2020 Q4

National Association of Division Order Analysts October / November / December 2020

PERSONAL ATTENTION • ETHICAL STANDARDS • PROFESSIONAL SERVICE

PURCHASING ROYALTIES ACROSS THE NATION

Quick, no-obligation offers

Royalty valuations

Mineral rights appraisals

Free estate and title transfer consults

Pro bono Medicaid & social services appraisals

N a t i o n a l A s s o c i a t i o n o f D i v i s i o n O r d e r A n a l y s t s

Info@LegacyRoyalties.com • 1-800-950-6954 • www.LegacyRoyalties.com

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

Legal, Engineering, Land & Division Order Expertise On Staff

Known For Integrity and Fair Dealing

NADOA Member 30 Years

N a t i o n a l A s s o c i a t i o n o f D i v i s i o n O r d e r A n a l y s t s 1-800-880-0940 | info@rudyenergy.com | www.RudyEnergy.com Russell T. Rudy Energy, LLC - Buying Oil & Gas and Mineral Interests Nationwide Since 1983 3

NADOA N a t i o n a l A s s o c i a t i o n o f D i v i s i o n O r d e r A n a l y s t s G R O W T H T H R O U G H E D U C T I O N

Volume MMXX • No 4

www.NADOA.org

Contents Feature

NADOA 2020 Officers President Luanne Johnson, CDOA

Articles

1st Vice President Lewis Box, CDOA 2nd Vice Presiden t Michele Lawton Treasurer Jennifer Kegans

2021 Election Results...................................................... 3 Cob Webs – Webinar Events........................................... 5 Self-Care – Psychological First Aid. ................................ 7 Unclaimed NAUPA Webinar North Carolina Colorado SB 88 Update................................................ 9 Legislative Updates Colorado..................................................................... 11 Wyoming..................................................................... 11 Federal........................................................................ 12 Legal Update Failure to Obtain Consent to Assign........................... 13 Leadership Lines........................................................... 20

Corresponding Secretary Michelle Harris, CDOA Recording Secretary Vicki Danielson, CDOA

The NADOA News Magazine is a quarterly publication of the National Association of Division

Order Analysts PO Box 1656 Palm Harbor, FL 34682

Subscription: By membership to NADOA, at $75.00 per year. News Magazine Editor Rona L. Erickson, CDOA Kaiser-Francis Oil Company Ronae@KFOC.net 918.491.4319 Associate Editors April Luedecke, CDOA aprilluedecke@yahoo.com Cheryl Hampton champton@limerockresources.com

In This

Issue

President’s Corner. .................................................1 2021 Institute.........................................................4 Decimal Points.......................................................5 Certification...........................................................8 Condolences..........................................................21 Counterpart Connection.......................................23 2020 Institute Committee.....................................28 2020 NADOA Board/Committee Chairs...............29 Calendar of Events. ..............................................32

Graphic Design Paul Beach

On the Cover: Holiday Lights in Roseland Courtesy of Shreveport Visitor’s Bureau

All rights reserved. No part of this publication may be reproduced/copied without written permission. Editorial disclaimer: The contents of this newsletter are intended for member use only and any other use without permission from the NADOA Board of Directors is strictly prohibited.Articles published herein represent the view of the authors; publication neither implies approval of the opinions expressed nor accuracy of the facts stated and NADOA accepts no liability for misprints.

President’s

Corner

Luanne M Johnson, CDOA, CPLTA 2020 NADOA President

Well, here we are at the end of 2020 and we made it. This is one year that we will all remember, and we will tell our future generations about. I have so many different memories and emotions that I have been through in the year both personally and professionally and both good and bad but in the end, I lived through them and survived. This being my last article as your 2020 National Association of Division Order Analysts President, I have a few people and memories I would like to share with you. In 2006 I went to my first Institute. Luckily, I had a great person with me to introduce me to many of you. That first year I went with Sarah Broyles and if you know Sarah you know she is a friend to all and boy, what a mentor. Anyway, Sarah took me along wherever she went and along the way I got introduced to new friends and what is was like to be a part of a great organization like NADOA. I’m still friends with many of the people I met that week. The following year when we were in Albuquerque, NM Linda Barry (another great friend and mentor who has been there for me so many times) convinced me to teach my first class (actually 4 hands- on classes) and it was called “Calculations from your Title Opinion to your Computer”. Back then many Division Order Analysts were still working their DOI on a calculator, but I was all about using my excel spreadsheet. I had formulated a pretty good easy one sitting with many experienced Division Order Analysts like Ernie Leuenberger and Sarah Broyles who really taught me what a burden was and how to calculate it. Then, when the current CDOA manual was started, Linda Barry asked me again to bring that first talk to chapter 6 of the manual. I was so excited and nervous, and it is funny how years later I still have people tell me they refer to that chapter or PowerPoint that I did when they work payouts. A few years later I got my first opportunity to start working on the Institute committee. It was so exciting to me to get to help make Institute great. That first year I worked on publication but since then I have done everything from goodie bags, to hotel and Co-Chairman of Institute. Along the way I’ve met many long-time great friends including Lucretia Jones, who I remember riding up to Dallas with for a committee meeting that first year I volunteered. We talked all the way there about our jobs, family and crafting (our favorite thing to talk about). That ride was with two other women, Sarah Broyles and Donna Reeves (another great friend who really knows her stuff ) who were BFFs and did so much for our organization. When we arrived in Dallas they laughed and said Lucretia and I were going to be just like them and be lifelong friends and they weren’t wrong! I have really enjoyed getting to meet so many and help with so many committees. Those times are very special to me, even the times that everything didn’t go the way we expected (toilets flooded hours before an outdoor event in Bastrop and scrambling to get everything into the hall we were given.) Those times are special because I had friends there to help and to be happy with and to cry with. Friends from Institute that I am so thankful for are Carla McCarty (I miss getting her hugs, that Midland accent and fixing her iPhone), Liz Fajen (who thank goodness Carla introduced me to!), Betty Davidson, Stephanie Moore, Brenda Pirozzolo, my domino partner in crime Vicki Danielson and WAY so many more that I can’t name but I want you all to know you are all dear to me and

