# purchasing property with an oil well on it



## Txrider

The absentee owner of the ten acres next to my 11 acres has put their property up for sale.

I would really like to have it as its the only property adjoining mine I would ever have chance to buy. 20 acres would be just about right for me I think and much better to possibly be able to a profit from than just my 11 acres.

It has a little 35 year old cabin on it that needs work that I can take or leave, I really want more pasture. It also has a pond, not a nice one, and it's dry from the drought.

The stick in the spokes is that a few years back when oil was 140 a barrel a company came in and drilled a well on the property without the owners even knowing it. They totally bisected this square 10 acre parcel with a crushed limestone road, drilled the well almost in the center of it, and ran crushed limestone paving all the way onto the neighbors 10 acres to one side and put their storage tanks on the neighbors property (also an absentee owner I think). So basically it has crushed limestone road and turnabout cutting it in half.

So not long after that they pulled the pump jack off the well and hauled the pump jack and the storage tanks away. That was a couple years ago now. They filed bankruptcy I assume in order to avoid having to plug the well and properly abandon it. They could also come back in a couple years and set up a new pump jack if oil prices skyrocket again.

The well is listed with the RR commission as a non producing well.

Now I have no problem with the wellhead staying forever, I do have a problem with the 2+acres of crushed limestone staying forever especially if the well is indeed non productive at all and they never intend to ever use it again.

Does anyone (maybe Texican?) have any experience in situations like this? 

Could I scrape off the crushed limestone and do something else with it? 

What are the laws about abandoning oil wells? Where would I go search to find the lease, the terms of the mineral rights that were separated back in the 70's?

Any ideas and suggestions? I'm ready to do footwork, don't think I can afford to hire an oil and gas attorney.

I want to make an offer on the property and I need to do it in the next 4 weeks at the most. I feel like I need more knowledge on where I stand regarding the oil well, access, and if I can ever get rid of the pavement cutting the property in half.


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## ChanceTheRapids

Odd...very odd. When we signed our oil/gas lease, they asked about putting in the same thing, and it reminds me of a couple of things:

1) I'm highly concerned that no one knew they were installing the well on the property. Even if the absentee owner did not own the mineral rights, he did own the land, and should have been notified properly.

2) There is often a clause in the contract that states the oil/gas company will have to restore the land to the prior condition, and/or make a monetary payment for unusable land thereafter. The mineral rights owner / land owner might have refused that clause, but I'm not sure why someone would do that. 

Wish I could help more. I'll talk to a landman friend of mine and see if he has some tips.


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## copperkid3

Txrider said:


> The absentee owner of the ten acres next to my 11 acres has put their property up for sale.
> 
> I would really like to have it as its the only property adjoining mine I would ever have chance to buy. 20 acres would be just about right for me I think and much better to possibly be able to a profit from than just my 11 acres.
> 
> It has a little 35 year old cabin on it that needs work that I can take or leave, I really want more pasture. It also has a pond, not a nice one, and it's dry from the drought.
> 
> The stick in the spokes is that a few years back when oil was 140 a barrel a company came in and drilled a well on the property *without the owners even knowing it.* They totally bisected this square 10 acre parcel with a crushed limestone road, drilled the well almost in the center of it, and ran crushed limestone paving all the way onto the neighbors 10 acres to one side and put their storage tanks on the neighbors property (also an absentee owner* I think*). So basically it has crushed limestone road and turnabout cutting it in half.
> 
> So not long after that they pulled the pump jack off the well and hauled the pump jack and the storage tanks away. That was a couple years ago now. They filed bankruptcy* I assume* in order to avoid having to plug the well and properly abandon it. They could also come back in a couple years and set up a new pump jack if oil prices skyrocket again.
> 
> The well is listed with the RR commission as a non producing well.
> 
> Now I have no problem with the wellhead staying forever, I do have a problem with the 2+acres of crushed limestone staying forever especially if the well is indeed non productive at all and they never intend to ever use it again.
> 
> Does anyone (maybe Texican?) have any experience in situations like this?
> 
> Could I scrape off the crushed limestone and do something else with it?
> 
> What are the laws about abandoning oil wells? Where would I go search to find the lease, the terms of the mineral rights that were separated back in the 70's?
> 
> Any ideas and suggestions? I'm ready to do footwork, *don't think I can afford to hire an oil and gas attorney*.
> 
> I want to make an offer on the property and I need to do it in the next 4 weeks at the most. I feel like I need more knowledge on where I stand regarding the oil well, access, and if I can ever get rid of the pavement cutting the property in half.


