Bill Seeks To Close Loophole Benefiting Minority Mineral Lease Owners

Dec 26, 2018

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Credit sapunkele

Minority owners of oil and gas rights are seeing excessive profits from a certain practice, according to Gillette Senator Michael Von Flatern. He plans to introduce a bill that would limit some of the benefits minority owners receive in January’s full legislative session... specifically when some landowners with minimal property rights are draining oil and gas owned primarily by other operators.

“They get first in line, then it makes your minerals kind of worthless,” Von Flatern said.

He gives an example: say a rancher has 1000 acres of land and owns about 10 percent of the mineral rights on it. This rancher might inquire with the majority owner to share the drilling costs. But if they decide not to, Von Flatern said, this rancher would benefit well.

“You get to drill that for... that $7 million well... for  $1 million because you only own 1/7 or probably even less than that whole unit and everyone else pays the costs, or they don’t pay the cost, and you get to redeem 300 percent of your drilling completion costs,” Von Flatern said.

And beyond the obvious lost funds, a majority owner will lose out on the high initial production, Von Flatern said.

He said his bill would cut down that huge redeemed cost, the 300 percent of drilling costs, substantially adding to several other benefits. Von Flatern said the bill will certainly face resistance from oil and gas advocacy groups, and he’s unsure whether the state Senate will even hear it. The bill will come up in January’s full legislative session.