I can’t thank you enough for your friendships. I’ve also been involved in the CDOA committee; I was a committee member for 6 years and did everything from approve points to becoming the CDOA chairman. During my time we moved from our original program to the current system that will be updated soon. This also was a time I met and became friends with everyone on my committees like Brenda Dickey, Eli Murray, Valerie Wible and all of the others that served with me. I can’t thank you all enough for all that you did. I started our Goto Webinars back in 2010, when Betty Davidson asked me to figure out a way to get classes online that we could broadcast across the nation so that all of our members could attend. That first couple of years we focused on the CDOA manual chapters and anything else I could get people to talk about. This was a huge success and is still something that I’m very proud of today. Finally, the board. I was on the board the first time in 2013 as a Director of HADOA and wow was that an experience! I felt like a fish out of water and I didn’t know what to do so I sat there and listened and learned. That was the year that Lisa Buffalo was President. That was a great year because that was when I knew I wanted to be President someday. So, I ran for the 2014 Board and lost but that didn’t get me down, it just made me determined to come back in a few years and try again. I did and I finally reached my goal of being President. Although I didn’t get that great Institute in Shreveport, Louisiana like we had started planning 2 years ago and I didn’t get that President’s Party that I had hoped for in the circle room that overlooked the city, that is ok because I got great memories and made lifelong friendships along the way. I want to make sure to thank the 2020 board: Lewis Box, Michele Lawton, Jennifer Kegans, Michele Harris-Fairclough, Vicki Danielson, Liz Fajen (I can’t thank you enough for stepping in as Board Advisor this year!), Valerie Wible, Stan Vargas, Kimberly Bowman, Victoria Frey, Jennifer Oden and Joe Anderson. Thank you all for knowing what was best for our organization. Also, thank you to our 2020 committee chairs: Lucretia Jones, Yoli Bazan, Stephanie Nguyen, April Luedecke, Eli Murray, Cheryl Hampton and Rona Erickson (thank you for always putting out great newsmagazines!) I want to also thank those that were involved in the Institute committee. I know there were many of you that started last November working to make it the best Institute yet! Thank you also to my family, Tim and Zachary. I know it was not always easy on them when I would leave for meetings or be gone a week for Institute. I couldn’t have done this without their support. Finally, I want to thank you, the membership and I want to challenge you to get more involved in the organization. If you don’t think you can make it to Institute, find out if there is something that you can help with from your city. We are always looking for volunteers and not just for Institute.

Thank you all, may you have a joyous holiday season and a great 2021!

G r o w t h T h r o u g h E d u c a t i o n - O c t o b e r / N o v e m b e r / D e c e m b e r 2 0 2 0

essentially, clients value five things in a law firm

strong relationships

clear communication

budget certainty/ lean staffing

know-how

results

TOP LISTED IN THE U.S. IN ENERGY LAW BY THE BEST LAWYERS IN AMERICA ® Sharon O. Flanery Chair, Energy and Natural Resources Department sharon.flanery@steptoe-johnson.com

THIS IS AN ADVERTISEMENT steptoe-johnson.com

ENERGY PROPELS US

Acquisition, Divestiture & Transition

Midstream & Pipeline Due Diligence

Process Design

Data Integrity

Litigation Support

Transaction Database

Experts in our field, we specialize in onsite project management with the highest caliber landmen and land professionals. Offering a customized approach to land projects, we are experts in A&D due diligence, transaction-related asset assimilation and data integrity projects. We cover projects related to offshore and onshore properties and pipelines. terrafirmaventures.com

N a t i o n a l A s s o c i a t i o n o f D i v i s i o n O r d e r A n a l y s t s

Election Results

THANK YOU TO ALL WHO PARTICIPATED ON THE NOMINATION AND COUNTING COMMITTEES!!