*****************************************************
concerning such matters.......and hopefully he can weigh in shortly to answer your most 
pressing questions. Perhaps he'll also comment on some that I can now see within the contents 
of your post. Being curious about something and actually knowing when it matters most are 
extremely important matters if you are planning on buying a property with possible 'contingencies'. 

See high-lighted portions above.


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## Txrider

Part of the issue is that it is a bit confusing trying to figure out who owns the mineral rights, who leased them etc. but I do know who the operator is.

I know the lease name, well API, drilling permits etc. and have printed out 60+ pages of info on it I found on the Texas RR commission site. It's a bit confusing without knowing the terminology they use.

I'd like to get back to the original separation of mineral rights and terms, leases etc, but I'm not sure of the best way to search all that down without paying for a lawyer to do it. Should all be filed with the county, and the Texas RR commission I think.

I plan to make an offer on the place regardless, but I'd like to get a clearer idea of what I'm taking on, so I decide what valuation I want to offer.


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## Belfrybat

Call the Texas RR commission and talk to someone there. I purchased a piece of property 9 years ago with three non-producing wells and dilapitated storage tanks. I called the RR Commission in Abilene and they sent out a representative who looked things over, researched the legal papers back to the 1960's and wrote me a letter telling me the steps to take to get the stuff off the property. They also wrote a letter to the oil company and within 3 months everything was gone, a foot of dirt taken out around the storage tanks where they had leaked and new dirt hauled in. 

Apparently oil folks do not want to get crosswise with the Texas RR Commission.


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## Txrider

Belfrybat said:


> Call the Texas RR commission and talk to someone there. I purchased a piece of property 9 years ago with three non-producing wells and dilapitated storage tanks. I called the RR Commission in Abilene and they sent out a representative who looked things over, researched the legal papers back to the 1960's and wrote me a letter telling me the steps to take to get the stuff off the property. They also wrote a letter to the oil company and within 3 months everything was gone, a foot of dirt taken out around the storage tanks where they had leaked and new dirt hauled in.
> 
> Apparently oil folks do not want to get crosswise with the Texas RR Commission.


Yeah that's what I understand.

The realtor sent me the owners last letter from the RR commission today. They sent an inspector out and he found the wrong operator's name displayed on the gate, and he found the well head seemed to have a small leak of salt water. The letter was cc'ed to oil company with a warning to fix those issues or be fined or such, but that other than that everything was legal.

I found the well completion report in the 60 pages. They completed it in '09 and tested it for 24 hours with a pump apparently. The records state that in 24 hrs of pumping they got 0 bbl of oil 0 CMF of gas, and about 300 bbl of water out of it.

It's my understanding a lot of these small outfits do all they can to keep from having to clean up and cap off bad wells even declaring bankruptcy to avoid it as it expensive and eats into profit. The state has had to start a fund to go around and plug off thousands of abandoned wells. It would appear that is the case here, but I believe there is law that says if they don't produce from it for so long they are required to plug it and clean up. I need to look into that I suppose and see what the definition they use for producing is. 

Maybe we need to change the law and have them deposit the money in escrow to plug wells off and properly abandon them before we issue a drilling permit or something, as every well will need to be plugged eventually when it runs dry. Seems to be a rather large problem in this state.


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## texican

If the landowner didn't own the mineral estate, "technically" the exploration company didn't need the landowner's permission... to drill the well on the land... or build the roads... or the pipeline. I say "technically" because the mineral rights holder have more power than the surface estate owners... because at some time in the past, the surface estate owner "granted" this right of exploration and development away, to whoever they sold the mineral rights to. Sucks royally, for future surface estate owners, but that's the way it is.

