nalta news · are you ready to supercharge your lease, everything you need to do your work is in...

1

www.NALTA.org National Association of Lease and Title Analysts Publication

NALTANewsQuarter ending March 2017

Galveston, Texas, Host city of the

2017 NALTA Conference

NALTA News | Quarter ending March 2017

2

A RELATIONSHIP OF TRUST

Consider Russell T. Rudy Energy, LLC

MINERAL, ROYALTY, & WORKING INTEREST ACQUISITIONS NATIONWIDE

Ownership Transfers Stop Here!We Do Not Reassign, Broker or Repackage Any Interest We Buy

800-880-0940 | [email protected] | www.RudyEnergy.comRussell T. Rudy Energy, LLC - Buying & Selling Oil & Gas and Mineral Interests Nationwide Since 1983

NALTA MemberLegal, Engineering,

Land & Division Order Expertise On Staff

Known For Integrityand Fair Dealing

3

Everything you need to do your work is in one secure place, with 24/7 web-based access from anywhere in the world.

• View data coming in directly from the field, in real-time, eliminating duplication of work

• Reference deeds, leases, images, instruments, title opinions and more

• Take advantage of over 110 built-in reports, or create your own with our customreport-builder

• Verify mineral leasehold ownership, royalty, non-participating royalty interest, workinginterest, and overriding royalty interest using our automated royalty division ordermodule

• Generate interest decks to easily manage farmouts, joint operating agreements, andassignments

• Establish smart conditions for tracking vertical/horizontal pugh clauses, leaseextensions, shut-in payments and more

• Automatically monitor payment obligations with a dashboard calendar schedule,chronological list, and email notifications

… and do all of these things IN SECONDS, with just a few clicks of your mouse!

www.ilandman.com

[email protected]

1-844-289-7143

Are You Ready To Supercharge Your Lease, Title, And Division Order Analyst Work?

Talk to your land department about upgrading to iLandMan today!

Now fully integrated with OGsys accounting software!


4

TABLE OF CONTENTS

06 2016/2017 NALTA Officers and Directors

08 Letter from the President, Amy R. Hopmann, CPLTA

09 Letter from the 1st Vice President, Nicholas Nelson

12 NALTA Board Report, Dawn Howell, CPLTA

14 2017/2018 NALTA Board Election, Dawn Williams Lindley, CPLTA

15 Scholarship Committee Report

16 Membership Report, Denise Duplantier

18 Website Technology Report, Charles Blocker

18 Treasurer’s Report, Cindy Nuffer, CPLTA, CMM

20 CPLTA Certification Report, Sarah Werner, CPLTA, RPL

22 Site Selection Committee Report

24 Educational review by Angela Pesina, CPLTA

46 1st Quarter 2017 NALTA Local Chapter Spotlights (ALTA, AT-LARGE and ETX-ALTA)

26 “Entireties Clauses in Oil and Gas Leases: Are Mineral Owners Outside Your Unit Entitled to Proceeds?”By: Michael Thatcher, Wexpro

28 “100+ Year-old Title Dispute: Instrument ruled a Mineral Deed, Not a Lease”By: Ian McNeill, McGinnis Lochridge

30 “Stop Complaining About the Price of Oil, And Drink Your $452-a-Barrel Bottled Water”By: Jeff Miller, Jeff Miller Marketing

32 “Changes to the Operator’s Rights and Obligations under the New 2015 A.A.P.L. Model Form JOA”By: Brian Tooley, Welborn Sullivan Meck & Tooley, P.C.

34 “The Granting Clause: The Gift That Keeps On Granting”By Mark L. Burghardt, Holland & Hart, LLP

38 “10 Oil and Gas Cases to Watch in 2017”By: Chris Halgren, McGinnis Lochridge

42 “Cost-Free Royalties – Where Valuation Begins and Post-Pro-duction Cost Deductions End”By: Celia C. Flowers and Melanie S. Reyes, Flowers Davis P.L.L.C.

OFFICIAL PUBLICATION OF THE NATIONAL ASSOCIATION OF LEASE AND TITLE ANALYSTS

IN THIS ISSUE:FEATURED ARTICLES:

VOLUME 33, ISSUE 1

National Association of Lease and Title Analysts4747 Research Forest Drive, Suite 180-221The Woodlands, TX 77381www.NALTA.org

EDITORIAL DISCLAIMER: The contents of this publication are intended for member use only and any other use with-out permission from the NALTA Board of Direc-tors is strictly prohibited. Articles published may not necessarily reflect the opinions of NALTA, nor does NALTA warrant liability for misprints.

On the Cover: Galveston Island, Host city of the 2017 NALTA Conference

Cover photography courtesy of: Galveston Island Convention and Visi-tors Bureau

5

Table of Contents

It has been an exciting month pre-paring for the March NALTA News m a g a z i n e ! I hope you enjoy all of the updates

and wonderful feature articles in this issue. We have been working diligently to improve the magazine. A new graphic designer has been enlisted to give the magazine a fresh look and we have also found a new printing company. This should help us shorten the time it takes to get each magazine in your hands. Thank you to the entire NAL-TA News Committee for your hard

work and contributions. This publi-cation is more than the work of any one person - it takes a multitude of people to make it a success!

Please remember to update your NALTA profile online to reflect if you would like to receive a physical copy of the magazine, otherwise, you will receive only a digital copy. If you have articles to recommend, topics you would like to see ad-dressed, or other suggestions or comments for NALTA News, please contact me at [email protected].

Sincerely,Tonya Fraley, CPLTA, CPLNALTA 2nd Vice PresidentNALTA News Editor

LETTER FROM THE EDITOR:

2016/2017 NALTA NEWS COMMITTEE:EDITOR:Tonya Fraley, CPLTA, CPLKVR Energy, [email protected]

COPY EDITOR:Kelley Newkirk Konarik, CPLTA

ASSISTANT EDITORS:Mandy Cookson, CPLTA, Linda How-erton and Ashley Mosby, CPLTA

ADVERTISING CHAIR:Erica Honeycutt, CPLTA, CDOA

PHOTOGRAPHY COMMITTEE:Kayla Hale, CPLTA (Chair), Kelley Newkirk Konarik, CPLTA, and Christie Osburn

GRAPHIC DESIGNER:Veronica Uvarov (Vongue Art)www.vongueart.com/design

ADVERTISING DIRECTORY:B.J. Kadrmas Inc. ....................................................................................... Page 16

Ensley Properties, Inc. .............................................................................. Page 40

iLandman................................................................................................... Page 03

Land Information Services, LLC ................................................................ Page 25

Landpro Corporation ................................................................................ Page 39

McGinnis Lochridge ................................................................................... Page 40

Meinders School of Business .................................................................... 1

Russell T. Rudy Energy, LLC....................................................................... Page 02

Steptoe & Johnson, PLLC .......................................................................... Page 13

Welborn Sullivan Meck & Tooley, P.C. ....................................................... Page 31

For information concerning advertising in NALTA News please contact Erica Honeycutt, CPLTA at [email protected].


6

PRESIDENTAmy Hopmann, CPLTA405-201-5194 Land Information Services, LLC 100 N Broadway Ave., Suite 2010Oklahoma City, OK [email protected]

FIRST VICE-PRESIDENTNicholas J. Nelson214-880-7141Petro-Hunt, LLC2101 Cedar Springs Road, Suite 600Dallas, TX [email protected]

SECOND VICE-PRESIDENTTonya Fraley, CPLTA, CPL918-599-9327 KVR Energy, LLC321 S Frankfort Ave, Tulsa, OK [email protected]

2016/2017 NALTA OFFICERS AND DIRECTORS

RECORDING SECRETARYDawn M. Howell, CPLTA505-599-4030ConocoPhillips CompanyPO Box 4289Farmington, NM [email protected]

CORRESPONDING SECRETARYDenise Duplantier832-486-6005ConocoPhillips Company2500 Woodland Park Dr., Apt G311Houston, TX [email protected]

TREASURERCindy Nuffer, CPLTA, CMM214-522-9131Providence Energy Corporation16400 North Dallas Parkway, Suite 400Dallas, TX [email protected]

CERTIFICATION DIRECTORSarah L. Werner, CPLTA, RPL 304-598-8000Steptoe & Johnson, PLLC1085 Van Voorhis Road, Suite 400Morgantown, WV [email protected]

WEBSITE TECHNOLOGY DIRECTORCharles Blocker214-537-6201Matador Resources Company5400 Lyndon B Johnson FwyDallas, TX [email protected]

PAST PRESIDENT/BOARD ADVISORDawn Williams Lindley, CPLTA 214-709-7521Tanos Exploration II, [email protected]

PARLIAMENTARIANLiz Bicoy, CPLTA405-476-4472Ascent Resources, LLC PO Box 14818Oklahoma City, OK [email protected]

2016/2017 NALTA Officers and Directors

7

2016/2017 Nalta Officers and Directors

ALTA (HOUSTON)Linda Howerton713-571-4710EOG Resources1111 Bagby, Sky Lobby 2Houston, TX [email protected]

AT-LARGEPriscilla J. Parsons, CPLTA361-553-9000Coastal Plains Exploration, LLC323 Alcoa Drive, Port Lavaca, TX [email protected]

DALTA (DENVER)Erica Honeycutt, CPLTA, CDOA303-534-9513Tracker Resource Development III, LLC1050 17th Street, Suite 2200Denver, CO [email protected]

DFW-ALTA (DALLAS-FT WORTH)Angela Pesina, CPLTA972-827-5870Matador Resources Company5400 Lyndon B Johnson FwyDallas, TX [email protected]

ETX-ALTA (EAST TEXAS)Christie Osburn903-939-7449Mewbourne Oil CompanyP.O. Box 7698, Tyler, TX [email protected]

GABALTA (GREATER APPALACIAN BASIN)Cassie Lookup, CPLTA, MPA 304-641-0321C. Lookup, LLC71 Lambeth Loop, Fairport, NY [email protected]

NOR-TEX ALTA (NORTH TEXAS)Deborah A. Frerich, CPL 940-696-0954807 8th Street Suite 1004Wichita Falls, TX [email protected]

OCAPLTA (OKLAHOMA CITY)Mandy Cookson, CPLTA405-971-4022Chesapeake Energy CorporationPO Box 18496Oklahoma City, OK [email protected]

PALTA (MIDLAND)Kayla Hale, CPLTA432-686-3028COG Operating Inc.600 W. Illinois AveMidland, TX [email protected]

SALTA (SOUTHWEST)Ashley Mosby, CPLTA970-563-5209Red Willow Production Company14933 Highway 172PO Box 369Ignacia, CO [email protected]

TALTA (TULSA)Kristie Rimpley918-661-5490ConocoPhillips Company315 S JohnstonePOB 510ABartlesville, OK [email protected]

LOCAL CHAPTER LIAISONS

STANDING AND WORKING COMMITTEESETHICS COMMITTEELeverne Hearn, [email protected]

FINANCIAL COMMITTEEJan Warren, [email protected]

Adam Hatch, [email protected]

PHOTOGRAPHY COMMITTEEKayla Hale, CPLTA (Chair)[email protected]

Kelley Newkirk Konarik, [email protected]

Christie [email protected]

PUBLIC RELATIONS COMMITTEETerra Peterson, CDOA, CPLTA (Chair)[email protected]

Angie Raspberry (Chair)[email protected]

SCHOLARSHIP COMMITTEEMarta Hodge, CPLTA (Chair)[email protected]

Cassie Lookup, CPLTA, MPA (Chair)[email protected]

SITE SELECTION COMMITTEEErica Honeycutt, CPLTA, CDOA (Chair)[email protected]

Linda Howerton (Chair)[email protected]

Olga [email protected]


8

LETTER FROM THE PRESIDENT

Dear NALTA Members,

Plans for the 32nd Annual NALTA Conference are well underway with Nick Nelson and his commit-tee members working tirelessly to ensure the 2017 Conference in Galveston, Texas is one of the best yet. Galveston is a tropical getaway but deeply rooted in the Oil & Gas Industry. Oilmen like George P. Mitchel heavily contributed to the growth and development of Galveston. As you make your way into Galveston you are welcomed by several re-fineries and offshore rigs in the ship channel. Our industry has always been and will always be eco-nomically cyclical. This is an enormous struggle in conference planning, but the NALTA board works conscientiously to maintain the quality and stan-dard that NALTA members have come to expect from our annual conference. Please continue to

promote NALTA to your company, peers and ven-dors that you work with to help attract members, conference attendees and donations.

As 2016/2017 NALTA President, one of the things I am most excited about is the opportunity to visit lo-cal chapters. I currently have plans to visit both ALTA and PALTA in the next couple of months. I can’t wait to meet you and hear the exciting plans you have for 2017.

Thank you again for the honor to serve as your NALTA President. Please feel free to reach out any-time with any ideas, questions or concerns you may have.

Sincerely,Amy R. Hopmann, CPLTA2016/2017 NALTA President

Olga McGee and Amy Hopmann visiting the

Ocean Star Offshore Drilling Rig Museum

Amy R. Hopmann

9

NALTA Board Reports

LETTER FROM THE 1ST VICE PRESIDENT

Be sure to save the date for NALTA’s 32nd Annual Conference (September 27th - 29th) at the fabu-lous Moody Gardens Hotel in Galveston, Texas! The 2017 conference committee has been busy prepar-ing another outstanding event. Be on the lookout for our full conference brochure coming in early April. Although we are still finalizing the details, we are excited to provide a few teasers of what you can expect at conference this year.

The conference seminar will begin on Wednesday and provide a day of “Surfing the Lease through the State Laws and Regulations”. The morning session will cover state laws and regulations as they pertain to the oil and gas lease with attorney George Snell (and others to be announced) as the guest speaker. After lunch, attendees will be led on a guided field trip and educational tour of the Ocean Star Ener-gy Center Museum and Offshore Drilling Rig. Red Willow Production Company will be providing an offshore expert to be our tour guide during the trip. This is a new twist on our usual Wednesday semi-nar and one you definitely won’t want to miss!

