob Hart
National Convention
President
at the Columbus Hyatt
Regency hotel, it is not too late. The convention will focus on
both national interest issues and Appalachian region specific
topics. A separate Appalachian track will take place simultaneously with two national interest focus tracks on Friday, Nov. 1.
This is a great opportunity to get the answers to your royalty
questions while networking with new and past royalty owners
from the Appalachian states and across the U.S.
The convention will also include a Certified Minerals
Management course and two exam sessions. A new short
courses format will feature 30-minute sessions on Thursday
afternoon covering seismic, leasing, surface usage, site
construction, water usage, well completion practices, well
production, natural gas liquids, division orders, check stubs,
title problems and estate planning.
One-day conference registrations will be offered. For more
information contact the NARO national office at (800) 5580557, [email protected], your Ohio section NARO Appalachia
board members, Emily Wagner, Bob Rea, or Tim Walsh, or call
my office at (877) 341-3244, [email protected].
Note that we are not hosting a separate Appalachian Chapter
Conference this fall. However, an Appalachian chapter caucus
will take place Saturday morning, Nov. 1, at the convention
center and we plan to resume a separate Appalachian Chapter
Convention in 2013. Dates to be announced later.
Legislative Matters: Severance Taxes, Lease
Integration
Critical upcoming state legislative sessions will be taking place
in the near future. Proposals to change severance tax rates and
passage of “lease integration” or force pooling bills in Ohio and
West Virginia, respectively, along with fracing and water usage/
disposition concerns in several states (including North Carolina) are not going away. Our members are asked to contact your
state section leaders to become active in monitoring new and
recycled proposals initiated and/or supported by producers and
those opposed to oil and gas development.
Volunteering to phone, email, or meet with key legislative
leaders can make a difference in a bill’s content or even preclude
a bill’s advancement or passing into law. Lease integration has
been introduced in West Virginia for several years without
success but a lack of interest or participation by mineral owners may deliver the wrong message to our lawmakers. Ohio is
particularly vulnerable to a possible passage of a bill to increase
the severance tax on oil and gas revenues to both operators and
mineral owners. A presentation will be delivered at the
Columbus convention by a representative of the Ohio Oil &
Gas Association during which severance tax changes in Ohio
will be discussed.
Earl Pregler & Associates
Box 1722, Tulsa, OK 74101-1722
Phone: (918) 583-2117 Fax: (918) 583-1344
We purchase producing mineral interests
and estates nationwide
WE PURCHASE OKLAHOMA
MINERAL INTERESTS AND ESTATES,
PRODUCING AND NON-PRODUCING
Call or write: W. H. Stromberg, Jr. 307 Colston Bldg.,
Ardmore, OK 73401 • (580) 223-0353 or (800) 687-5882
WANT TO PURCHASE MINERALS.
And other oil/gas interests.
Send details to:
P.O. Box 13557 • Denver, CO 80201
• Royalty Acquisitions
• Estate Appraisals
• Title Transfer
Personal Attention, Ethical Standards,
Professional Service
For a free consultation call:
1-800-950-6954
(fax) 903-596-9814
(email) [email protected] • Tyler, Texas
www.LegacyRoyalties.com
Steve Smith - President / Petroleum Engineer
© 2010 Legacy Royalties
As we approach a favorite time of
year for many with football season
in full swing and hunting seasons to
follow soon, let us be thankful for
having endured another August “dog
days” of summer. The Spanish refer
Terry Retzloff
to this period during the peak of
NARO-TX President
summer heat as “La Conicula.”
It goes without saying but worth
stressing that your NARO Texas District Directors are open
to working with the members to provide more education and
transparency. Please contact your district director or myself
with any questions or ideas you have. I’m confident that most
directors will be willing to work you the membership this time
of year to squeeze in their schedules any educational functions
you desire to participate in and help with.
One of the educational opportunities available is the TCU
Energy Institute Royalty Owner Program that NARO
endorses. Upcoming November 2013 course titles are
“Foundation of Energy Law in Texas,” “Leasing the Mineral Estate,” and “Critical Issues After Production Begins.”
Instructors are certified mineral managers and experienced royalty owners. For a complete list of these classes, more details,
and pricing, please go to the NARO web site and click on the
“events” tab.
The NARO Texas board recently met to continue
conducting business as we routinely do. The convention
committee has been working very hard and has finalized
contract negotiations for both the 2014 and 2015 Texas
conventions. To keep the focus on 2013 events in this report,
I’ll provide more details on the 2014 convention in a
subsequent ROAR issue.
Natural gas prices continue in the $3.40 to $3.60 range with
Houston Ship channel gas price for September coming in just
above $3.50. The middle $3 range is respectable for this time
of year. In recent past years during the transition period from
summer to fall, prices have been somewhat weaker than they
currently are. West Texas Intermediate oil prices continue in
the range from $105 to $108 per barrel at the time of this
writing.