The following members participated on the Election Nominating Committee: Whitney Katigan Megan McKee Patricia Reynolds Janet Cavanah

The following members participated in the Election Counting Committee:

NADOA is a volunteer organization and it cannot run without the participation of its members. Participation gives you a chance to meet more people and interact in the Organization. It can only help you in furthering your career and learning more about the workings of the industry.

Betty Davidson Norma Dooley Debbie McKee Mary Sons Liz Fajen

Victoria Frey Jeff Kliewer Evelyn Kastne r

NADOA extends a sincere THANK YOU for your time and efforts!! Your time is sincerely appreciated!! VOLUNTEER!! It is fun and educational!!

2021 OFFICERS NADOA is eternally grateful for the time and efforts that individuals put into the organization. Being a NADOA officer is one of the most rewarding experiences you can have in this profession. THANK YOU to all the candidates who ran for office for 2021. Your efforts and dedication to NADOA are sincerely appreciated. CONGRATULATIONS TO THE FOLLOWING SLATE OF OFFICERS FOR 2021 President Lewis Box, CDOA 1st Vice President Michele Lawton 2nd Vice President April Luedecke, CDOA Treasurer Michelle Harris-Fairclough, CDOA Recording Secretary Maryann Maimo, CDOA, CPLTA Corresponding Secretary Vicki Danielson, CDOA Board Advisor Luanne Johnson, CDOA

BOARD ADVISOR Luanne Johnson

PRESIDENT Lewis Box

2ND VICE PRESIDENT April Luedecke

1ST VICE PRESIDENT Michele Lawton

Directors are chosen by the local associations. Known directors at press time: CAPDOA Valerie Wible, CDOA DADOA Stan Vargas, CDOA DALWORTH Kimberly Bowman HADOA Stephanie Nguyen, CDOA PBADOA Jennifer Oden, CDOA SADOA Joe Anderson

TREASURER Michelle Harris-Fairclough

CORRESPONDING SECRETARY Vicki Danielson

RECORDING SECRETARY Maryann Maimo

G r o w t h T h r o u g h E d u c a t i o n - O c t o b e r / N o v e m b e r / D e c e m b e r 2 0 2 0

NADOA

Institute

Mark your calendars for the 2021 NADOA Annual Institute. Stay tuned for more information in early 2021.

N a t i o n a l A s s o c i a t i o n o f D i v i s i o n O r d e r A n a l y s t s

NADOA

Decimal Points

Regional Reporters

First Quarter..............February 12, 2021 Second Quarter. ...............May 14, 2021 Special Institute Edition. .....July 2, 2021 Third Quarter. ....... September 24, 2021 Fourth Quarter......... November 5, 2021 Details are still being put in place regarding the 2021 Ellis Rudy Memorial Scholarships – more information to come. April Luedecke, CDOA Associate Editor Rona Erickson, CDOA Editor 2021 NADOA Article Deadlines Remember to keep your NADOA directory information updated. Due to all of the changes taking place in our industry and the world, it is more important than ever to maintain professional contacts and receive the educational benefits of membership in NADOA.

Cheryl Hampton Associate Editor

ABADOA

Steptoe & Johnson PLLC dan.swiger@steptoe-johnson.com Donna King, CDOA donna.king@flywheelenergy.com

CAPDOA

DADOA OPEN DALWORTH Lewis Box, CDOA

lbox@comstockresources.com

HADOA

OPEN

MAADOA

Angie Coady, CDOA

acoady@vessoil.com

PBADOA

OPEN

SADOA

Joe Anderson

Janderson96@cox.net

Arkansas

Jackie Clotfelter, CDOA

jclotfelter@hannaoilandgas.com

North Dakota Kimberly A. Backman

kbackman@crowleyfleck.com

New Mexico

Zachary P. Oliva

zoliva@kolawllp.com

Louisiana

OPEN

If you have a suggestion for someone to act as a Regional Reporter to help NADOA keep abreast of current legislation and legal issues for your region, please submit the name or the name of the firm.

5 (www.nadoa.org). Links to recorded webinars are available to NADOA members by using the page to determine if other webinars are pre- approved or need to be submitted for approval to the NADOA Certification Committee. Contact Sherry Werth for approvals ( srw6886@ gmail.com ). Certification points should only be applied for after completing the event. If you are unable to attend an event due to unforeseen circumstances, it is an ethics violation to apply for the credit. NADOA - Webinar information and registration links will be posted on the website

Cob Webs

Educational webinars can be approved for 1 (one) CDOA certification point. NADOA webinars, Steptoe & Johnson PLLC webcasts and Kiefaber & Oliva LLP webinars are pre- approved. Please check the certification

G r o w t h T h r o u g h E d u c a t i o n - O c t o b e r / N o v e m b e r / D e c e m b e r 2 0 2 0

Webinar link in the Members Only section on the homepage. For webinar questions, suggestions or comments, contact webinars@nadoa.org • January 13, 2021 – Wyoming Force Majeure • February 17, 2021 – Overview of TX Minerals Pooling Act • March 17, 2021 – Using LA SONRIS Website • April 21, 2021 – Overriding Royalty Calculations • May 27, 2021 – OK SB168 Calculations • June 24, 2021 – Using Excel Effectively • July 22, 2021 – LA Prescription Issues Steptoe & Johnson PLLC – Visit: https:// www.steptoe-johnson.com and click on News for details. • December 9, 2020 – Top Issues Facing New Mexico Producers The Steptoe webcasts are recorded. To access previously recorded webcasts, go to

Steptoe-Johnson.com and enter Webcasts in the search feature. Kiefaber & Oliva LLP LANDMAN EDUCATION SERIES – UPCOMING WEBINARS (click link to register) • December 9, 2020 – Ethics and Negotiations

Visit www.kolawllp.com/events for further information.