Want to know who owns the royalty? Get the current landowners name, go to the courthouse (or if you have the Benjamins, to a Title Abstract office) and search the index's for his/her name... find that deed and read it thoroughly and see if it mentions another earlier deed, and whether minerals were specifically "reserved" (Don't 'reserve' them, and regardless of what one thinks, they're transferred with the land). Follow the deeds back to Patent (from the State) and work every deed out, to see if minerals were retained, or sold off fractionally or in whole.

IF you have an oil/gas well on the land, go look at the sign on the road, which will identify the well by lease name and number. You can go to the TX RRC site and you can find production records. If it's been plugged, it's a dead well. If it hasn't been officially plugged, it could be just 'shut in' and shut in royalties could be being paid to royalty owners. If it's not plugged, find some of the leases let on the property, and see how long the well has to be non productive, before the mineral leasing rights revert back to the owner. Pretty much standard 12 months of non production, for a plugged well, and the minerals are in play again, for anyone else interested in drilling again. "They" can't come back in and redrill or drill another well, without leasing again from the mineral rights holders. Also, damages are customarily paid (even though they don't have to) for locations and for all roads/pipelines. Last price I heard for pipelines was 10 to 15$/linear foot... roads the same. You can also negotiate (even without minerals) for noise abatement, dust control, fencing, cattleguards, etc.

If you post the County, the Company, the Lease information (all on the sign out by the highway) I can look that info up in just a minute or two...

As far as the road.... look at it in a positive way. You've got an all weather road bisecting the place... you can fence down one side and do rotational grazing. If I were negotiating for it, I'd argue I'm losing two acres to a road, and possible well location (think a good place for a barn/shed...) I'd """Never""" be able to use, and knock a few thousand off the purchase price. The cost of removing the road would run into the thousands, quickly... and the area under the road is probably 'very' compacted...


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## Txrider

That's one of the issues, it appeared the sign was gone when I was there last weekend.

I got a letter from the realtor from the RRC that has the info though.

It's the Tyra lease in Bastrop county, Lease ID 25053, well #3H Giddings (Buda) field. Apparently Impetro operating LLC. in San Antonio is the current operator, I think it has changed since the well was drilled.

Along with that the inspector also said "Chlorides of the water in the cellar indicated a small well head leak, as well as salt crystals on the well head.

As far as I know the minerals were reserved quite a while back and seperated before the current owner's grandfather bought the tract back in the mid 70's. I assume it was a land developer that bought a larger place, cut it up and sold off in 10 acre parcels and kept the mineral rights.

From what I can see from the completion report dated in 2009 they tested the well and got no oil, no gas, just water. There is no equipment there and hasn't been since 2009. 

It's my understanding they are required to plug any well that has been inactive for over 12 months and this one seems to be inactive to me, unless they file for an extension which is good for a maximum of 5 years and place a bond or equivalent in the amount needed to plug the well..

If they are not in compliance the RR commission can not renew their annual operation organization report that is required to operate in the state.

It's also my understanding from reading the law that if I bought the place I could make an agreement with them to plug at the base of useable fresh water and turn the well into a water well for irrigation or whatnot.

I would assume I would have to call the RRC and somehow show it is inactive over 12 months and see if the RRC will make them plug it, or maybe talk to the current operator and split plugging cost to plug it at the base of the fresh water level which is about 450ft. and make it a water well or something.

I could use the crushed limestone elsewhere if they didn't scrape it up and haul it off, I'm going to have to buy a lot of it soon for a driveway for my property so if they left that behind I could just scrape it up and move it at my leisure.


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## Txrider

Well I fished around on the RRC web site, seems the well is listed as inactive, shut in in 2008, and they have an approved extension on plugging it. Assuming a 5 yr extension that means they have until some time in 2013 to resume activity on it or plug it.


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## Txrider

Hmm I was wrong. Called the RRC and apparently they can put off plugging it basically as long as they want they just have to keep a surety bond or another option for showing financial responsibility and file it every year basically as long as they want to.