The keynote speaker on Thursday will be J. P. Bryan, founder and CEO of Torch Energy Advisors. Mr. Bryan is known for his museum-quality collection of Texa-na: rare artifacts such as rifles, swords, uniforms, fine art, old books, papers and more documenting the Lone Star state’s history. In 2015, Mr. Bryan opened the Bryan Museum in Galveston to display his col-lection. His museum tells the story of the American West. He was born into one of Texas’ most storied families, a great-great grandson of the dynamic set-tler Emily Austin Perry and her first husband, James Bryan. Perry was the sister and sole heir of Stephen F. Austin, known as the father of Texas.

We are fortunate to have another outstanding lun-cheon keynote speaker, Nancy Robinson Masters, with us on Friday. Ms. Masters is a popular inspira-tional speaker for schools, businesses, organiza-tions, and events. She is a pilot and the author of 44 books with combined sales of more than 500,000

Nicholas (Nick) Nelson

Ocean Star Energy Center Museum Nancy Robinson Masters


10

copies. Her feature articles have appeared in a variety of magazines and newspa-pers, and her flying/writing adventures have taken her around the world, includ-ing traveling with the Na-tional Science Foundation in Antarctica by special invitation from the White House. She has twice been named the Distinguished Citizen of the Year by the United States Air Force and became the first woman to receive the Stephen F. Aus-tin Distinguished Service Award for her “Freedom to Read ‘em” programs promoting patriotism and the power of free people to freely read and write. Thousands of Americans

have been inspired hearing Nancy speak, and her workshops are highly recommended by teachers and participants.

Moody Gardens Hotel, Spa and Convention Center is located on Galveston Island approximately 73 miles south of Houston In-tercontinental Airport and 41 miles south of Houston Hobby Air-port. Come early or stay late to explore the hotel and many other island restaurants and attractions. The hotel has four com-plimentary shuttles available for trans-porting guests to oth-er venues around the

island. The low conference rate of $165/night plus taxes will be honored 3 days prior to and following the NALTA Conference.

In addition to the hotel, Moody Gardens’ massive complex (242 acres) is also host to the following popular Galveston attractions (excerpt from www.moodygardens.com):

EXPLORE the ocean and meet penguins, sharks and more at the Aquarium Pyramid®.

ENJOY an authentic rainforest adventure and close encoun-ters with free-roaming monkeys, macaws and other endan-

gered animals and plants at the Rainforest Pyramid®.

CLIMB the five-tier Sky Trail® Ropes Course and SOAR over Palm Beach on the Zip Line.

LEARN about the mysteries of science at the Discovery Museum® or IMMERSE yourself at the MG 3D Theater and

4D Theater.

EMBARK on a Colonel Paddlewheel Boat cruise, HAVE FUN during the summer at the lazy river, wave pool and more at

Palm Beach, Galveston’s only white sand beach.

RELAX and indulge in a little island time at the beautiful Moody Gardens® Hotel or take on a new CHALLENGE at

the Moody Gardens Golf Course.

For updates on conference and more information on everything Galveston has to offer, check www.NALTA.org and be sure to fol-low us on Facebook, Twitter (@OfficialNALTA), LinkedIn, and In-stagram. Start making plans now to join us in Galveston and to “Catch the Education Title Wave”!

Respectfully,Nicholas (Nick) NelsonNALTA 1st Vice President and 2017 Conference Coordinator

J. P. Bryan with dog Chalk

Moody Gardens Hotel, Spa & Convention Center

11

NALTA Board Reports

Special recognition to Brooke Higgins (Beaverton, Oregon) for designing the 2017 Galveston Conference Logo! Thank you Brooke!

porting guests to other venues around the island. The low confer-ence rate of $165/night plus taxes will be honored 3 days prior to and following the NALTA Conference.

In addition to the hotel, Moody Gardens’ massive complex (242 acres) is also host to the following popular Galveston attractions (excerpt from www.moodygardens.com):

For updates on conference and more information on everything Galveston has to offer, check www.NALTA.org and be sure to fol-low us on Facebook, Twitter (@OfficialNALTA), LinkedIn, and In-stagram. Start making plans now to join us in Galveston and to “Catch the Education Title Wave”!

Respectfully,Nicholas (Nick) NelsonNALTA 1st Vice President and 2017 Conference Coordinator

ANNOUNCING THE 2017 NALTA GALVESTON CONFERENCE COMMITTEE!

President Amy R. Hopmann, CPLTA Land Information Services, LLC

1st VP & Conference Coordinator Nicholas (Nick) Nelson Petro-Hunt, L.L.C.

Audio Visual Chair Charles Blocker Matador Resources Company

Brochure Committee Chair Tonya Fraley, CPLTA, CPL KVR Energy, LLC

Brochure Committee Member Lisa Coats, CPLTA Sullivan and Company, LLC.

Brochure Committee Member Kristin Gott ConocoPhillips Company

Conference Signs Chair Dawn M. Howell, CPLTA ConocoPhillips Company

CPLTA Director Sarah Werner, CPLTA, RPL Steptoe & Johnson PLLC

Donations Chair Rheannon H. Coleman, CPLTA Repsol Oil & Gas USA, LLC

Donations Committee Member Vonda Sams, CPLTA Repsol Oil & Gas USA, LLC

Donations Committee Member Jackie Jordan, CPLTA Repsol Oil & Gas USA, LLC

Door Prize Chair Lori Fisher, CPLTA Percheron LLC

Education Chair Josie Amejorado, CPLTA Neumin Production Co

Education Committee Member Tanna Buie Pardus Oil & Gas

Education Committee Member Mylissa Clark Dan A. Hughes Company, L.P.

Education Committee Member Lisa DeMasi Concho Resources

Education Committee Member Priscilla J. Parsons, CPLTA Coastal Plains Exploration LLC

Education Committee Member Connie Wilcoxson, RPL, CPLTA, CDOA Dorchester Minerals Operating, LP

Entertainment Chair Co-Chair Crystal Clark Matador Resources Company

Entertainment Chair Co-Chair Angela Pesina, CPLTA Matador Resources Company

Exhibitor/Vendor Fair Co-Chair Liz Bicoy, CPLTA Ascent Resources, LLC

Exhibitor/Vendor Fair Co-Chair Kelley Newkirk-Konarik, CPLTA Independent

Finance Chair Cindy Nuffer, CPLTA, CMM Providence Energy Corporation

Hotel Co-Chair Lynda Gutierrez Freeport-McMoran Oil & Gas

Hotel Co-Chair Olga McGee Independent

Name Tags Chair Jan Warren, CPLTA Petro-Hunt, L.L.C.

Photography Chair Kayla Hale, CPLTA COG Operating LLC

Presidents Gift Chair Linda Howerton EOG Resources

Registration Co-Chair Enjoli Hoff, CPLTA Neumin Production Co

Registration Committee Member Debbie Wilpot, CPLTA Enerplus

Transportation Co-Chair Kristie Rimpley ConocoPhillips Company

Transportation Co-Chair Michael Smith, CPLTA Independent


12

ln Energy TransactionsTHE PROOF lS lN THE NUMBERS

$18B in recent complex energy transactions, including due diligence, joint venture agreements, asset acquisitions, and divestitures

1 of the largest due diligence teams nationwide

Managed divestiture of more than 2 million mineral acres in a single transaction

Extensive experience in private placement and private equity financing

More than 200 attorneys and paraprofessionals devoted to the energy industry

More than 100 years experience in Energy Law

Top-ranked in Energy Law by Chambers USA, The Best Lawyers in America®, and AV rated by Martindale-Hubbell

P L L C

www.steptoe-johnson.com

THIS IS AN ADVERTISEMENT

Sharon O. FlaneryChair, Energy and Natural Resources Department

[email protected]

January 2017 NALTA Board Meeting

NALTA BOARD REPORTThe NALTA Board of Directors met for the January board meeting at the historic, and some say haunt-ed, Skirvin Hilton Hotel in Oklahoma City. A sincere thank you to hotel chair Olga McGee. She did an ex-cellent job preparing our accommodations.

The board members in attendance were Amy Hop-mann, CPLTA, Nick Nelson, Tonya Fraley, CPLTA, CPL, Denise Duplantier, Dawn Howell, CPLTA, Cin-dy Nuffer, CPLTA, CMM, Sarah L. Werner, CPLTA, RPL, Linda Howerton, Mandy Cookson, CPLTA, Kayla Hale, CPLTA, Christie Osburn, Cassie Lookup, CPLTA, Kristie Rimpley, Erica Honeycutt CPLTA, An-gela Pesina, CPLTA, Priscilla J. Parsons, CPLTA, Deb-bie Frerich, CPL, Ashley Mosby, CPLTA, and Charles Blocker. Liz Bicoy, CPLTA served as Parliamentarian and Dawn Lindley, CPLTA, as Past President.

The board reviewed administrative reports as well as the certification, public relations, membership and all local chapter reports. Cindy Nuffer pre-sented the treasurers report and the 2017 oper-ating budget. Charles Blocker gave a technology report highlighting features of the new website, which may I say, is wonderful.

NALTA 2nd Vice President, Tonya Fraley, submit-ted a proposal from a prospective new graphic designer and printing company. The board ap-proved both changes for the magazine. She also gave an update on new and returning advertisers for the 2017 NALTA News Magazine. Linda Hower-ton and Erica Honeycutt presented the site selec-tion committees’ report on potential locations for the 2019 NALTA Conference. NALTA 1st Vice Pres-ident, Nick Nelson, gave an update on plans for the 2017 NALTA Conference to be held in Galves-ton, TX, at the beautiful Moody Gardens Hotel. You are not going to want to miss this one, it is going to be fantastic!

The board will meet again on June 9th in Galves-ton, TX. By meeting in the host city we are able to get a feel of the conference space to ensure we can be as helpful as possible when conference rolls around.

Respectfully submitted,Dawn Howell, CPLTA2016/2017 NALTA Recording Secretary

Dawn Howell, CPLTA

13

NALTA Board Reports

ln Energy TransactionsTHE PROOF lS lN THE NUMBERS

$18B in recent complex energy transactions, including due diligence, joint venture agreements, asset acquisitions, and divestitures

1 of the largest due diligence teams nationwide

Managed divestiture of more than 2 million mineral acres in a single transaction

Extensive experience in private placement and private equity financing

More than 200 attorneys and paraprofessionals devoted to the energy industry

More than 100 years experience in Energy Law

Top-ranked in Energy Law by Chambers USA, The Best Lawyers in America®, and AV rated by Martindale-Hubbell

P L L C

www.steptoe-johnson.com

THIS IS AN ADVERTISEMENT

Sharon O. FlaneryChair, Energy and Natural Resources Department

[email protected]


14

2017/2018 NALTA BOARD ELECTION

Dear Valued Members of NALTA:

As we rapidly advance through 2017, I am hap-py to announce some important deadlines for the 2017/2018 NALTA Board of Directors Election. Please keep the following dates in mind:

2017/2018 NALTA BOARD ELECTION DATES:June 10th: Nominations closeJuly 7th: Ballots distributedAugust 7th: Voting closesAugust 14th: Election results announced to

prospective candidatesAugust 21st: Election results announced to

membershipSeptember 28th: 2017/2018 Board of Directors

sworn inSeptember 29th: 2017/2018 President sworn in

THE FOLLOWING BOARD POSITIONS ARE OPEN FOR NOMINATIONS:

• PRESIDENT

• FIRST VICE PRESIDENT

• SECOND VICE PRESIDENT

• CORRESPONDING SECRETARY

• RECORDING SECRETARY

• TREASURER

• CERTIFICATION DIRECTOR

• WEBSITE TECHNOLOGY DIRECTOR

• AT-LARGE DIRECTOR

(Note: the immediate past president and all local chapter liaisons are non-elected positions)

Dawn Lindley, CPLTA

Please submit your nomination (including nominee’s biography and photo) by June 10th to: [email protected]

If you have any questions, please feel free to email me.

Respectfully Submitted,Dawn Williams Lindley, CPLTA2016/2017 NALTA Past President/Board Advisor

ELECTIONS AHEAD

15

NALTA Board Reports

SCHOLARSHIP COMMITTEE REPORT

APPLICATIONS WANTED: 2017 NALTA Scholarship ProgramThe scholarship committee is pleased to announce that the open application period for the 2017 NAL-TA scholarship program has begun! The program is open to the public but special preference is given to NALTA members, NALTA industry related mem-bers, and family of NALTA members who are in good standing.

• Requirements for eligibility include:• Minimum GPA of 3.0• Official college transcript affirming credits

earned• Enrollment at a fully accredited college or uni-

versity• Sponsorship by a NALTA member who is in

good standing

Applicants are not required to pursue a degree in the energy field. Applications can be found at www.NALTA.org. Additionally, applications may be obtained from NALTA liaisons or from the scholarship committee. Applications will be ac-cepted until April 30th, 2017 and a determination will be made by the NALTA Board of Directors be-fore the beginning of the fall semester. Scholarships granted by the NALTA Board of Directors are paid di-rectly to the recipient’s educational institution.

2017 NALTA Scholarship CommitteeCassie Lookup and Marta Hodge are excited to be serving as your 2017 NALTA Scholarship Com-mittee. Cassie originally hails from West Virginia and currently resides in Rochester, NY. Cassie also serves NALTA as the GABALTA chapter liaison. Mar-ta lives in Bridgeport, WV with her family. Marta also serves NALTA as a CPLTA committee member and CPLTA liaison for the GABALTA chapter. They are both avid Mountaineer fans.

As your scholarship committee, we are committed to assisting applicants in any way possible. We are a resource available to you and should you have any questions, concerns or need assistance, please contact us. All current college students who meet the above criteria are encouraged to apply. The NALTA organization has a strong commitment to education and proudly boasts a history of support-ing the community through scholarships!

Respectfully Submitted,

Cassie Lookup, CPLTA, MPA, Scholarship Committee [email protected]

Marta Hodge, CPLTA, Scholarship Committee [email protected]

Cassie Lookup, CPLTA, MPA

Marta Hodge, CPLTA


16

Every road leads somewhere.Make the right turn.