If you are aware of other educational webinars, please advise NADOA News Magazine editor, Rona Erickson (ronae@kfoc.net), Associate editor, April Luedecke (aprilluedecke@yahoo.com), Associate editor, Cheryl Hampton (champton@ limerockresources.com), or 2020 NADOA Education Chair, Yoli Bazan (ybazan@hilcorp. com)

Title Opinions

Client Referrals

Curative Issues

Have confidence knowing we can help draft the documentation you need to mitigate your company’s business risks.

For your mineral or royalty owners that need more specific help, we would be happy to serve them and clear interests held in suspense, probates, quiet title actions, and more!

Let us save you time and money by calculating the interests you need for your decks and find the magic number 1. We can help you with DOTOs, Drilling, and Acquisition Title Opinions.

This is an advertisement .

N a t i o n a l A s s o c i a t i o n o f D i v i s i o n O r d e r A n a l y s t s

Self Care - Psychological “First Aid” By Rona Erickson, CDOA

Practical, real world things that everyone can use to foster psychological well being and resilience: 1. Address basic daily bodily needs (food, water, shelter, etc.), first for yourself, then for your loved ones/tribe/ community. 2. Avoid further harm a. Practice kindness, gratitude and compassion with yourself and others. b. May need to set limits on media consumption

6. Get enough sleep

Remember that laughter is good for you. Focus on what is going right in your life right NOW.

Yoga, meditation, progressive muscle relaxation and deep breathing exercises have been shown to help reduce stress and increase mindfulness.

Helpful free apps:

to prevent overload and mood alteration or anxiety. Take time to focus on things in your life that are going well and that you can control.

COVID Coach (Veterans Administration) Buddify UCLA Mindful Headspace Calm (Meditation and sleep) Websites: https://store.samhsa.gov (Substance Abuse and Mental Health Services Administration – many helpful free downloads, including “Tips for Survivors of a Pandemic” and “Taking Care of Your Behavioral Health”) www.Mindful.org https://ymca360.org/on-demand/category/22 (Yoga) www.CHOMP.org (Community Hospital of Monterey Peninsula. Click on Classes to register for free online classes. New mindfulness classes are being planned for January 2021) https://www.mayoclinic.org/healthy-lifestyle/ Check your local health and wellness websites for opportunities near you

3. Keep calm to carry on – Mindfulness is anything that helps you come back to the present. Employ mindfulness to limit anxiety due to: a. Worrying about “what ifs” b. Reliving past events that bring guilt, shame or doubt. Practice self-compassion and have a nonjudgmental attitude toward your thoughts, feelings or experiences. c. Acceptance – no amount of worry will alter the future; reliving the past will not change what happened. 4. Prioritize your most urgent needs and identify things that can wait. 5. Connect with/reach out to others. Practice simple acts of kindness. a. Help others when you can. Be a good listener and practice good communication. b. Ask for and accept help when you need it c. Altruism; kindness for its own sake

Many thanks to Kalen Erickson-Moreo, Psy.D. for resources in writing this article.

G r o w t h T h r o u g h E d u c a t i o n - O c t o b e r / N o v e m b e r / D e c e m b e r 2 0 2 0

CERTIFICATION

of Certification Committee Chairman for the 2021 year. Yoli has been handling the Applications for the Certification Committee for several years in a remarkably organized fashion, and I have no doubt that she will excel in this new position. Thank you again for allowing me to represent you, the past, current, and future CDOA’s, in 2019 and 2020!! . Respectfully Submitted, Eli Murray, CDOA 2020 Certification Chairman emurray@dmlp.net

First, the Certification Committee wants all CDOA’s and CDOA Candidates to know that we are here to help during this crazy time!! We understand that family and life should be your first priority. As such, we are empathetic to those who are dealing with hardships in either recertifying or testing. If you happen to fall into that category, please do not hesitate to reach out to the Committee for assistance. Please note we are granting extensions to those who cannot test due to social distancing issues. Also, we are working diligently to approve webinars in order for CDOA’s to attain the credits necessary to recertify in a safe environment. As a reiteration, please contact us should you have any questions or concerns. Second, this was my last year on the Certification Committee, and it is a bittersweet feeling to know I will not be returning next year. I am grateful for the opportunity to serve you. I have enjoyed getting to know many of you through the years and gained lifelong friends from this group. Although I am sad about the departure, I am thrilled to announce Yolanda Bazan will taking on the role

TIME TO RECERTIFY?