Knowing that I called the operator of the well to ask what their situation was and what they intended to do with the well. I was told they have a lease issue with the mineral owners and their intent is to come back in with a work over rig as soon as they have the rights negotiation cleared up and pull up to a shallower formation where they believe they can get oil from, perf the well there and install a new pump jack and storage tanks. If that doesn't work out they will likely plug it.

The other possibility is that they don't get the rights straightened out and sell the well off to another firm, or plug it sometime in the future. A bit of risk there.

From the discussion about various issues if I were to buy the place they seem like a very reasonable company that I can deal with on getting a fence up and access and whatnot straightened out so I knocked 30k off the asking price and made an offer for the place. Seems fair to me.

Apparently they offered 15k in damages to the owner of the land who is now trying to sell, and they refused it. The original company that drilled it did so without any notification and really got the land owner upset, and then they went bankrupt and the current operator picked up the well out of bankruptcy it seems.


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## francismilker

FWIW, being from oil field country as well, there's no such thing these days as a "dry hole" in the oilfield anymore. Once again, this is the way I've had it explained to me by a driller. (not the owner of an oil production company)

Apparently, with the seismograph and other types of technology we have today they find the oil before they drill. They gather up investors to go in together on a well. Then, they drill. 

What happens next sometimes is that the guy who gathered the investors' money and contracted a driller to do the job says something like, "I sure hope this hole aint dry" to the driller and pads his pocket with a few benjamins. Then, after the well produces like the one described in the OP the owner of the well goes to his investors and says, "sorry guys, must've been a dry hole."

Then, after they file their plugging extension for a few years they sell out or lose out in bankruptcy and their bil or best friend ends up with it in his/her own name. This new owner decides to "get a workover rig" and mysteriously finds oil!!!!! Hooray, the original investors can't get a thing out of the original owner because it was a dry hole and he's been bankrupted...... 

The difference between a dry hole and a good producing hole can be as simple as how deep the perforations are set in the well casings!

Another thing, don't get too saddened if you figure out the rep from the regulatory commision doesn't side with the oil producers. I once went to the OK Corporation Commission and filed a complaint about an oil company coming in without me knowing it and pushing a 30' by 1/4 mile right-of-way through my place to build a road to a well. Before I had even made it back to the house a rep from the company that had done the damage showed up at my house to smooth things over. The corporation commission rep called the guy and forwarned him of my intentions of locking the gate and barracading him off my place.


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## CountryLivin86

Belfrybat said:


> Call the Texas RR commission and talk to someone there. I purchased a piece of property 9 years ago with three non-producing wells and dilapitated storage tanks. I called the RR Commission in Abilene and they sent out a representative who looked things over, researched the legal papers back to the 1960's and wrote me a letter telling me the steps to take to get the stuff off the property. They also wrote a letter to the oil company and within 3 months everything was gone, a foot of dirt taken out around the storage tanks where they had leaked and new dirt hauled in.
> 
> Apparently oil folks do not want to get crosswise with the Texas RR Commission.


I'm Wanting to buy some land, but has oil / gas pumps on property. They don't want to sell the mineral rights. Could you tell me who you spoke to and what department you contacted exactly. I want to see if it's possible in my case to remove it from the property. I want the property to farm, but it's in the center of it. Takes up lots of potential land to farm. I would really appreciate your help.


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## Alice In TX/MO

What state are you in?
Is there current/active oil or gas production?


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## muleskinner2

Belfrybat said:


> Call the Texas RR commission and talk to someone there. I purchased a piece of property 9 years ago with three non-producing wells and dilapitated storage tanks. I called the RR Commission in Abilene and they sent out a representative who looked things over, researched the legal papers back to the 1960's and wrote me a letter telling me the steps to take to get the stuff off the property. They also wrote a letter to the oil company and within 3 months everything was gone, a foot of dirt taken out around the storage tanks where they had leaked and new dirt hauled in.
> 
> Apparently oil folks do not want to get crosswise with the Texas RR Commission.


That is how to do it. The Rail Road Commission has very strict rules, and has the final say in such matters.


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## Fishindude

You're gonna need a big hat, pointy boots, a belt buckle the size of a frying pan and a convertible Cadillac with bull horns on the hood, if you've got an oil well on your property. 😁


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