Right-of-Way | Due Diligence | Abstracting | Title Research | Lease Acquisition

1-800-730-0361 www.bjkadrmasinc.com [email protected]

MEMBERSHIP REPORTNALTA Membership as of 2/16/2017

Active members by chapter that have renewed and paid for their memberships through January 2018:

*Please note that some NALTA members belong to more than one local chapter.

Respectfully Submitted,Denise Duplantier2016/2017 NALTA Corresponding Secretary

Denise Duplantier

MEMBERS BY CHAPTER

ALTA 170

AT LARGE 74

DALTA 101

DFW-ALTA 164

ETX-ALTA 13

GABALTA 86

NON-AFFILIATED 60

NORTEX-ALTA 2

OCAPLTA 82

PALTA 62

SALTA 15

TALTA 91

TOTAL *920

17

NALTA Board Reports

2017 NALTA MEMBERSHIP FORMMembership term: January 1, 2017 to December 31, 2017 | www.NALTA.org

MEMBERSHIP STATUS: NEW ______RENEWAL ___________________________________

NAME_______________________________________________________________________

HOME ADDRESS ____________________________________PHONE ___________________

CITY ___________________________ ST __________________ ZIP ____________________

EMPLOYER (Please use full company name) ________________________________________

BUSINESS ADDRESS __________________________________________________________

CITY ___________________________ STATE ________________ ZIP ___________________

WORK PHONE ____________________________ FAX NO ____________________________

POSITION/TITLE _________________________ E-MAIL _____________________________

PREFERRED MAILING: HOME_____ OFFICE_____ CPLTA: Y/N ______ CPLTA CERTIF. #: ______

OTHER CERTIFICATIONS _______________________________________________________

WOULD YOU BE WILLING TO SERVE ON A COMMITTEE? YES ________ NO _________

WOULD YOU LIKE A DIGITAL OR A PRINTED MAGAZINE? DIGITAL ______ PRINTED_________

TYPE OF MEMBERSHIP (CHECK ONE) (refer to bylaws for clarification)

________ACTIVE MEMBERSHIP ______ Years employed as a Lease/Title Analyst

________ASSOCIATE MEMBERSHIP (less than 3 yrs. in Lease/Title work)

________RETIRED MEMBERSHIP (dues reduced by one-half)

AFFILIATIONS (CHECK ONE OF THE FOLLOWING):

________ LOCAL CHAPTER –AND- NALTA

($75.00 U.S. Dollars FOR NALTA DUES –PLUS- AMOUNT OF LOCAL CHAPTER DUES INDICATED ON LOCAL MEMBERSHIP FORM) ***SEE MAILING INSTRUCTIONS***

LOCAL CHAPTER NAME? ___________________________________________

________NALTA ONLY ($75.00 U.S. Dollars)

Membership MUST be processed by NALTA no later than 03/31/2017 to be published in the directory.

***MAILING INSTRUCTIONS***

IF YOU ARE A MEMBER OF ALTA (HOUSTON), DFW-ALTA (DALLAS FORT WORTH), OCAPLTA (OKLAHO-MA CITY) OR PALTA (MIDLAND) YOU WILL NEED TO SEND YOUR NALTA DUES DIRECTLY TO NALTA AND YOUR LOCAL CHAPTER DUES DI-RECTLY TO YOUR LOCAL MEMBER-SHIP CHAIRMAN. FOR QUESTIONS PLEASE CONTACT YOUR LOCAL MEMBERSHIP CHAIRMAN.

FOR NALTA MEMBERSHIP PLUS MEMBERSHIP IN ALL OTHER LOCAL CHAPTERS

Mail completed form(s) along with a check for your NALTA dues and local chapter dues to your local association. Your local association will forward your NALTA dues and application to the national level. Please make check payable to your local association.

If you are applying for or renewing NALTA membership ONLY please make your check payable to NALTA.

Mail check and NALTA membership form to:

NALTA, 4747 RESEARCH FOREST DR, SUITE 180-221, THE WOOD-LANDS, TX, 77381 ATTN: MEM-BERSHIP

FOR NALTA USE ONLYNew Member: Mailed welcome letter: Renewal: Posted to Database: Published in Magazine: Date Received: Added to Database:


18

WEBSITE TECHNOLOGY REPORT

TREASURER’S REPORT

If you haven’t done so already, please log in to the new NALTA website (www.NALTA.org) and veri-fy that your information is up to date. I am a firm believer that the most valuable asset to an orga-nization is the members themselves. With that in mind, we on the NALTA board would love to share many exciting educational opportunities with you throughout the year. The only way we can get these to you is with your current contact information.

Speaking of the new website, there are several fea-tures worth noting. A calendar of events has been added to the front page which will allow you to download events directly to your Google or Apple calendar. This calendar is updated frequently with

the event schedules of all our local chapters. Also, at the bottom of the front page, we have added NALTA’s various social media accounts. Please fol-low us on Facebook, Twitter, LinkedIn, as well as Instagram.

Lastly, if you experience issues with the NALTA web-site, CPLTA website or just have a general question, you can send the helpdesk a message by using the form located at the bottom of the front page of the NALTA website.

Respectfully Submitted,Charles Blocker 2016/2017 NALTA Website Technology Director

2017 is off and running and we are looking forward to a great year! During the January board meeting we focused a significant amount of time on estab-lishing the 2017 NALTA budget. We also discussed the many ways to continue serving the member-ship at the same high level NALTA is known for while keeping current economics in mind. During the discussion regarding the annual conference

budget, it was exciting to hear all the potential ideas that the conference committee is consider-ing for Galveston! They are diligently working to create another exceptional event and I hope to see you all there in September!

Respectfully Submitted,Cindy Nuffer, CPLTA, CMM2016/2017 NALTA Treasurer

Charles Blocker

Cindy Nuffer, CPLTA, CMM

Summary of Accounts as of December 31, 2016

Bank of America Checking Account Balance: $ 96,066.34

Bank of America Conference Checking Account Balance: $157,335.35

Bank of America Savings Account Balance: $ 33,257.58

Total NALTA Assets as of 12/31/2016: $286,659.27

19

NALTA Board Reports

NALTA Profit & Loss Budget vs. ActualJanuary through December 2016

NALTA Profit & Loss Budget vs. Actual

January through December 2016

Jan - Dec 16 Budget $ Over Budget % of BudgetOrdinary Income/Expense

IncomeTotal Certification Program Income 14,268.15 20,000.00 -5,731.85 71.34%Total Conference 82,416.52 41,100.00 41,316.52 200.53%Membership 91,754.82 90,600.00 1,154.82 101.28%News Magazine Income 1,700.00 3,000.00 -1,300.00 56.67%

Total Income 190,139.49 154,700.00 35,439.49 122.91%Gross Profit 190,139.49 154,700.00 35,439.49 122.91%

ExpenseAt-Large Membership 1,055.83 1,500.00 -444.17 70.39%Total Board Expenses 10,659.24 40,000.00 -29,340.76 26.65%Total Certification Program Expense 1,105.21 20,000.00 -18,894.79 5.53%Total Conference Expense 204,694.71Education Local Chapters 500.00 2,000.00 -1,500.00 25.0%Educational Grant 500.00Expansion 0.00 0.00 0.00 0.0%Memorials 0.00 200.00 -200.00 0.0%Total Miscellaneous 6,896.39 15,000.00 -8,103.61 45.98%Total News Magazine 14,909.16 25,500.00 -10,590.84 58.47%President's Travel 702.92 1,500.00 -797.08 46.86%Public Relations 2,858.72 10,000.00 -7,141.28 28.59%Scholarship 2,000.00 10,000.00 -8,000.00 20.0%Site Selection Committee 1,434.68 5,000.00 -3,565.32 28.69%Special Gifts & Awards 0.00 4,000.00 -4,000.00 0.0%Website Technology 7,774.45 20,000.00 -12,225.55 38.87%

Total Expense 255,091.31 154,700.00 100,391.31 164.89%

Net Ordinary Income -64,951.82 0.00 -64,951.82 100.0%Other Income/Expense

Other IncomeInterest Income 426.04 100.00 326.04 426.04%Miscellaneous Income 1,629.06

Total Other Income 2,055.10 100.00 1,955.10 2,055.1%Net Other Income 2,055.10 100.00 1,955.10 2,055.1%

Net Income -62,896.72 100.00 -62,996.72 -62,896.72%


20

CPLTA CERTIFICATION REPORT

Voluntary Certification Directors and Liaisons:(For contact information visit www.NALTA.org/certification)

Sarah L. Werner, RPL, CPLTA National CPLTA Certification Director

Lori Fisher, CPLTAALTA-Houston Certification Director

Erica Adkisson, CPLTADALTA Certification Director

Donna Huels, CPLTADFW-ALTA Certification Director

Pam Tapp, CPLTAOCAPLTA Certification Director

Billie Lopez, CPLTAPALTA Certification Director

Lisa Coats, CPLTATALTA Certification Director

Tonya Fraley, CPL, CPLTATALTA Certification Director

Trudy Pingree, CPLTA, CDOASALTA Certification Director

Marta Hodge, CPLTAGABALTA Certification Director

Connie Wilcoxson, RPL, CPLTA, CDOAAt-Large and Recertification Director

JANUARY CPLTA COMMITTEE MEETINGIn January, the 2017 CPLTA Committee met in Okla-homa City, OK to prepare for the year ahead. We are thankful for our returning CPLTA liaisons who continue committing their time and talents to the mission of the CPLTA program and we are excited several new faces have joined us this year. The com-mittee has been hard at work updating the CPLTA manual, acclimating to our new and improved CPLTA point tracking system (http://cplta.nalta.org/) and leading review and testing sessions with their respective local NALTA chapters.

CPLTA MANUAL UPDATEI would like to extend a sincere “thank you” to the committee members and the CPLTA manual au-thors who have worked diligently over the past several months assisting with the CPLTA manual update. Many of our authors have contributed to the manual by updating their respective chapters so they more accurately represent the current laws and climate of the industry. Current CPLTAs who are in good standing will be provided with information regarding how to obtain a copy of the updated ma-terial.

Sarah L. Werner, RPL, CPLTA

21

NALTA Board Reports

2016/2017 CPLTA Certification Committee

CPLTA LIAISON ASSISTANCEI am extremely fortunate to have a com-mittee full of willing, able and talented in-dividuals who are eager to assist you with any of your CPLTA needs. Here are some of the many questions your chapter liaison is available to answer for you:

• What is CPLTA certification all about?

• Are there opportunities for me locally to earn continuing education credits?

• Will my chapter be hosting a review and testing session this year?

• Can I get further assistance with the new CPLTA point tracking system?

• How can I obtain a CPLTA manual?

Nicholas AllensworthAriana Christine AmortKenton BoeversJared BreedloveDianna Lea CookLisa DeMasiElizabeth DziakBobbie GastusPaloma GonzalesDonna GoodeKim HallChristopher K. HarrisKerry HeredenKatie HessJeremy HornApril Stroud HubbardJames HullMonette HuttonBarbara A. JarosCarol JohnsSheryl KohlKathryn LaRueMichele LunaRebecca MorganElizabeth Ann NewtonEmily NowlinSharon Lillian PayneSonia PazNorma PennJohn D. PlattDamaris QuijanoChristina ReavesClayton RippsteinJeanette G. RivasSergio RiveraAmy SchelfhoutMelinda Warren

Congratulations to the following CPLTAs who recently received their certification:

REVIEW AND TESTINGAs you can see from the number of new CPLTAs, the liaisons have been busy with reviews and testing. We are very excited to expand our CPLTA membership numbers. Each local chapter will be working to plan a CPLTA review and testing session for the upcoming year. If you would like more information, please contact your local CPLTA liaison.

Respectively Submitted, Sarah L. Werner, RPL, CPLTA2016/2017 NALTA Certification Director

If you have any questions or concerns, feel free to reach out. We are here to assist!


22

SITE SELECTION COMMITTEE REPORT

Greetings NALTA Members!

The Site Selection Committee (Linda How-erton, Erica Honeycutt and Olga McGee) has been busy researching cities and venues for our 2019 annual NALTA conference. The four cities we explored were San Diego, Califor-nia, Denver, Colorado, Austin, Texas, and Oklahoma City, Oklahoma. We are pleased to announce that Denver, Colorado was selected by the NALTA Board as the 2019 An-nual NALTA Conference host city. The com-mittee will visit Denver in April to further ex-plore the various hotels/contracts.

For those of you who are interested, we wanted to provide an overview of the de-tails of the site selection process. Each year, the process to select a location for our conference two years out begins in September. At the September board meet-ing, the NALTA Board selects four to five cit-ies for the committee to explore. The com-mittee sends a Request for Proposal (RFP) to the Convention and Visitors Bureaus of

each prospective city. The CVB’s facilitate by sending the RFP to the various hotels in their city. Shortly before the deadline, the committee begins to receive preliminary hotel proposals from the hotels in each city for review. At the following January/February board meeting, the committee presents a recap of all proposals from each city and makes a recommendation as to which city/proposals appear to be the best fit for NALTA. Many factors are taken into consideration when choosing a city and hotel, such as adequate hotel rooms, meeting room space, room rates, hotel concessions, air fare cost to the city, tax rates and much more. Taking these factors into account, the NALTA Board then votes on the final city to explore.

The committee will visit the selected city and the various hotels that submitted pro-posals conducting further negotiations with them. After the site visit, the commit-tee has a better idea as to which hotel(s)

would best serve NALTA’s needs and con-ducts further contract negotiations with the finalists. The committee presents its report of the final hotel contract(s) and makes a recommendation to the NALTA board at the June board meeting. The NAL-

Colorado State Capitol Building

23

NALTA Board Reports

Denver, Colorado – Host City of the 2019 NALTA ConferencePhoto Courtesy of the Denver Visitors Bureau

2017 Galveston, Texas2019 Denver, Colorado

2018 Orlando, Florida

TA Board then votes on the host hotel and its respective contract. Prior to signing the final contract, the board may suggest that additional points be re-negotiated or clar-ified.

Once the NALTA President signs the hotel contract, the site selection process begins again. It starts over with exploring and putting together a new list of possible cit-ies for the next conference to present to the board at the subsequent September board meeting.