If you are a CDOA whose certification expires January 1, 2021, you should receive your Re-Certification Application electronically by the end of January. If you do not receive your Application, please contact Darryn McGee, CDOA at Darryn.Mcgee@gmail.com.

CANDIDATES FOR CERTIFICATION Publication of the following “Certified Division Order Analyst” applicant(s) fulfills the requirement as stated in the Voluntary Certification Policy, III C.2 which states: “…applicant’s name will be published in the NADOA Newsletter or other official publication of NADOA.” This allows the NADOA membership an opportunity to present objections to the certification of the applicant. Any objection to the certification of the applicant must be in writing and signed by a NADOA member or non-member who qualifies his knowledge and objection of the applicant. All such letters will be considered confidential and must be received by the NADOA Certification Committee at the following address within thirty (30) days following the last day of the month in which the Newsletter or other official publication of NADOA was published: NADOA Certification Committee P O Box 1656 Palm Harbor, FL 34682 If the objection warrants denial of the certification or temporary withholding of certification, the applicant will be notified by Certified Mail. CANDIDATES FOR RECERTIFICATION

Deborah S Godwin – The Woodlands, TX

Pam J Wells – Claremore, OK

Congratulations to our new CDOA:

Kacie Tapanila

2020 CERTIFICATION COMMITTEE

Chairman

Eli Murray, CDOA Sherry Werth, CDOA Darryn McGee, CDOA

emurray@dmlp.net Srw6886@rgmail.com

Dorchester Minerals, LP

Recertification Credits

Independent Independent

Recertification Applications Applications & Publications

Darryn.Mcgee@gmail.com

Yolanda “Yoli” Bazan, CDOA

ybazan@hilcorp.com

Hilcorp

Review Manual/Forms

Lewis Box, CDOA

LBox@comstockresources.com bonniedidrickson@gmail.com mmckee@rangeresources.com

Comstock Resources

Testing Policies

Bonnie Didrickson, CDOA Megan McKee, CDOA

Independent

Range Resources

N a t i o n a l A s s o c i a t i o n o f D i v i s i o n O r d e r A n a l y s t s

Unclaimed

Property

The National Association of Unclaimed Property Administrators (NAUPA) is hosting a webinar - Fundamentals of Unclaimed Property Reporting for Holders - on Wednesday, December 2, 2020, from 2:00pm – 3:30pm ET | 1:00pm – 2:30pm CT | noon – 1:30pm MT | 11:00am – 12:30pm PT.

needed to file accurate reports. Key terms will be defined and core concepts such as dormancy periods, due diligence, and reporting requirements will be provided by a panel of experienced state administrators. Following the formal presentation, engage with state administrators in an exclusive Question & Answer session.

In this 90-minute webinar, participants will learn the essential unclaimed property fundamentals and skills

Learn more and register here.

North Carolina

landing page! The Holder Payment portal is a feature that allows holders to submit a payment if paying by ACH and their report is submitted via the Holder Reporting portal. Visit the Reporting Library to locate additional reference materials and guides to assist in compliance with North Carolina General Statute NCGS 116B. If you have questions, please contact us by email at: upre- ports@nctreasurer.com.

While North Carolina encourages holders to report and remit by November 1, the reporting deadline has been extended until January 31, 2021 for businesses directly impacted by the Coronavirus pandemic. Formal requests for an extension are not required. Visit our website at NCCash.com to find out more about the holder reporting process. The Holder Information and Reporting tab links to North Carolina’s 4 Step Reporting Process. Holders may submit their reports directly to North Carolina using the Holder Reporting portal found on the NCCash.com

Colorado SB 88 Update By: Gary Joseph, MBA, CIA

Colorado

CO SB 88 has gone LIVE!

Staying true to form, the unclaimed property landscape continues to evolve as states continue to pursue uniformity with their peers. In its latest attempt to achieve a uniform unclaimed property act, the Uniform Law Commission (“ULC”) finalized the Revised Uniform Unclaimed Property Act (“RUUPA”) in 2016. Since that time, some states have elected to limit the number of updates to their law, while others, such as Colorado, have introduced significant revisions. In this article, we’ll address the updates to Colorado’s unclaimed property statute that directly impact the energy sector.

With the enactment of Senate Bill 88 (“SB 88”), Colorado is the latest state to materially revise its unclaimed property statute. The revisions are heavily influenced by the Revised Uniform Unclaimed Property Act and primarily focus on shortened dormancy periods, reduced exemptions and deductions, and revised due dates.