On a closing note, please make plans to attend the national
convention in Columbus, Ohio, beginning Oct. 31 to
support NARO and just importantly to continue
furthering your education. Among other things on that
convention schedule is a list of six rapid fire short courses
categorized into “pre-production” and “post production” areas.
This format brings a bit of a new twist to the scheduling and
covers a variety of topics that will greatly help both new and
experienced royalty owners. A further bonus for any Texans
attending would of course be the cooler weather you are likely
to experience and a change of scenery which includes getting a
flavor of what it’s like to enter buckeye (the Ohio State
University) country in October.
God Bless.
September 2013
Royalty Owners Action Report I 9
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10 I Royalty Owners Action Report September 2013
Blanchard
Rockies from page 3
your own cause. We need to raise $20,000 now to protect your
mineral rights and to cover expenses for 2014.
This is an investment in your future that could last for several
generations!
Won’t you please help and send a donation to NARO
Rockies and return to:
Keith Crichton, CPA,
Treasurer, NARO Rockies
6075 S. Filbert Court
Centennial, CO 80121
Please indicate where you would like your payment to go to by the example below:
o Enclosed payment is for the Legislative Fund (please note donations sent to the Legislative Fund are NOT tax deductible)
o Enclosed payment is for the General Fund and is tax deductible
Please continue to remember the flood victims and those who
are stranded in your prayers.
NARO-ND from page 5
In an article published September 2013 in the Great Plains
Examiner, “The $100 Million Oil Question: Who Owns Lake
Sakakwea’s Shoreline?” it was reported that the Department of
Trust Lands has placed almost $100 million in reserve
representing bonus payments for issuing shore zone leases.
Further, the article incorrectly states that the reserve is to
“repay private landowners should the case be lost.” The state’s
obligation is to the oil company, or lessee, paying the bonus
and return of the bonus would be to the state’s lessee. The oil
company and the riparian owner may already have a lease on
the uplands that includes accretions/relictions, or if not, the
oil company will have to negotiate an additional lease for those
acres.
Other
As operators continue to drill in-fill wells, an emerging concern
will be overlapping or the combining of spacing units. Mineral
owners need to monitor the state’s regulatory orders and
hearing applications to ensure correlative rights are protected.
I was recently asked, “Why does my
royalty check have codes that
references ‘Blanchard,’ and what does
Mason Mungle
it mean?”
President
“Blanchard” comes from the royalty
owner’s name in a 1977 case dealing with paying royalties.
Under the “Blanchard” decision, every royalty owner shared
in the 1/8th royalty on all sales; we called this 1/8th the
“Blanchard” royalty or it was “Blanchardized.” To the extent
his royalty percentage exceeded 1/8 (i.e., a 3/16th), the “extra”
royalty (1/16th) was called the “excess royalty” and was only
due on sales by the company owning your lease (it was inflated
to make up for when your working interest owner did not sale
gas). This system resulted in a horrible accounting nightmare
in the world of split-stream sales. Millions of dollars of royalties
went unpaid. Royalty owners would get multiple checks from
producers they had never even heard of on the same well and
when they figured out they were being underpaid, it was almost
impossible to figure out who owed it.
That all changed with the passage of the Production
Revenue Standards Act (Senate Bill 168, May 8, 1992).
Under PRSA, we not only “Blanchardized” the 1/8th
royalty, we “Blanchardized” the entire royalty and made the
operator responsible for paying the royalty in one check, not
multiple checks from multiple owners. At that point, many
companies dropped the “Blanchard” and “Excess Royalty”
designations from their royalty payments in favor of just a
“royalty” designation. Some dropped the “Excess” royalty,
but kept the “Blanchard” designation to represent the entire
“Blanchardized” royalty (not just the 1/8th). Some also began
using the “Blanchard” designation to represent those royalties
that they received from a non-operating working interest that
they were simply “passing through” the payment to the royalty
owner under PRSA.
Thus, although the “Blanchard” decision has been replaced
by PRSA, the term “Blanchard” is still used by some companies
(and old timers like me that have been dealing with payment
problems for almost 30 years). Watch for more discussion on
this issue in the OK-NARO Newsletter. For more
information go to; http://law.justia.com/cases/oklahoma/
supreme-court/1963/36460.html.
Paying Top Prices
Minerals and Production
Buying Minerals–Non-producing, large or small.
Please provide legal description and revenue
information if applicable. Prompt reply to any size offer.
800-880-8004 • 405-843-7979 • Fax: 405-843-8844
JAMES PETROLEUM TRUST
SUCHER ENERGY, INC.
P.O. Box 4648 • Tulsa, OK 74159
or call (918) 582-6297
E-mail: [email protected]
Website: www.sucherenergy.com
September 2013
Royalty Owners Action Report I 11
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© 2013 Bank of Oklahoma, a division of BOKF, NA. Member of FDIC. Equal Opportunity Lender. Neither BOKF, NA., nor its affiliates offer legal advice.
Oklahoma City, OK
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