Don’t forget that NALTA’s 2017 annual con-ference will be in Galveston, Texas and our 2018 host city is Orlando, Florida! Start making your plans now!

Respectfully Submitted,2016/2017 NALTA Site Selection CommitteeLinda Howerton, Co-ChairErica Honeycutt, CPLTA, CDOA, Co-ChairOlga McGee, Committee Member


24

“KEEPING THE LEASE ALIVE WITH THE CONTINUOUS DEVELOPMENT CLAUSE” – an educational review by Angela Pesina, CPLTA

Presentation from the 2016 NALTA Conference – Atlanta, GeorgiaSpeaker: Jerris E. Johnson, CPL, Land Manager, Energen Resources Corporation

Mr. Johnson did a terrific job breaking down the Continuous Development Clause. He was very entertaining and gave great examples! Here are a few key points about the Continuous Development Clause from Mr. Johnson’s presentation:

Sample Continuous Development Clause“If after discovery of oil or gas on said land or on acreage pooled therewith, the production there-of should cease from any cause after the primary term, this lease shall not terminate if Lessee com-mences additional drilling or re-working opera-tions within one hundred eighty (180) days from the date of cessation of production or from the date of completion of a dry hole. If oil or gas shall be discov-ered and produced as a result of such operations at or after the expiration of the primary term of this lease, this lease shall continue in force so long as oil or gas is produced from the leased premises or on acreage pooled therewith.

If, at the expiration of the primary term of this lease, oil or gas is not being produced on the leased premises or on acreage pooled therewith but Les-see is then engaged in drilling or re-working op-erations thereon, then this lease shall continue in force so long as operations are being continuously prosecuted on the leased premises or on acreage pooled therewith; and operations shall be con-sidered to be continuously prosecuted if not more than one hundred eighty (180) days shall elapse be-tween the completion or abandonment of one well and the beginning of operations for the drilling of a subsequent well.”

The first paragraph of the clause, commonly known as the “cessation of production” provision, allows the Lessee an opportunity to restore production through additional drilling or re-working operations. The sec-ond paragraph of the clause, generally referred to as the “well-completion” provision, allows the Lessee ad-ditional operational time to establish well production.

The Continuous Development Clause provides an ex-press covenant for full lease development. It requires continuous drilling within a certain time frame, dic-tates the conditions which must be met in order to utilize the provision and may permit the ability to bank time under the lease. The Continuous Develop-ment Clause is very important in that, without it, all lease acreage outside of a unit would expire.

At times, the Continuous Development Clause offers the Lessee the ability to “bank” time. Bank-ing lets the Lessee earn well credit for additional wells drilled beyond the Annual period stated in the lease. An example of banking terminology in a lease reads as follows: “If Lessee drills more than 5 wells on the Leased Premises or lands pooled there-with during a given Annual Period and thus accel-erates the development of the Lease Premises, then Lessee shall receive future well credit(s) for each ad-ditional well drilled in said Annual Period.”

When determining your company’s ability to con-tinuously develop a lease, make sure to read each Continuous Development Clause in detail because they are not always the same. Ask yourself the fol-lowing questions:

1. What must the Lessee do in order to utilize this clause?

2. When does the first well have to be drilled? 3. Which condition must be satisfied at the end of

the primary term to enter continuous develop-ment?

Submitted by Angela Pesina, CPLTA, DFW-ALTA Liaison

Angela Pesina, CPLTA

In conclusion, make sure to read each lease in its entirety and NEVER assume one lease or clause is like all others!

25

NALTA Board Reports

EXPERIENCE On demand Landmen, Reporting Spe-cialists, Data Specialists, Lease and DO Analysts, Project Coordinators and Man-agement Consultants.

REPUTATION Connected with peers in leadership positions at other companies.

Outsource Providers focused on Client Service, Efficiency and Data Integrity.

RESOURCES Full Service, all-level Lease and Division Order Departments.

Scalability to handle non-routine pro-jects, due diligence and implementa-tion.

SYSTEM Quick ramp up with established infra-structure and software solutions.

Built in workflows for Broker Submittals, Title Requests, Well Proposals, Division Order Tracking, Document Manage-ment, Owner Relations and Task Dele-gation.

Integrates with host accounting system.

LEASES RECORDS Coordinate conversions and set-up/maintain records. Well /Lease Records Reconcilations Generate monthly expiration and obligation reports. Distribute obligation payments and bill partners. Analyze shut-in obligations and monitor shut-in payments. Lease and contract provisioning. Prepare/review exhibits to assignments Prepare agency assignments (BIA, BLM, State). Record fee and agency assignments. File bonding requirements for state and agency leases. Prepare formal briefs of agreements, leases and gas contracts.

DIVISION ORDERS Coordinate conversions and set-up/maintain records. Prepare letters-in-lieu. Notify and coordinate with purchasers/vendors/operators. Set up and maintain ownership records. Set up new well DOI. Determine working interests and burdens. Research and resolve revenue, JIB, and title issues. Distribute and maintain division orders. Manage owner relations. Track suspense accounts for escheat reporting and escrow. Transfer title and revenue.

The Landvantage dashboard is your Land department’s team site and the launching point for workflows in broker submittals,

proposal evaluation and more.

LEASE RECORDS, CONTRACTS AND WELL DATABASE Instant infrastructure with proven processes and

personnel to back new ventures.

CONTACT www.landinfoserv.com

Amy Hopmann [email protected]

405.201.5194


26

Entireties Clausesin Oil and Gas Leases:

Are Mineral Owners Outside Your Unit Entitled to Proceeds?

By: Michael Thatcher, Esq.*, Landman with Wexpro

Most oil and gas leases, with certain con-ditions, permit the lessee to develop the leasehold as a whole, so that drilling one well on one tract covered by the lease will satisfy drilling obligations for all tracts cov-ered by the lease. The language typically reads as follows: “if the leased premises are now or hereafter owned in severalty or in separate tracts, the tracts, neverthe-less, may be developed and operated as an entirety.” Known fittingly as the “entireties clause,” by treating the lease as a whole, even if certain tracts are later carved off

*Michael Thatcher was Formerly Of Counsel for Holland & Hart LLP. He is currently a Landman for Wexpro, a sub-sidiary of Questar Corporation.

This article is a part of the Fee Lease 101 Series, written by Holland & Hart LLP’s oil and gas law practice group. NALTA News is excited to feature the entire Fee Lease 101 Series throughout several of our upcoming issues. You can find the Fee Lease 101 Series and other articles writ-ten for Landmen, Lease and Title Analysts and Division Order Analysts by visiting Holland & Hart LLP’s blog at www.theoilandgasreport.com.

27

Featured Articles

such leases often contain no Pugh clause. Thus, particular care should be taken when reviewing the provisions of leases that have been held by production for multiple decades. Even when certain tracts of leases with royalty apportionment clauses have been released, some have argued that the lessors of released tracts remain entitled to proceeds from actively producing tracts. The entireties clause should also be care-fully reviewed in the context of the other lease provisions, which may impact the ap-plication of the entireties clause. Further, any lease amendments should be carefully scrutinized because in some instances en-tireties clauses will have been deleted and replaced with a form of Pugh clause.

The entireties clause deserves the atten-tion of operators, especially considering the many different forms in which the clause is drafted. The royalty apportion-ment-type clause treated here is just one variant with critical implications for the proper distribution of proceeds. Each lease needs to be examined in its own right with attention paid to the particular language used in order to determine what issues might arise out of its application beyond royalty apportionment.

Sources:1-7 Law of Pooling and Unitization § 7.04 (3d ed.).

4-6 Williams & Meyers, Oil and Gas Law § 678.

1-XII The Law of Oil and Gas Leases § 12.01 (2d ed.).

Gene L. McCoy, The Entirety Clause—Its Current Use and Interpretation, 12 Rocky Mt. Min. L. Inst. 10 (1967).

William S. Livingston, The Entirety Clause and the Drafting of Division Orders, 5 Rocky Mt. Min. L. Inst. 12 (1960).

acre sections of land, and that he leased his interest in both sections to XYZ Oil in 1985. The lease included the entireties clause above. In 1990, just before the lease expired, XYZ Oil drilled a prolific well (the Titan I well) in the north section, and the well continues to produce today. The lease did not have a Pugh clause, and thus the Titan I well held both the north section and the south section by continuous produc-tion. Meanwhile, in 1995, Bob conveyed all of his interest in the south section to his sis-ter Jill by mineral deed. In accordance with the entireties clause, Bob and Jill updated ownership of the lease with XYZ Oil, and Jill thereafter enjoyed her apportioned royalty proceeds from the Titan I well.

To continue the story, in 2014, ABC Oil leased up the remaining undivided miner-al owners in the south section, and drilled the Minerva I well on a 640-acre unit basis. XYZ Oil, as lessee of Bob’s and Jill’s lease, participates in the well. A title examina-tion is ordered for the south section, and the examiner confirms not only that Bob’s and Jill’s lease is held by production from the Titan I well, but also that the entireties clause in the lease provides for the appor-tionment of royalties. At this point the ex-aminer alerts ABC Oil that title to the north section covered by the lease will need to be examined in order to confirm the party or parties entitled to royalty proceeds from the Minerva I well. Perhaps Bob conveyed his interest in the north section to his chil-dren and grandchildren. By virtue of the entireties clause, such new owners will be entitled to their apportioned share of royal-ties, even though production is from a well located in the south section of the lease. Confirming such ownership will require a potentially burdensome title examination of land outside of the subject drilling unit. The title examination problem intensi-fies when a lease containing an entireties clause covers multiple tracts spread across multiple sections.

Entireties clauses with the type of royalty apportionment language discussed here are not ordinarily found in leases of recent vintage (their use having fallen out of fa-vor), and appear most often in leases dat-ing from the 1950s to 1970s. Importantly,

and sold to others, the clause relieves the lessee of the obligation to drill offset wells to protect owners of the other non-produc-ing tracts from internal drainage.

How are royalty payments treated? Early court decisions developed what is known as the non-apportionment rule, which holds that if the tracts covered by a lease were owned by different parties, and a producing well was drilled, for example, in Bob’s tract, then Jill, who owns a neighboring tract, is not entitled to any proceeds from produc-tion from the well on Bob’s tract. The ba-sic principle is that each separate owner is entitled to production from his or her own tract, free from the claims of the others. The non-apportionment rule was soon recog-nized as unfair, especially if the lessee was under no obligation to drill offset wells. The rule left landowners like Jill receiving no benefits from production on the leasehold. To avoid the unfair result, language was inserted into the entireties clause to allow for the apportionment of royalty payments. Typical language reads as follows: “royalties shall be paid to each separate owner in the proportion that the acreage owned by him bears to the entire leased area.” Thus a bal-ance was introduced: lessees were allowed to develop the leased premises as a whole while all lessors benefited from production from anywhere within the whole.

Entireties clauses can take any variety of forms, but the form of concern here con-tains royalty apportionment language. For example:

If the leased premises are now or hereafter owned in severalty or in separate tracts, the premises, nevertheless, may be devel-oped and operated as an entirety, and the royalties shall be paid to each separate owner in the proportion that the acre-age owned by him bears to the entire leased area. There shall be no obligation on the part of the lessee to drill offset wells on separate tracts into which the land cov-ered by this lease may hereafter be divided by sale, devise, or otherwise, or to furnish separate measuring or receiving tanks for the oil produced from such separate tracts.

Now suppose that Bob owned an undivid-ed fractional mineral interest in two 640-


28

100+ Year-Old Title Dispute:Instrument Ruled a Mineral Deed, Not a Lease

By Ian McNeill, Oil and Gas Attorney with McGinnis Lochridge

The trial court determined that the 1908 release was intended to, and did in fact, release the 1906 instrument. Thus, the one-half mineral interest reverted to the grantors in the 1906 instrument.

Richardson appealed the decision arguing that the trial court erred in its determination of the legal construction and effect to be given to the 1906 instrument and 1908 release.

1906 InstrumentAppellees contended that the 1906 instrument was an oil and gas lease. Arguing that the 1906 instrument was an oil and gas lease benefitted Appellees because the one-half mineral interest described therein would have reverted to the grantors (Appellees’ predecessors) if the grantees therein did not fulfill their contrac-tual obligations.

The first paragraph of the 1906 instrument describes certain acts required of the grantees: examine grantors’ title and

cure any defects; pay off any purchase money indebted-ness existing against the property; conduct tests to deter-mine whether oil, gas and other minerals existed under

the property; and manage and control the property so that the minerals could be developed.

The second paragraph contains a statement of consideration and a granting clause. The third paragraph begins with

a habendum clause, which contains no limitations or conditions. A warranty clause follows the

habendum clause. Both the habendum clause and warranty clause contain

the word “forever.”

The Tyler Court of Appeals disagreed

with Appellees and the trial

court and held that the 1906

Richardson v. Mills, 2016 WL 7488860 (Tex. App. —Tyler 2016)

Richardson v. Mills is an appeal from the 145th Judicial District Court in Nacogdoches County, Texas. This suit involves the construction of both a 1906 instrument that was exe-cuted in favor of Robert Lindsey and June C. Harris for a one-half mineral interest and a 1908 release execut-ed by the same Robert Lindsey and June C. Harris. For years, Appellees (Mills), who are the successors-in-in-terest to the grantors in the 1906

instrument, received royalty payments for one-half of the oil, gas and other minerals in and under the property. When those payments stopped in 2010, they filed suit against Ap-pellants (Richardson), who are the suc-cessors-in-interest to the grantees in the 1906 instrument.

At issue was whether the 1906 instru-ment, dated July 9, 1906, was an oil and gas lease or a mineral deed and what effect, if any, the 1908 release had upon the 1906 instrument.

The trial court determined that the 1906 instrument and the 1908 release were ambiguous when construed to-gether and that ex-trinsic evidence was admissi-ble to deter-mine the par-ties’ intent.

29

Featured Articles

instrument was a mineral deed that con-veyed a one-half interest in the minerals.