CO SB 88 was enacted on April 16, 2019 and became effective on July 1, 2020. While a number of the

G r o w t h T h r o u g h E d u c a t i o n - O c t o b e r / N o v e m b e r / D e c e m b e r 2 0 2 0

Conclusion

statutory revisions impact multiple industries, there are several that directly impact unclaimed property reporting and compliance in the energy sector, specifically the following: 1. Conversion from a non-current to pay (“NCTP”) to current to pay (“CTP”) 2. Reduction dormancy period from 5 years to 3 years for most property types 3. Increased records retention period to 10 years after the later of the date the report was filed or the last date a timely report was due to be filed, unless a shorter period is provided by rule of the administrator 4. Inclusion of a 5-year transitional period 5. Elimination of the deduction of 2% or $25, whichever is greater, of the property’s value 6. Increase interest rates and penalties for non- compliance As the basins and shale plays are widespread in Colorado and its contiguous states, it is highly probable that holders operating in this region will have landowners and businesses in Colorado. In the event there has been a loss of contact with the landowners or any other party to whom unclaimed property is due with a last known address in Colorado, the property would be reportable to the state once the dormancy period has been met. With the reduction of the dormancy period from 5 to 3 years, and the transitional provision applying to bring forward property that would have been due had the new shorter dormancy periods been in effect for the past five years, holders will more than likely realize an increase in unclaimed property reportable to Colorado. In the event a holder is incorporated in the State of Colorado, and the aforementioned conditions are met for owners for whom the address is missing, the property should be reported to Colorado. As the statutory update became effective July 1, holders must update their unclaimed property procedures to address the change from NCTP to CTP, as well as apply the 3 year dormancy period. Failure to update this information will result in non-compliance with the state’s law in future filings. Non-compliance with the statute puts holders at risk of being assessed penalties and interest, the amount of which, as noted above, has also increased.

SOVOS KEANE sincerely hopes that you find our articles useful and valuable. If there is any specific subject matter applicable to the industry of which you wish for us to address in the future, we ask that you reach out using the contact information in the “ABOUT THE AUTHOR” section.

*************** About the Author:

Gary Joseph, MBA, CIA Senior Consulting Manager SOVOS KEANE Consulting and Advisory

Gary Joseph assists companies operating in the energy sector with Unclaimed Property compliance. Gary has over a decade of experience in the Unclaimed Property space, formerly serving as both an Audit Manager and Program Leader for a 3rd party audit firm and now assisting clients in various engagements including audit defense, voluntary disclosure agreements, establishing policies and procedures and obtaining overall compliance. He resides in Houston, Texas!

Phone: (267) 566-3962 Email: gjoseph@keaneup.com Email: gary.joseph@sovos.com

*************** SOVOS Acquires KEANE

On July 23, 2020, SOVOS acquired the reporting and consulting divisions of KEANE. Together, SOVOS KEANE continues to solve a range of challenges for holders in the energy sector as well as other industries. The combination of the two companies creates new synergies the likes of which has not been seen across industries or practices. Should anyone have any questions regarding the new business combination, feel free to reach out to the author or any other member of the SOVOS KEANE Consulting team!

N a t i o n a l A s s o c i a t i o n o f D i v i s i o n O r d e r A n a l y s t s

Colorado - OXY and Noble Energy favor increased Local Control

Colorado

Representatives from Occidental (OXY) and Noble (NBL) told the Colorado Oil and Gas Conservation Commission (COGCC) in August that they are in favor of increased regulatory control at the municipal and county level as the commission began six weeks of rule-making hearings for Senate Bill 19-181 (SB 19-181). This is a change in posi- tion from operators historically arguing that a jumble of local regulations would be difficult to navigate and could

create unnecessary approval hurdles. Sponsors of SB 19-181 have stated that state regulations will be the base level and local restrictions would apply only if they are more severe. A zoom meeting for a vote by the COGCC on the rules and final rulemaking was scheduled for November 23, 2020.

Legislative

Update

Wyoming Oil and Gas Legislative Update: HB14

Wyoming

June 17, 2020 —Wyoming’s oil and gas regulations were recently amended in an effort to attract energy development in the state. Among the new laws is House Bill 14, which changes the way operators force pool nonconsenting owners. The Wyoming Oil and Gas Conservation Commission has authority to issue pooling orders to pool interests located within a drilling and spacing unit (“DSU”). WYO. STAT. § 30-5-109 currently provides that when two or more separately owned tracts of land are embraced in a DSU, and in the absence of voluntary pooling, any interested party may enter an order pooling all interests in the DSU. Nonconsenting working interest owners and nonconsenting unleased mineral owners are chargeable with their proportionate share of costs for (i) newly acquired surface equipment (e.g., stock tanks, separators, treaters, pumping equipment and piping) and (ii) drilling and operating the well commencing with first production. Such nonconsenting parties were also subject to a risk penalty of (i) up to 300% of the costs of drilling, reworking, deepening, plugging back, testing and completing and (ii) up to 200% of that portion of the

cost of newly acquired equipment. Beginning on July 1, 2020, House Bill 14 significantly amends WYO. STAT. § 30-5-109. Under the new compulsory pooling statute, an applicant-operator is given twelve months from the date an order is issued to commence operations. As in the previous version, the operator is entitled to recover its proportionate share of costs for equipment, drilling and operating from each carried nonconsenting owner. For lessees, the risk penalty remains (i) up to 300% of the costs of drilling, reworking, deepening, plugging back, testing and completing and (ii) up to 200% of that portion of the cost of newly acquired equipment. With regard to unleased nonconsenting mineral owners, the risk penalty will now be (i) up to 200% for drilling and operating costs and up to 125% for newly acquired equipment for the first well, and (ii) up to 150% for drilling and operating costs and up to 125% for newly acquired equipment for each subsequent well.