1908 ReleaseAppellants contended that the 1908 re-lease refers to an unrecorded oil and gas lease while the Appellees contended that the release related to the 1906 instrument. The full language of the 1908 release is as follows:

WHEREAS on the 9th day of July A.D. 1907, R.E. Mills, Tom Hills and Sam Mills execut-ed and delivered to the Nacogdoches Land Company, a firm composed of Robt Lind-sey and June C. Harris, a certain contract or lease covering land described in said contract or lease, a part of the John Coo-per, T.J. Cooper and the M.J. Mills surveys in Nacogdoches County, Texas, providing for the development and exploitation of said property for oil and other mineral, and

WHEREAS by the terms of said contract or lease the time for said development has expired rendering null and void said lease.

THEREFORE this is to acknowledge a full and complete release and relinquishment of my right or claim held or claimed by Na-cogdoches Land Co., Robt. Lindsey or June C. Harris by virtue of said contract, lease or agreement, and the same is hereby de-clared to be extinguished and of no further force or effect.

Citing Tate v. Sartain, 793 S.W.2d 45, 47 (Tex. App. —Texarkana 1990, writ denied), the Tyler Court of Appeals stated that when an instrument connects itself with a prior conveyance through its recitals, the two conveyances are to be construed together to determine the intention and effect of the instruments. Thus, the court examined the 1908 release to determine if it connected it-self with an unrecorded oil and gas lease or the 1906 instrument.

The 1908 release states that it is releas-ing an instrument dated July 9, 1907. The 1908 release refers to the document be-ing released as a “contract” or “lease,” but never describes it as a deed. The release specifically states that “by the terms of said

contract or lease the time for said develop-ment has expired rendering null and void said lease.” The 1906 instrument contains no language specifying a time period for the development of the mineral estate. The 1908 release also states that the “contract or lease” was delivered to the Nacogdo-ches Land Company, a firm composed of the grantees to the 1906 instrument. The 1906 instrument does not reference the Na-cogdoches Land Company. The court went on to describe other differences between the 1908 release and the 1906 instrument.

The court stated that the numerous differ-ences between the 1906 instrument and the “contract or lease” described in the 1908 release mean that the release of a 1907 contract or lease is not simply a mis-taken date reference. The court held that

the 1906 instrument and 1908 release are unambiguous on their face and that ap-plying both of them to the relevant subject matter results in the conclusion that the 1908 release refers to some instrument oth-er than the 1906 instrument.

Accordingly, the Tyler Court of Appeals re-versed the trial court’s judgment and ren-dered judgment that the Appellees take nothing, and that they have no interest in the mineral estate in the real property de-scribed in the 1906 instrument, save and except interests they subsequently ac-quired by separate instruments.

Notice: This Opinion has not been released for publication in the permanent law re-ports. Until released, it is subject to revision or withdrawal.


30

Stop Complaining About the Price of Oil, And Drink Your

$452-a-Barrel Bottled Water

By Jeff MillerThis article originally appeared on TheSurge.com

Oil has been going up lately, much to the enjoyment of those of us in the in-dustry. But friends, family, and neigh-bors who aren’t in the energy biz keep complaining to me

about the much-overdue rise. “What’s going on?” they ask. “Why is it so expensive?”

They usually ask me this over cocktails, dinner or dessert. So I did a little research and found the best way to answer their complaints (as if I actually had anything to do with the fall-and-rise of oil prices any-way), was to give them some comparisons.

While they were sipping on their Crown-and-Coke, I reminded them that a barrel of Crown Royal . . . the very same barrel we notch oil prices in . . . came out to just under $8,500. The Coke they mixed with it is $148 a barrel. That shut them up, at least until the Crown kicked in and they started arguing about any other of a myriad of subjects.

And while doing my research, I found out that oil is probably one of the cheapest commodities per barrel of anything we use on a daily basis. Remember that a barrel of oil, as set by the Bureau of Standards, is 42

US gallons, not your typical 55-gallon drum.

For example: you’d think bottled water, simple clear Dasani bottled water (which isn’t spring water, just filtered tap water), would be cheaper than oil. Nope. A barrel of bottled water comes in at a little over $450 per barrel. Heinz Ketchup for your burger: $820 per barrel. And if you get the aforementioned ketchup on your shirt, a barrel of Tide liquid will cost you $681.

It doesn’t stop there. Starbucks coffee: $635 a barrel (and that’s for the coffee af-ter it’s brewed, not just the beans). A Texas favorite, Blue Bell Ice Cream: $470 per bar-rel. Campbell’s Cream of Mushroom soup: $636. Windex: $827. Liquid butter for frying pancakes: $2,184, and maple syrup for those pancakes: $3,967 per barrel.

How about other types of oil? Well, store-brand Canola oil is $620 a barrel. That old can of 3-in-1 oil you have: $5,376 per bar-rel. LouAna Peanut Oil for frying your tur-key: $441 per barrel.

Want a beer with your turkey? That’ll cost you about $1,100 per barrel (for cheap beer, I didn’t even want to start with pric-ing craft beers).

But the ones that really helped shut my neighbors up were the two highest I could

find (I didn’t do liquid gold, platinum or sil-ver, that would just be silly).

Liquid Paper, that correction fluid invented by former Monkee Mike Nesmith’s mom in Dallas, came out to over $11,000 per bar-rel. And the winner of all of them: Krazy Glue at $293,000 per barrel.

Even though it’s expensive, perhaps next time my neighbors start complaining about the price of oil, I’ll suggest some of that Krazy Glue for their mouth.

With over 40 years in marketing communica-tions, most of that in the energy industry, Jeff Miller decided to devote most of his time to writing. Three years ago, he and his wife sold their home in Houston and moved to a lake house on Lake Livingston, about an hour and a half north of Houston, but far enough away from the big city that he can fish, swim, smoke cigars, and drink single malt Scotch without worrying about stray bullets.

Jeff is also certified by the Department of Homeland Security and Michigan State Uni-versity in Incident Management and Crisis Communications. His writing has won nu-merous awards over the years, and in addi-tion to writing about oil and gas, he is also a playwright as well as a director/actor for community theatre. He can be contacted at: [email protected].

31

Featured Articles

WSMT

www.wsmtlaw.com

Sheryl Howe • Denver303-376-4483 • [email protected]

Laura Lindley • Denver720-305-5806 • [email protected]

J. Kenneth Barbe • Casper307-234-6907 • [email protected]

Amy E. Seneshen • Denver303-376-4467 • [email protected]

With offices in Denver, Colorado and Casper, Wyoming, our law firm specializes in oil and gas as well as issues related to other energy, water, real estate, natural resources and land related matters. Our attorneys provide advice, assistance and representation in transactions, title and regulatory work, representation before federal, state and local government agencies, litigation, mediation, and forming and operating natural resource companies. Involved in the industry since our founding in 1993, our attorneys provide the expertise that comes with experience.

On page 30 of our December 2016 issue we thanked all of the donors and sponsors of the 2016 NALTA Conference in Atlanta, Georgia. A few donors and sponsors were inadvertently missed and we would like to take this opportunity to apologize for the omission and to sincerely thank them for their

continued support of NALTA.

RSP Permian, Inc.Wilhelm Law Firm

Petro-Hunt LLCEnergen Resources Corporation

Denbury Resources, Inc.Martindale Consultants, Inc.

Thank You!


32

CHANGES TO THE

OPERATOR’S RIGHTS AND

OBLIGATIONS UNDER THE NEW 2015

A.A.P.L. MODEL FORM JOABy Brian Tooley, Attorney with Welborn

Sullivan Meck & Tooley, P.C.

The American Association of Professional Land-men recently released its 2015 Model Form Operat-ing Agreement. The A.A.P.L form 610 - Model Form Operating Agreement has established the operat-ing framework within the United States since 1956, and the last major modifications to the Model Form occurred in 1989. The 2015 Model Form con-tains notable changes to provisions governing the appointment and removal of the Operator, access to records, assignments, authority of the Opera-tor to communitize and pool, and the Operator’s

standard of conduct. This summary is not comprehensive. There are many other sub-stantive changes to the 2015 Model Form, including, but not limited to, changes relat-ed to horizontal drilling, which are not dis-cussed herein.Operator’s Standard of Conduct. The 2015 JOA revises the Oper-ator’s standard of conduct. It now provides in pertinent part:

Operator shall conduct its activities under this agreement as a reasonably prudent operator, in a good and workmanlike man-ner, with due diligence and dispatch, in ac-cordance with good oilfield practice, and in compliance with applicable law and regulations. However, in no event shall it have any liability as Operator to the other parties for losses sustained or liabilities in-curred in connection with authorized or approved operations under this agree-ment except such as may result from gross negligence or willful misconduct. Art. V.A (Emphasis added).

Notably, the insulation of liability except for gross negligence or willful misconduct ap-plies only to “authorized or approved op-erations” and not to all Operator activities such as accounting and other administra-tive functions. This is a significant change from the 1989 JOA form which broadly states that in no event shall Operator have “any liability as Operator to the other par-ties for losses sustained or liabilities incurred except such as may result from gross negligence or willful misconduct.” (Emphasis added).

Non-Owning Operators. Article V of the 2015 Model Form maintains the gen-eral requirement that the Operator must own an interest in the Contract Area, ex-cept it allows the parties to decide the percentage of ownership the Operator must own and maintain and also allows a non-owning person to serve as Operator provided the putative non-owning oper-ator and the Non-Operators enter into a separate agreement, or insert Article XVI provisions to the agreement to govern the relationship between them. Absent such separate agreement or Article XVI pro-visions, a non-owning operator shall be bound by all terms and conditions of the agreement applicable to Operator. Fur-

33

Featured Articles

ther, the failure of a non-owning operator and Non-Operators to enter into such a separate agreement or Article XVI provi-sions “shall disqualify said non-owning operator from serving as Operator, and a party owning an interest in the Contract Area must instead be designated as Op-erator.” Unless the parties have otherwise agreed, a non-owning Operator may also be removed at any time, with or without cause, by the affirmative vote of parties owning a majority interest. If good cause for removal of such non-owning Opera-tor exists, the non-owning Operator may also be removed by the affirmative vote of Non- Operators owning a majority in-terest after excluding the voting interest of any non-operator who is an Affiliate of the non-owning Operator. Operatorship is “neither assignable nor forfeited” except in accordance with the provisions of Ar-ticle V. The 2015 Model Form states that “a change of a corporate name or type of business entity” shall not be deemed to constitute resignation of Operator, but no longer includes the 1989 language that a “transfer of Operator’s interest to any sin-gle subsidiary, parent or successor corpo-ration shall not be the basis for removal of Operator.” Whether courts will interpret this language to be a material change re-mains to be determined.

Removal of Operator. Article V.B.4 maintains the language in the 1989 JOA providing that an Operator may be removed for good cause by the affirmative vote of Non-Operators owning a majority interest after excluding the voting interest of Opera-tor, and continues to provide that such vote is not effective until a written notice has been delivered to Operator by a Non-Op-erator detailing the alleged default and Operator has failed to cure within 30 days from its receipt of the notice (or 48 hours if the default concerns an operation then being conducted). The definition of “good cause,” however, is slightly broadened. The 1989 Form provides that good cause “shall mean not only gross negligence or willful misconduct but also the material breach of or inability to meet the standards of oper-ations contained in Article V.A. or material failure or inability to perform its obligations under this agreement.” The new 2015 JOA

form states “good cause” shall “include, but not be limited to (i) Operator’s gross negligence or willful misconduct, (ii) the material breach of or inability to meet the standards of operation contained in Arti-cle V.A or (iii) material failure or inability to perform its obligations or duties under the agreement.” Art. V.B.4

Selection of Successor Operator. The 2015 Model Form generally maintains the 1989 Model Form provisions governing the selection of a successor Operator but clarifies that an assignee of the Operator’s interests is allowed to vote. Upon the resig-nation or removal of Operator, a successor Operator shall be selected by the affirma-tive vote of one or more parties owning a majority interest including the vote of the former Operator “and/or any transferee of the former Operator’s interest,” but if an Operator who has been removed or is deemed to have resigned fails to vote or votes only to succeed itself, the successor Operator shall be selected by the affirma-tive vote of the party or parties owning a majority interest remaining after excluding the voting interest of the Operator who was removed or resigned. The 2015 Model Form adds a tie breaker provision: In the event of a tie, “the candidate supported by the former Operator or the majority of its transferee(s), shall become the successor Operator.” Art. V.B.6

Access to Records. Subject to certain exceptions, the 2015 Model Form provides that a Non-Consenting Party is not enti-tled to access the well and is not entitled to well information and reports solely re-lating to such non-consented operation until the earlier of full recoupment by the Consenting Parties or two years following the date the non-consented operation was commenced. Art. V.D.5. Prior to payout, however, a Non-Consenting Party who is not otherwise in default is generally en-titled to review the joint account records pertaining to non-consented operations to the extent necessary to conduct an au-dit of the payout account. Under the 2015 Model Form, Operator is obligated to send “to the Consenting Parties” instead of “Non-Operators” (as used in the 1989 Mod-el Form) such reports, test results and no-

tices regarding the progress of operations on the well as the Consenting Parties may reasonably request, including daily drilling reports, completion reports and well logs. See Articles IV.A and V.D.5.

Operator Authority to Pool and Communitize. Article V.A and the Re-cording Supplement to the 2015 Model Form JOA now include provisions appoint-ing the Operator as attorney-in-fact for ex-ecuting declarations of pooling and com-munitization agreements on behalf of the Non-Operators. This provision eliminates some legal uncertainty related to whether an Operator can pool a lease in which it owns no interest (i.e., a lease owned by a Non-Operator), and addresses recent BLM actions which have denied communitiza-tion agreement proposals because not all the working interest owners signed the ap-plication.

Assignments. Article VIII.D of the 2015 Model Form JOA provides that, after expi-ration of a 30 day period, a transferor will not be liable for costs of operations con-ducted after that period. However, a re-cent Wyoming decision confirms the gen-eral rule that, with respect to those who are not parties to the JOA, the assignor remains liable under other contracts, such as leases or surface use agreements, ab-sent an express novation or an agreement releasing the transferor of future liability upon assignment of interests. See Pennaco Energy, Inc. v. KD Co. LLC, 2015 WY 152, 363 P.3d 18 (Wyo. 2015).