During the time the operator is receiving the risk penalty from the unleased mineral owners, the mineral owners can

G r o w t h T h r o u g h E d u c a t i o n - O c t o b e r / N o v e m b e r / D e c e m b e r 2 0 2 0

Contact

receive the greater of 16 percent or the acreage weighted average royalty interest of the leased tracts within the DSU. Additionally, once the operator has received the full amount of the risk penalty, the unleased mineral owners have the option to change their minds and begin participating in the drilling unit as working interest owners, or they may simply continue receiving the royalty. House Bill 14 imposes stiff risk penalties, but gives unleased mineral owners more options in the forced pooling context. It also incentivizes operators to have a tighter drilling schedule because pooling orders only last one year from establishment. Overall, House Bill 14 promotes production while also giving mineral owners additional choices when working with operators. As noted above, House Bill 14 will go into effect on July 1, 2020.

Brad Gibbs, Partner bgibbs@kolawllp.com

The content of this publication and any attachments are not intended to be and should not be relied upon as legal advice or to create a lawyer-client relationship. © 2020 Kiefaber & Oliva LLP. All rights reserved. This publication may qualify as “Attorney Advertising” requiring notice in some jurisdictions. Houston (principal office): 815 Walker Street, Suite 1140, Houston, Texas 77002, 713-229-0360 | Columbus: One East Livingston Avenue, Suite B, Columbus, Ohio 43215, 614-349-4525.

Federal Legislative Update: Mineral Royalty Valuation Policy

August 26, 2020 — In an effort to bolster America’s position in energy independence, the U.S. Department of Interior proposed a new rule to ease its regulation on how royalties for minerals, such as oil, gas and coal from federal lands, are calculated. The proposal would amend portions of the Office of Natural Resources Revenue (“ONNR”) regulations to lift certain royalty restrictions and restore pre-2016 policies that favor historical practices on valuation. According to a statement by the U.S. Secretary of Interior David L. Bernhardt, “this proposal provides regulatory certainty and clarity to States, Tribes and stakeholders, removing unnecessary and burdensome regulations for domestic energy production.” EX T EX Division Order Services, LLC 4865Ward Road, Suite 200 Wheat Ridge, CO 80033 303-463-8799 303-463-8808 extexllc.com Fax Division Orders, Revenue Distribution, 1099’s Dennis Pade Boyd Sanstra Chris Pennels President Vice President Vice President

In 2016, the ONNR regulations were updated by the 2016 Consolidated Federal Oil & Gas and Federal & Indian Coal Valuation Reform Rule (“2016 Valuation Rule”), which eliminated the benchmark approach used since the 1980s that allowed companies to pay royal- ties on non-arm’s length or captive transactions. Under the 2016 Valuation Rule, royalties would be calculated at arm’s-length transactions to determine market value, thereby closing a loophole and restricting revenue[1] Since implementing the 2016 Valuation Rule, multiple executive orders have been issued that are inconsistent with the rule’s framework, including Promoting Energy Independence and Economic Growth (Executive Order 13783)[2], Implementing an America-First Offshore Energy Strategy (Executive Order 13795)[3], and Secre- tary’s Order 3350[4]. During the Trump administration, the ONNR suspended the rule and then repealed it. Two courts later struck down the ONNR’s repeal for failure to provide a reasoned explanation and determined the 2016 Valuation Rule would remain in effect. In response to the executive orders, recent litigation and desire to reduce the burden on the energy industry, the new proposal would return several provisions to their pre-2016 valuation rule language, including provisions regarding transportation costs, allowances and process- ing limitations. The new rule would also lift restrictions

N a t i o n a l A s s o c i a t i o n o f D i v i s i o n O r d e r A n a l y s t s

Contact If you have any questions regarding this legislative update or suggestions for topics to be covered in future issues, please call our office at 713-229-0360 or contact:

on coal and further clarify civil penalties for violations, among other changes.

The proposed rule is available for viewing here, and pub- lic comments are accepted for 60 days from the date of publication before the final rule is published. [1] https://www.doi.gov/pressreleases/interior-depart- ment-announces-final-regulations-ensure-american-pub- lic-receives-every [2] https://www.federalregister.gov/docu- ments/2017/03/31/2017-06576/promoting-energy-inde- pendence-and-economic-growth [3] https://www.federalregister.gov/docu- ments/2017/05/03/2017-09087/implementing-an-ameri- ca-first-offshore-energy-strategy [4] https://www.doi.gov/sites/doi.gov/files/press-release/ secretarial-order-3350-offshore-508.pdf

Brad Gibbs, Partner bgibbs@kolawllp.com

Legal

Update

This article is not intended to be and should not be relied upon as legal advice or to establish any kind of an attorney-client relationship with the author.