Article VI. of the 2015 Model Form JOA also provides that any interests assigned to non-abandoning parties upon aban-donment of a well by some but not all the owners will be made free of Subsequently Created Interests.

The 2015 Model Form JOA contains numer-ous other changes addressing horizontal drilling and other matters and should be carefully reviewed and modified depend-ing on the intentions of the parties.

Copyright 2015 Brian Tooley – Welborn Sullivan Meck & Tooley, P.C. All Rights Re-served – Reprinted with Permission - www.wsmtlaw.com


34

THE GRANTING

CLAUSE: The Gift That Keeps On Granting

By: Mark L. Burghardt, Esq., Attorney with Holland & Hart, LLP

The granting clause of a lease con-tains the required words of grant that create an interest in the lessee.1 This clause is typically found at the begin-ning of the lease and is often over-looked when drafting a lease, to the detriment of the lessee. The granting clause generally covers three main topics: (i) the leased substances; (ii) the associated easement rights; and (iii) the property description.

Leased substancesThe granting clause should include a careful description of the substances covered by the lease. Typical granting clauses include language such as “oil, gas, and other minerals,”2 “oil and all gas of whatsoever nature or kind,”3 or some variation of these simplis-tic descriptions. Even though this language may, at first glance, seem uncontroversial, the failure to adequately list the substanc-es covered by the lease has led to a multitude of lawsuits.

For example, the failure to adequately define the leased sub-

1 Patrick H. Martin & Bruce M. Kramer, Williams & Myers, Manual of Oil and Gas Terms 497 (12th ed. 2003).

2 David E. Pierce, Incorporating a Century of Oil and Gas Jurisprudence Into the “Modern” Oil and Gas Lease, 33 Washburn L. J. 786 (1994).

3 Martin & Kramer.

stances can lead to questions whether the lease covers coalbed methane, which depending on the state, may not be included in a general grant of gas. Another problem is encountered when in-terpreting what is included in the “other minerals” under a lease. The parties to a lease should not rely on a court to dictate what substances are covered by that lease.

As a practical matter, the goal in drafting the leased substances portion of the granting clause is to ensure that the lease covers all substances that are necessary to produce the oil and gas from the leasehold. Any special substances that may be encountered, such as coalbed methane, helium, carbon dioxide, hydrogen, or sul-fur, should be individually listed in the lease. By including a list of known or expected substances, together with catch-all language to cover substances that may not yet be known or expected in the field, the lessee can avoid unfavorable interpretations by a court that could render the lease unprofitable or unusable.

Associated Easement RightsThe second part of the granting clause is the description of the ease-ment granted to the lessee. Historically, the grant of an easement and the right to conduct surface operations has been broadly, if not vaguely, described in the lease. The lessee has, instead, relied on the implied right of access to the surface estate arising from the mineral estate’s dominance. Reliance on this implied right of access can be problematic when the surface owner engages in activities that pre-vent or inhibit oil and gas development or when the surface owner disagrees with and challenges the lessee’s use of the surface estate.

35

Featured Articles

THE GRANTING

CLAUSE:

contiguous with the leasehold will be cov-ered by the lease.

In the event that the lease is limited in depth, the property description should include language that identifies the spe-cific interval covered by the lease, making sure that the depth description is tied to a measured depth in a specific well. A care-fully crafted depth description will avoid confusion as to the actual depth covered by the lease.

Other ConsiderationsA common, but surprising, issue is that some granting clauses fail to include pres-ent words of grant. That is, the granting clause describes the activities that can be undertaken on the leasehold but does not expressly grant the rights to the underly-ing oil and gas.5

Another issue that you should be aware of is that, with horizontal drilling result-ing in ever increasingly long laterals, the easement in the granting clause should

5 Pierce.

include language granting the lessee a subsurface easement to accommodate horizontal development. Again, if this subsurface easement will be used for the benefit of lands located outside the lease-hold, the subsurface easement should be created by a separate agreement be-tween the parties, thereby preventing the easement from terminating with the underlying lease. Also, for a lease limited by depth, the granting language should include a subsurface easement for all depths that must be traversed in order to access the leased interval.

In summary, through careful drafting of the various components of the granting clause, the lessee can protect itself from unexpected complications and ensure that it is allowed to fully develop and pro-duce the oil and gas resource.

This article is a part of the Fee Lease 101 Series, written by Holland & Hart LLP’s oil and gas law practice group. NALTA News is excited to feature the entire Fee Lease 101 Series throughout several of our upcoming issues. You can find the Fee Lease 101 Se-ries and other articles written for Landmen, Lease and Title Analysts and Division Order Analysts by visiting Holland & Hart LLP’s blog at www.theoilandgasreport.com.

As for split estate lands, the lessee should be careful to ensure that the lease does not grant and that the lessee does not rely on a right of access that was not reserved or conveyed in the deed creating the split es-tate. Keep in mind that the lessor can only grant the rights that the lessor owns.

To avoid these issues, I recommend that this portion of the granting clause describe the specific activities that the lessee will be conducting on the leased premises, such as construction and location of the various production facilities, powerlines, roads, pipelines, and any other activity that may foreseeably be required to produce the oil and gas. By describing the specific ac-tivities, the surface owner is put on notice of the types of activities that the lessee is planning to conduct on the surface estate. If a lawsuit ensues, it will be very difficult if not impossible for the surface owner to argue that they were unaware that the sur-face would be used for these activities.

I note also that, even though the lessee, through careful drafting of the lease, may be able to secure surface access for gather-ing facilities and other surface disturbance activities not related to production of oil and gas from the leasehold, this grant of access could be terminated upon expira-tion of the lease term. For such activities, I recommend that the lessor obtain a sep-arate surface use agreement specifically granting the right to conduct these activi-ties to ensure that they survive termination of the lease.

The Leased PremisesFinally, the granting clause should include a description of the land covered by the lease. This should, of course, include a legal description of the property together with the acreage covered by the lease-hold. For small or irregular tracts of land, the lease should include a Mother Hub-bard clause4 to ensure that inadequately described property that is adjacent to and

4 A clause commonly included in contemporary leas-es to meet the problem of adequately describing strips of land owned by a lessor contiguous to the land specifically described by the lease and intended to be covered by the lease. Id. at 246. Also known as a cover-all clause or an all-inclusive clause.


36

CPLTA - Why Become Certified?

CPLTAs are recognized for exemplifying the highest standards of experience, competence and integrity. Earning the CPLTA designation has been known to:

• Help you earn credibility and respect

• Open more opportunities for advancement

• Increase your earning potential

• Prove your willingness to invest in your own development

• Demonstrate your commitment to your profession

• Build confidence in your lease and title analysis knowledge

In 1989, the National Association of Lease and Title Analysts (NALTA) implemented the Certified Professional Lease and Title Analyst (CPLTA) program to enhance the professional status and provide a reliable standard of excellence and achievement amongst qualified lease and title analysts.

Participation is voluntary and only available to NALTA members in good standing. Candidates who meet the established criteria and who successfully complete a comprehensive examination will be granted the coveted title of Certified Professional Lease and Title Analyst (CPLTA).

For program requirements and details visit our website at www.NALTA.org/certification

37

Featured Articles

Do I qualify to apply for the CPLTA certification?

Congratulations – you qualify to apply for the CPLTA

Certification!

You do not qualify to apply for the CPLTA certification at

this time.

Are you a currentNALTA

member in good

standing?

Do you work full-time in a job directly related to lease and title

analysis, lease administration within the energy industry

or in a related supervisory or management position?

DO YOUR TOTAL CREDITS EQUAL 7 OR MORE?

Have you completed a minimum of seven years of full

time work experience in the work previously described?

Do you agree to abide by the Code of Ethics of the Bylaws

of the National Association of Lease and Title Analysts?

1) Give yourself 1 credit for each year of full time experience you have in the work previously described

_________ Credits

(Up to 7)

2) Do you have a bachelor’s degree from an accredited college or university? If Yes, Give yourself 2 Credits

_________ Credits

(Up to 2)

3) Do you have an advanced degree from an accredited college or university? If Yes, Give yourself 1 Credit

_________ Credis

(Up to 1)

Total Credits from 1, 2, and 3 = __________NO

YES YES

NO

YES

YES

YES

NO

NO

NO


38

Mr. Halgren represents clients in a wide variety of litigation matters. Chris strives to identify an aggressive, yet practical ap-proach to accomplish his clients’ needs, taking into account the particular legal and business is-sues presented. With horizontal drilling transforming the energy landscape across Texas, Chris developed an emphasis on oil and gas related matters. He has

represented operators, non-operators, and landowners in a variety of disputes ranging from seismic misappropria-tion, leasing issues, royalty disputes, title litigation, lease termination, midstream accounting, and other related contractual disputes. Chris has been selected to the Texas Super Lawyers Rising Stars list, a Thomson Reuters service, (2014-2015).

By Chris Halgren, Oil and Gas Attorney with McGinnis LochridgeThis article originally appeared on oilandgaslawdigest.com

With the beginning of a new year, there are several oil cases pend-ing in the Texas Supreme Court relevant to the oil and gas indus-try. We’ll be following the following 10 cases throughout the year:

Argued CasesThe Supreme Court has granted a petition for review in each of the following cases and oral argument has already occurred.

1. Production in Paying Quantities:

BP Production Company v. Laddex, Ltd.15

A top lessee seeks a determination that a prior lease termi-nated for failing to produce in paying quantities. This will be one of the first Supreme Court cases to analyze the law related to production in paying quantities in quite a while.

10 OIL AND GAS CASESTO WATCH IN 2017

2. Liability for Surface Damages:

ExxonMobil Corp. v. Lazy R Ranch, et al

A surface owner seeks an injunction against a lessee which would require the lessee to remediate damage to the proper-ty. The lessee contends that the cost to remediate the proper-ty would exceed the property’s value, thus the relief would run afoul of longstanding Texas law which limits recovery in proper-ty damage cases to the value of the property.

3. Parties Necessary for Royalty Litigation:Richard D. Crawford v. XTO Energy, Inc.

The Supreme Court will determine whether a royalty owner who claims to have been underpaid must join any third-parties that may have received royalties which should have been paid to the plaintiff royalty owner. The royalty owner in this case claims that such a procedural requirement would place an undue burden on small royalty owners.

4. Shut-In Wells:BP America Production Company v. Red Deer Resources, LLC

Another lease termination case, the parties dispute whether a well shut-in by BP America could perpetuate the lease. At issue, among other things, is whether a well was capable of producing in paying quantities when shut-in and whether a reasonably pru-dent operator would continue to operate the lease.

5. Indemnity:Noble Energy, Inc. v. ConocoPhillips Company

A purchaser of assets out of a bankruptcy estate took the assets “free and clear” of all “claims,” but an appellate court found a duty of defense and indemnity existed in connection with a $60 million liability arising 10 years after the assets were purchased. This case should be followed by any company acquiring assets out of bankruptcy proceedings.

39

Featured Articles

Petition GrantedThe Supreme Court has granted a petition for review in the follow-ing cases, but oral argument has not yet occurred.

6. Fiduciary Duties:Longview Energy Company v. The Huff Energy Fund, LP, et al.

(set for argument 2/9/2017)

This case analyzes the duties owed by board members to a company. The trial court judgment, valued by some to be just under $1 Billion (based largely on the value of mineral inter-ests at the time), but the appellate court held that there was insufficient evidence to support a claim for breach of fiduciary duty by usurping a business opportunity.

7. Pooling:Samson Exploration, LLC v. T.S. Reed Properties, Inc., et al.

(set for argument 2/28/2017)

This dispute involves several questions related to the nature of pooling and the corresponding lease obligations. Among oth-ers, this case concerns the legal effect of two overlapping units designated by Samson as well as the interpretation of lease language controlling how royalty payments are computed.

Briefing on the Merits RequestedThe Supreme Court has requested full briefing on the merits, but has not yet determined whether to grant a petition for review. If the petition for review is denied, the proceeding at the Texas Su-preme Court will likely be over. If it is granted, then the case will likely be set for oral argument.

8. Offset Obligations:Murphy Exploration & Production Company – USA v. Shirley Adams, et al.

The dispute concerns the obligations placed on a lessee to protect a lease from drainage. The trial court held that the lessee complied with the requirements of the lease’s offset obligations clause, but the appellate court reversed based on its holding that the lessee did not prove that an offset well drilled to comply with the lease did in fact protect the lease from drainage.

9. Retained Acreage Clauses:XOG Operating, LLC, et al. v. Chesapeake Exploration Limited Partnership, et al.

At issue is the interpretation and application of a retained acreage clause. The dispute focuses, in large part, on whether the lessee is permitted to retain all acreage it could have in-cluded in a proration unit or only the acreage which it actually included in the proration unit for each well.

10. Post-Production Costs:The General Land Office of the State of Texas, et al. v. San-dridge Energy, Inc., et al.

Recently reinstated by the Supreme Court, this is another “post-production costs” dispute concerning whether a royalty clause requiring payment of royalty based on the “greater of” the market price where produced or the gross price paid to the lessee. The appellate court held that royalty should be deter-mined net of costs, but the GLO contends this conflicts with the express terms of the leases.

Lease Acquisition Software

LandPro ExpressLPX

Revenue Distribution Software

Coal MiningVisual LandPro

Land Management Software

2000Visual LandPro

LeasesTractsFee MineralsContractsWells/Units

250+ Modifiable ReportsImport/Export DataTract-based Lease ManagementPayment ObligationsSpecial Provisions

Add-on Programs:Calculate Division OrdersMapSuite GIS EditorArcGIS PluginLPRs/MORs/COTs (LPX)Import LPX Broker Data

Visual LandPro 2000 Features Include:

www.Landpro.comLandpro SoftwareSolutions for Land Departments & Field Brokers [email protected]

(281) 363-4213


40

For 90 years, McGinnis Lochridge has served to protect the interests of our clients in continuously changing landscapes including cutting-edge technology, oil and gas litigation, regulatory matters and more. The quality of our work is reflected in our clients’ long-lasting loyalty and in our top-tier external rankings.

Austin I www.mcginnislaw.com I Houston

Chris Halgren, Partner713 615-8539 I [email protected]

For 90 years, McGinnis Lochridge has served to protect the interests of our clients in continuously changing landscapes including cutting-edge technology, oil and gas litigation, regulatory matters and more. The quality of our work is reflected in our clients’ long-lasting loyalty and in our top-tier external rankings.

Austin I www.mcginnislaw.com I Houston

Chris Halgren, Partner713 615-8539 I [email protected]

41

Featured Articles

Advertise With Us!Advertising within the pages of NALTA News puts your business in front of our nearly 1,300 read-ers deeply engaged within the lease and title industry.

Our membership represents hundreds of companies and many independents from all over the United States and Canada. Membership is not limited to lease analysts—many landmen, title attorneys, division order analysts and GIS analysts are also NALTA members.

NALTA News is published three times a year and the content includes educational articles, up-dates from the NALTA Board of Directors, information about our annual industry conference and much more! Our 2017 rates are listed below your convenience.

To request an advertising contract or if you have any questions, please contact NALTA News advertising chair Erica Honeycutt at [email protected].

SUBMISSION DEADLINES:

Second Quarter: May 15th, 2017 (June/July Issue)

Fourth Quarter: October 16th, 2017 (December Issue)

Ad Size Single Issue B/W One Full Year(3) Issues B/W

Single Issue Color

One Full Year(3) Issues Color

1/8 page $50.00 $100.00 $100.00 $200.00 1/4 page $100.00 $300.00 $200.00 $400.00 1/2 page $200.00 $400.00 $225.00 $500.00 Full page $300.00 $500.00 $350.00 $900.00

Premium Ad Placements:Inside Front Cover $500.00 $1,100.00Page 3 (Next to inside Front Cover) $450.00 $1,000.00Inside Back Cover $450.00 $1,000.00½ Page Back Cover $400.00 $950.00

2017 NALTA NEWS ADVERTISING RATES


42

COST-FREE ROYALTIES -WHERE VALUATION BEGINS AND POST-PRODUCTION COST DEDUCTIONS END

By: Celia C. Flowers and Melanie S. Reyes, Attorneys with Flowers Davis, P.L.L.C.

Texas jurisprudence has long held that the royalty “stick” of the mineral estate is free of production costs. Although the royalty interest is not subject to production costs, royalty is usually subject to post-production costs. Heritage Resources, Inc. v. NationsBank, 939 S.W.2d 118, 122 (Tex. 1996). Nevertheless, parties are free to contract around this general rule and may allocate post-produc-tion costs however they see fit. See id. The ability to contract around default laws seems relatively simple. Whatever the law holds, the parties simply sign a contract to achieve a different result. Unfor-tunately, the courts have made this process much more difficult in the context of drafting around the post-production cost deduction default rules. And, the problem primarily lies in the manner in which a particular royalty is valued and the time/place where the value determination is made. Without an in-depth understanding of royalty valuation meth-ods, many drafters find themselves attempting to draft around default laws that simply cannot be altered. This is further complicated by the fact that there are numerous means of valuing a royalty.

1. Royalty Valuation MethodsThe two primary methods of royalty valuation are “market value” and “proceeds value”. The two pri-mary times/places royalties are valued are “at the well” and “down-stream sales” to third parties. Understanding how, when, and where the royalty valuation takes place is the key to understanding how to allocate post-production cost deductions between the parties and how to draft around the default rules.

“Market value” is what a willing buyer would pay a willing seller in an arms-length transaction, gener-ally determined by comparable sales. If compara-

Celia C. Flowers

Melanie S. Reyes

ble sales are unavailable, understanding the time/place of royalty valuation becomes of paramount importance. “Market value at the well,” means val-ue at the well, net of any value added to the product after it leaves the wellhead. Judice v. Mewbourne Oil Company, 939 S.W.2d 133, 135 (Tex. 1996). This method deducts postproduction costs. Thus, all in-crease in the ultimate royalty value attributable to the expenses incurred after production is built in to the market value at the well equation.

“Proceeds” or “amount realized” royalty valua-tion methods require measurement of the royalty based on the amount the lessee in fact receives under its sales contract for the product. The caveat here, however, much like with the “market value” method, is the time/place of the valuation. If the lease language itself indicates that the point of sale takes place “at the well,” then, the equation con-templates post-production deductions. Thus, the coupling of “proceeds” or “amount realized” with “at the mouth of the well,” results in the same valu-ation as “market value at the well.”

2. No Post Production Deduction ClausesThe Texas Supreme Court’s first major holding related to attempts to draft around post-produc-tion cost deductions came in the 1996 Heritage Resources, Inc. v. NationsBank case. 939 S.W.2d 118 (Tex. 1996). In Heritage Resources, the royalty valuation method was “market value at the well.” However, the leases also included the following prohibition: “provided, however, there shall be no deductions from the value of Lessor’s royalty by reason of any required . . . transportation, or oth-er matter to market such gas.” Id. at 120-121. The court noted that the “no deductions” clause only prohibited deductions from the “value of the Les-

43

Featured Articles

sor’s Royalty.” See id. (emphasis added). Accordingly, the court reviewed the “no de-ductions” clause in light of the “market val-ue at the well” royalty valuation method, holding that because post-production cost deductions are inherent in this valuation method, the “no deductions” clause neces-sarily became “surplusage” and therefore had no effect. Id.

Since Heritage Resources, drafters have taken a two-fold approach. First, the drafter attempts to remove any language marrying the “no deductions” clause with the “roy-alty valuation” method. Second, drafters attempt to expressly disclaim the Heritage Resources holding in the lease addendum. The effectiveness of this solution, howev-er, has been called into question due to a series of cases. See Warren v. Chesapeake Exploration, L.L.C., 759 F. 3d 413 (5th Cir. 2014) (“no deductions” clause in adden-dum ineffective where royalty valuation method “at the well”); Potts v. Chesapeake Exploration, L.L.C., 760 F.3d 470 (5th Cir. 2014) (“no deductions” clause ineffective where royalty valuation method is “mar-ket value at the point of sale” but “point of sale” is at the well.)

After nearly 20 years, the Texas Supreme Court finally revisited Heritage Resources in the 2015 Chesapeake Exploration, LLC v. Hyder case.1 Hyder involved multiple royalty clauses. One valued royalty as mar-ket value at the well, one valued royalty as price actually received, and one valued royalty as “gross production obtained.” The first two clauses were limited by the following: “The royalty reserved herein by [lessors] shall be free and clear of all pro-duction and post-production costs . . .” Id. The third clause, although containing no express post-production deduction limita-tion, was expressly called a “cost-free” roy-

1 Chesapeake Exploration, L. L. C. v. Hyder, 2016 WL 352231 1. ; 59 Tex. Sup. Ct. J. 290 (Tex. Jan. 29, 2016) opinion substituted for Chesapeake Exploration, L. L. C. v. Hyder, 58 Tex. Sup. Ct. J. 1182 (Tex. 2015). *Please note, the original opinion was withdrawn and a new opinion substituted in its place on January 29, 2016. A detailed review of the substituted opinion, however, demonstrates no significant, substantive changes be-tween the original and the new opinion. Citations in this paper will be made to the Texas Supreme Court’s most recent Hyder opinion.

alty. Id. at 478. Finally, the lease included an express disclaimer of the Heritage Re-sources holding. Id. at 477.

The only issue that was explicitly decided by the Texas Supreme Court was whether the third royalty valuation method allowed for post-production cost deductions. Hy-der, 2016 WL 352231 at 1. The court held that the “cost-free” designation prohibited the lessee from deducting post production costs. See id. at 2. Nevertheless, while the

lessors in Hyder may have won the day, the war still seems to favor the lessees due to the court’s analysis therein.

The first problem with Hyder is that it gives effect to the “cost free” language in the third royalty valuation method, but it ignores the “free and clear” language limitation on the other two royalty clauses in the same lease. Is “cost free” now a defined term of art that, regardless of timing of royalty valuation, frees the royalty (any royalty) of bearing


44

post-production costs? Had the Heritage Resources case included the “cost free” language, would that result have been dif-ferent, irrespective of the implication of timing? And, why is the term “cost free” ef-fective but the phrase “free and clear of all post-production costs” surplusage?

The second Hyder problem is that, in dic-ta, the court opines that by making a lease a “proceeds lease,” this, in and of itself, is sufficient to avoid post-production cost deductions from the lessor’s royalty. See id. at 2. But, this conclusion is inconsistent with prior law relating to “proceeds leas-es.” The high court has previously held that a “proceeds lease” that uses a “net pro-ceeds” methodology, per se, contemplates post-production cost deductions. This is so because a “net proceeds” calculation is synonymous with the amount realized, calculated at the mouth of the well. Con-versely, a “gross proceeds” lease would theoretically not allow such deductions. See Judice, 939 S.W.2d at 136.

It’s important to note that in the 5th Circuit Potts case, the lease at issue was a pro-ceeds lease, but the court held that the les-sor’s royalty still bore the cost of post-pro-duction activities. In that case, the author (who wrote the concurrent opinion in Her-itage Resources) was very careful to stress that the underlying reasoning behind Heritage Resources was not a matter of “market value” versus “proceeds” method-ologies. The Heritage Resources reasoning stems from the “when and where” valua-tion --- specifically, at what point is the roy-alty valued: at the well or downstream after processing? In Potts, the point of sale was at the well; thus, the lessor’s royalty includ-ed post-production cost deductions. This “timing” analysis, although perhaps overly complicated, at least makes logical sense and provides a more solid understanding of the rule set out in Heritage Resources.

But, the Texas Supreme Court does not ad-dress Potts at all in Hyder. Unfortunately, in connection with the first two royalty claus-es at issue in Hyder, the court does not ad-dress the “timing” analysis, either. In failing to do so, the question of whether a “no de-ductions” clause will have any effect on a “proceeds” lease that calculates royalty at

the mouth of the well is left unclear. The Hyder case expressly states: “the price-re-ceived basis for payment in the lease is suf-ficient in itself to excuse the lessors from bearing postproduction costs.” Hyder, 2016 WL 352231 at 2. Standing alone, that statement seems to imply that timing does not matter – call it a proceeds lease and no deductions. But, as noted, such an im-plication flies in the face of long-standing Texas law with respect to how a price paid at the well calculation is derived, and it undermines the only logical reasoning be-hind the Heritage Resources holding – that timing is the key. If this Hyder statement relates solely to “gross proceeds” leases, it could be harmonized with existing law. But, a “net proceeds” lease, as examined in both Judice and Potts, is a different animal altogether.

Another aspect of the Hyder case that is in-teresting is the court’s rejection of the Heri-tage Resources disclaimer. In the context of “timing,” again, this holding makes sense. If a royalty is valued at the well – be it mar-ket value or actual price received – those calculations include post-production cost deductions, and thus, a disclaimer of the Heritage Resources holding is as inef-fective as a “no deductions” clause. But, again, the court veers away from the timing analysis in its analysis of the royalty claus-es. Still, the bottom line seems to be that a disclaimer of Heritage Resources is of no effect under any circumstances.

As to the specific holding in the case as it re-lates to the royalty clause, the court states:

Heritage Resources does not suggest, much less hold, that a royalty cannot be made free of postproduction costs. Heritage Resources holds only that the effect of a lease is governed by a fair reading of its text. A disclaimer of that holding, like the one in this case, can-not free a royalty of postproduction costs when the text of the lease itself does not do so. Here, the lease text clearly frees the gas royalty of postpro-duction costs, and reasonably inter-preted, we conclude, does the same for the overriding royalty. The disclaimer of Heritage Resources’ holding does not influence our conclusion. Id. at 5.

Finally, the Hyder dissent is worth note. The majority held that the “cost-free” language of the overriding royalty clause controlled, but the dissent focused on the “gross pro-duction” language. Hyder, dissent, 2016 WL 352231. The dissent notes that “gross production” is not as familiar a term as “market value at the well” or “amount re-alized, calculated at the mouth of the well.” Id. But, based on the standard definition of “gross” and “production,” the dissent con-cludes this phrase is synonymous with an “at the well” calculation. See id.

Under such a reading, the dissent would have held that the “cost free” language was surplusage because, as Heritage Re-sources holds, a “no deductions” prohi-bition clause cannot free a royalty from a valuation method that is inherently based on a post-production cost deduction cal-culation. In other words, gross production is what is obtained at the well, and thus, no post-production costs have been in-curred at the time of production. The dis-sent would have resolved this tension “to give full meaning to ‘gross production,’ which defines the interest where “cost-free” is only an adjective describing it.” Id.

Despite the inherent problems with the new Hyder decision, the Texas Supreme Court now has the opportunity to clarify the opinion in light of the problems raised by the dissent as the case of Commission-er of General Land Office of State of Texas v. Sandridge Energy, Inc. is now at the high court and briefs on the merits have been submitted. 454 S.W.3d 603 (Tex. App.---El Paso 2014, pet filed). Sandridge Energy in-volves the interpretation of the following clause: “gross production or the market value thereof such value to be based on the highest market price paid or offered for gas of comparable quality in the gen-eral area where produced and when run, or the gross price paid or offered to the producer whichever is greater.” Id. at 608. The El Paso court of appeals determined this clause equivalent to be a market-val-ue at the well valuation. See id. at 616. It will be interesting to see if the high court grants petition for review, and if so, how the opinion attempts to harmonize the case with Hyder.

45

Featured Articles

“Home Grown: Our Unconventional Oil & Gas Industry”Gayle Riggs, Geologist, Devon Energy

“A Landman’s Perspective of the Current Oil and Gas Setting” Jerris Johnson, Land Manager, Energen

Keynote Speaker - “Smart Leadership: The New Leadership Paradigm that will take your Company Culture from Ordinary to Extraordinary”

Brett M. Hutton, Leadership Author, Coach, and Keynote Speaker

“Embracing Change and Opportunities – What’s New for Oil & Gas in Law and Regulations.”

Meredith Wegener, J.D., LL.M., Associate Professor & Director Graduate Energy Programs,B.C. Clark Jr. Chair in Legal Studies,

Oklahoma City University | Meinders School of Business

"The New Era of Land Administration" Lucas McGuire, President, Endatus

“The Current Status of US Hydrocarbon Exports” Tom Seng, Professor, University of Tulsa

Don’t miss this amazing educational opportunity! We will share the latest developments in our industry to inform and educate all land professionals!

5 CPLTA Points & CDOA Points Pending

*Deadline for Registration is: April 12th 2017

“Embracing Change - What’s New for the Oil & Gas Land Professional”

OCAPLTAA N N U A L

TH10

April 27th, 20177:30 - 4:30

OSU - OKC CAMPUSStudent Union, 3rd Floor

$100 Members$120 Non-MembersLunch IncludedRegister on-line: www.ocaplta.org

EMB

RA

CE

CH

AN

GE

AC

HIE

VESU

CC

ESS

SYMPOSIUM

3. WHERE DO WE GO FROM HERE?After 20 years of drafting around Heritage Resources, the ma-jority of practitioners are looking back and realizing that their efforts to work around the holding were most likely in vain. Due to the Hyder opinion, Lessors who may have seen their royal-ty free of post-production costs could now be receiving royal-ty checks for lower amounts. The question now is: How do we draft a royalty valuation clause and/or no-deductions clause to meet the understanding of the parties?

At first glance, for lessees, the answer seems relatively clear. If the royalty is calculated as the market value “at the mouth of the well,” the royalty is subject to post-production costs irre-spective of the addition of a no-deductions clause or a Heritage Resources disclaimer. But, due to the Hyder language that the price-received basis for payment is “sufficient in itself to excuse the lessors from bearing postproduction costs,” the implica-tion is that any “proceeds” could free the lessor’s royalty from postproduction costs whether it is a gross proceeds or a net proceeds lease. This may be an unintended consequence of the Hyder language, but the argument is not ripe for adju-dication, and drafters will have to hope the high court eventually clarifies this language. In the meantime, if the lessee wants the lessor to bear post-production costs, the safest bet is to calculate the lessor’s royalty as market value at the well.

For lessors, the picture is even less clear. Drafters now know that a market value at the well royalty valuation will render a no deductions clause surplusage no mat-ter what language they use in the no deductions clause. But, what about “market value at the point of sale”?

This will depend on “where” the actual point of sale occurs. If evidence demonstrates the point of sale is “at the well,” the lessor is back to square one and a no deductions clause will be ineffective. Thus, it becomes imperative that the lessor determine “where” the actual point of sale will occur before relying on this language. Moreover, a lessee may change its point of sale over the course of a lease. Accordingly, lessors may need to firm up the point of sale language to something more specific such as: “cost free royalty, calculated by the market value at the final point of sale, downstream, af-ter all processing, transporting, gathering, marketing, and other post production operations have occurred.”

As to a proceeds lease, lessors, like the lessees, would be at risk relying on the Hyder language. To be full-proof, a proceeds lease should be just as specific as a market value lease. Therefore, the royalty valuation clause should specifically state that the royalty is “cost free, calculated by the gross proceeds or total amount realized at the final, downstream point of sale, after all processing, transporting, gathering, marketing, and other post production operations have occurred.”

This article has been modified to fit in the space provided. To down-load the complete article please visit:

https://drive.google.com/file/d/0ByjSweiuasQDUnZfeU0yNHBSb-WM/view?usp=sharing

CONCLUSIONWhether the drafter is preparing a lease favorable to a lessor or lessee, the traps inherent in formulating a cost-free or burdened royalty are now abundant due to the confusing nature of the case law. As noted, the courts’ analyses logically turn on timing. However, because Hyder arguably stirs away from this logic, the effects of proceeds leases are now unclear. Thus, drafters, in order to be safe, should use succinct, specific language in the royalty valuation clause and stop relying on no-deduc-tion addendums until Texas courts hopefully, one day, shore up this issue with a clear, bright-line edict.


46

1ST QUARTER 2017 NALTA Local Chapter Spotlights

ALTA – Association of Lease and Title

Analysts (Houston)

Page 47 Page 49 Page 50

AT-LARGE – Members who do not fit within

the immediate geographical area of a

local NALTA chapter

ETX-ALTA – East Texas Association of Lease

and Title Analysts

FEATURING:

PLEASE CHECK WWW.NALTA.ORG FOR A LISTING OF UPCOMING LOCAL CHAPTER EVENTS!

47

Chapter Spotlights

ALTA Chapter SpotlightBy: Linda Howerton

ALTA hit the ground running in 2017! We are look-ing forward to having a successful year and seeing many of you in the Lone Star State for the Annual NALTA Conference in September!

ALTA’s first luncheon speaker for 2017 was Lori Fisher, CPLTA. Lori is the Director of Land Admin-istration at Percheron, LLC and is ALTA’s CPLTA Liaison. The title of our first luncheon was “GET YOUR CPLTA IN 2017”. Lori discussed the CPLTA Program, recertification, continuing education and presented a chapter from the CPLTA Manual. At the end of her presentation, Lori introduced our newly certified CPLTAs and presented them with their CPLTA Certificates.

Since this year’s conference is in our own back-yard of Galveston, TX, ALTA is rolling out the wel-come mat! Our February luncheon will focus on promoting NALTA and the 2017 NALTA Annual Conference as we welcome NALTA President, Amy Hopmann, CPLTA, from Oklahoma City, OK! In preparation for the luncheon, we have asked our members these questions: What is NALTA? What is the Annual NALTA Conference? Have you ever been to conference? February’s luncheon prom-ises to be packed with the NALTA experience! After NAL-TA President Amy Hopmann addresses our membership, previous NALTA conference speaker, Curt Horne, will give an update on the topic he pre-sented last year at conference titled: “Real Property Law for Land Professionals”. ALTA will be handing out free give-aways from past conferences and making luggage tags from business cards (like we do at our conference booth every year). ALTA wants our members to get excited and

2017 Officers and Directors

Office of President: Robyn E. Arnold

Office of 1st Vice President: Sharon Tucker

Office of 2nd Vice President: Kelly Klaus

Office of Recording Secretary: Pam Lackey

Office of Corresponding Secretary:

Paula White

Office of Treasurer: Claire Kilgore

Director of Education: Katha Valigura

Director of Employment: Sheryl Kohl

Director of Ethics and By-Laws:

Candace Conner

Director of Membership: Susan Eaton

Director of Social Ways and Means:

Joey King

NALTA Liaison: Linda Howerton

Linda Howerton

ALTA Booth at 2016 NALTA Conference


48

“Catch the Education Title Wave” set to hit Galveston in September 2017!

On March 29th, ALTA is thrilled to have Monte Williams with Steptoe & Johnson who will be flying in to join us from West Virginia. Mr. Williams will be presenting his very popular program titled: “FIRE, FIRE, FIRE – Emergency Preparedness for Businesses – How Will Your Business Re-spond to an Emergency”?

On April 25th, ALTA is scheduled to have our first half day seminar. The topic will fo-cus on the Fundamentals of Surface, Land and Right of Way issues. On November 13th, we will have our fall half day semi-nar focusing on the various components of Acquisitions and Divestitures.

In September, ALTA really hopes y’all will come to Galveston and “Catch the Edu-cation Title Wave”! There is a lot to do at Moody Gardens, in Galveston and some re-ally great places to eat which is important to self-described “foodies” like me! I in-tend to visit a couple of my favorite haunts and will definitely be going back for more shrimp kisses at my little neighborhood

spot (Shrimp N Stuff located at 3901 Ave-nue O in Galveston) where the locals go!!! If you are a shrimp lover, plan to stay over for the Texas Wild Shrimp Festival in Galveston the weekend after conference. It should be fun and more good food!

Board of Directors MeetingsFebruary 21

March 21

April 18

May 16

June 20

July 18

August 15

October 17

November 7

December 4

General Membership Luncheons

February 28

March 29

April 25 (Includes Half Day Seminar)

May 23

June 27

July 25

August 22

October 24

November 13 (Includes Half Day Seminar)

December 11 (Holiday Celebration)

Start making your plans to join us now! We will see you there!!

Respectfully submitted,Linda Howerton2016/2017 ALTA Liaison

Newly Certified ALTA CPLTA’s

49

Chapter Spotlights

AT-Large Chapter SpotlightBy: Priscilla J. Parsons, CPLTA

A big thank you to all of the AT-LARGE members who attended the 2016 NALTA conference and helped with our conference booth. We used part of our 2016 budget to purchase a customized ta-ble runner featuring the AT-LARGE logo. It looks sharp and makes packing and traveling to con-ference much easier. For our table giveaway we purchased AT-LARGE themed cosmetic compacts, which were a big hit, and brought a lot of traffic to our booth. In addition to the compacts, we also had 30 oz. RTIC tumblers with engraved NALTA lo-gos to give away as door prizes. One door prize winner was chosen from the entries submitted by AT-LARGE members and another was chosen from entries submitted by general conference attend-ees. The remaining items were used as volunteer gifts or were donated to NALTA’s Friday afternoon door prize drawings. It is always such a pleasure to meet and visit with the AT-LARGE membership and I am grateful that we have a booth at confer-ence which allows me that opportunity.

Working on the NALTA Board of Directors has been a wonderful experience and has allowed me to enlighten many members to the various challenges AT-LARGE mem-bership faces. I believe it is important to continue using AT-LARGE membership for NALTA members who do not fall within the geographical boundaries of the other local NALTA chapters.

Two AT-LARGE members were awarded grants to attend the 2016 NALTA conference; one of which was able to attend conference for the very first time. I am pleased to say that the recipient was thrilled and expressed her appreciation for the opportunity. I am also

excited she is giving back to NALTA by serving on a committee for the 2017 conference.

This year’s conference is quickly approaching and I am thrilled to see several of our AT-LARGE mem-bers who are volunteering their time by serving on the 2017 conference committee. It takes many people to make NALTA successful and I cannot ex-press enough how rewarding an experience it can be to volunteer. For those of you who are interest-ed in volunteering but are not sure where to start, feel free to reach out to me or any board member. Even if you only have a little time, every little bit helps. Volunteering for NALTA has allowed me to network and meet several amazing people who I now call friends.

As I have said before, my door (email) is always open to the AT-LARGE membership for any ques-tions, ideas or suggestions that you may have.

Respectfully submitted,Priscilla J. Parsons, CPLTA2016/2017 AT-LARGE [email protected]

Priscilla Parsons, CPLTA

At-Large Booth at 2016 NALTA Conference


50 okcu.edu/business

GRADUATEPrograms in Energy

MS in Energy ManagementMS in Energy Legal Studies

Earn Your Master’s Degree in Energy from Anywhere in the WorldLive/Online Distance Education

• 100% energy-focused curriculum, accredited by AACSB & AAPL

• Two programs offered: Energy Management or Energy Legal Studies

• 2-year program, 1 night per week, on-campus or live-streaming

• GMAT and prerequisites not required• Affordable tuition, scholarships available• Join a strong, nationwide network of leaders

in the energy industry

Contact: Meredith Wegener

Director, Graduate Energy Programs

[email protected] • 405-208-5593

ETX-ALTAChapter Spotlight

By: Christie Osburn

2017 ETX-ALTA Officers and Directors

ETX-ALTA’s mem-bership meetings are held every other month, with guests always wel-come. Most meet-

ings include a speaker whose topics qual-ify for educational credit with NALTA, AAPL and/or NADOA. Our board meetings are held quarterly at Mewbourne Oil Company in Tyler, Texas from 5:30-6:30 p.m.

Our 2017 elections were held this past No-vember, and our new officers were sworn in on December 19th, 2016.

ETX-ALTA member, Michelle Potter, was the recent recipient of a NALTA educational scholarship and was very thankful for the opportunities this will afford her.

We are proud to announce that ETX-ALTA made charitable contributions of $250.00 to CASA Gregg County, Texas and $250.00 to CASA Smith County, Texas (Court Appointed Special Advocates).

Sharon Mercer Peggy BagleyJennifer Hamm Christie OsburnTiffany Smith Susan Griffin

2017 Officers and Directors President: Sharon Mercer

Vice President: Jennifer Hamm

Treasurer: Peggy Bagley

Secretary: Tiffany Smith

NALTA Liaison: Christie Osburn

Past President: Susan Griffin

To help with the expenses of procuring a CPLTA accreditation, our chapter is hold-ing an essay contest and will award a cer-tification scholarship to one of our eligible members.

On March 2nd, ETX-ALTA hosted our sec-ond annual “Chills and Drill” social at a local restaurant in Tyler, Texas. Our mem-bership deadline is March 31st which allowed this function to also serve as a membership drive.

ETX-ALTA will be hosting a spring seminar on April 18th at the Tyler Junior College Outreach Cam-pus. The speaker and top-ic for this event are still to be determined.

Respectfully Submitted,Christie Osburn2016/2017 ETX-ALTA Liaison

ETX-ALTA Booth at the 2016 NALTA Conference

51

Chapter Spotlights

okcu.edu/business

GRADUATEPrograms in Energy

MS in Energy ManagementMS in Energy Legal Studies

Earn Your Master’s Degree in Energy from Anywhere in the WorldLive/Online Distance Education

• 100% energy-focused curriculum, accredited by AACSB & AAPL

• Two programs offered: Energy Management or Energy Legal Studies

• 2-year program, 1 night per week, on-campus or live-streaming

• GMAT and prerequisites not required• Affordable tuition, scholarships available• Join a strong, nationwide network of leaders

in the energy industry

Contact: Meredith Wegener

Director, Graduate Energy Programs

[email protected] • 405-208-5593


52

Save the DateNALTA 32th Annual Conference

September 27th - 29th, 2017

National Association of Lease and Title Analysts4747 Research Forest Drive, Suite 180-221 The Woodlands, TX 77381 www.NALTA.org

Moody Gardens - Galveston, Texas

nalta news · are you ready to supercharge your lease, everything you need to do your work is in...

Documents