The Failure To Obtain The Lessor’s “Consent To Assign” Prior To The Lessee Entering Into Deed Of Trust With Oil & Gas Lease(s) Pledged As Collateral

By Terry E. Hogwood Attorney-At-Law

I. Factual Setting

and gas lease, then the written consent of the lessor must be obtained agreeing to said assignment. Other variants of the consent clause, such as those whereby the lessor agrees not to unreasonably withhold its consent, may be the subject of additional related articles). Thereafter, by note and duly recorded mortgage/deed of trust, XYZ Oil Company mortgaged its interest in Said Lease to ABC Bank. XYZ Oil Company thereafter defaulted on its note and ABC Bank foreclosed its deed of trust via a non-judicial foreclosure sale. At that sale, the trustee under the deed of trust issued a trustee’s deed (either a quitclaim deed or a deed with or without a warranty) conveying either “all of its right, title and interest, if any, “or purporting to convey Said Lease or a specific interest in Said Lease” to Burns Oil Company.

A, the mineral owner of Blackacre, leased Blackacre to XYZ Oil Company for oil and gas development purposes (“Said Lease”). XYZ Oil Company thus has, under Texas law, a fee simple determinable interest in the oil, gas and other minerals in, on and under Blackacre ( Anadarko Petroleum Corp. v. Thompson, 94 S.W.3d 550 (Tex. - 2003)). Said Lease was also duly recorded in the pertinent Texas county deed records. Said Lease contained a “consent” provision requiring the written consent by A to any assignment of the oil and gas lease by XYZ Oil Company. (NOTE: this paper will explore only those consent clauses which provide in essence that, if the lessee desires to assign all or any part of the oil

G r o w t h T h r o u g h E d u c a t i o n - O c t o b e r / N o v e m b e r / D e c e m b e r 2 0 2 0

Mortgage

At no time in the foregoing process was written consent to the mortgage/deed of trust nor the trustee’s deed ever obtained from A. A had, at no time, any actual knowledge of XYZ’s mortgage/deed of trust.

“ Texas follows the lien theory of mortgages. Under this theory the mortgagee is not the owner of the property and is not entitled to its possession, rentals or profits. Thus, it has become a common practice to include in the deed of trust, or in a separate instrument, terms assigning to the mortgagee the mortgagor’s interest in all rents falling due after the date of the mortgage as additional security for payment of the mortgage debt.” Taylor v. Brennan, 621 S.W.2d 592, 594 (Tex. - 1981) (emphasis added) Under the lien theory of mortgages, the legal and equitable titles to the mortgaged properties are severed. Williams v. Nationstar Mortg., LLC, 349 S.W.3d 90 (Tex.App. - 2011); Flag-Redfern Oil Co. v. Humble Exploration Co. , 744 S.W.2d 6, 8 (Tex. - 1987) The mortgagor continues to own the legal title to the mortgaged properties (in the instant fact situation, oil and gas leases) but the equitable title in and to the mortgaged properties is vested in the mortgagee. Williams v. Nationstar Mortg., LLC, 349 S.W.3d 90 (Tex.App. - 2011) Conversely, upon the happening of a valid foreclosure and trustee’s deed issued to a purchaser at a foreclosure sale, the legal and equitable titles are merged into the purchaser. Conseco Finance Servicing Corp. v. J & J Mobile Homes, Inc., 120 S.W.3d 878 (Tex.App. — 2003) A purchaser at a foreclosure sale can only obtain that title and interest the trustee has authority to convey. Bonilla v. Roberson, 918 S.W.2d 17 (Tex.App. — 1996) More significantly, the act of foreclosure does not terminate those interests in the mortgaged properties which are senior to the mortgage being foreclosed. Williams v. Nationstar Mortg., LLC, 349 S.W.3d 90 (Tex.App. - 2011); Conversion Properties v Kessler, 994 S.W.2d 810 (Tex.App. — 1999)

II. Definition of the Issues

Issue No. 1 – Was the written consent of A, under Texas law, required so that XYZ Oil Company could validly enter into its mortgage/deed of trust (assignment) with ABC Bank? Issue No. 2 – Was the written consent of A, under Texas law, required in order for the Trustee’s deed (assignment) to Burns Oil Company to be a valid assignment of Said Lease?

III.

Select Definitions

Assignment

For purposes of this paper, express written consent by A, the lessor, is only required if XYZ Oil Company assigns Said Lease to a third party. Case law in Texas early on held that: “…The word ‘assign’ is defined: ‘To make or set over to another; to transfer; as to assign property or some interest therein.’ 2 Bl. Comm. 326; Black, Law Dict. 97. The word ‘assignment’ means ‘the act by which one person transfers to another, or causes to vest’ in another, his property, or an interest therein; the transfer or making over the estate, right, or title which one has in lands and tenements.” Harlowe v. Hudgins , 19 S.W. 364, 365 (Tex. 1892) Subsequent case law has followed this early legal definition and very clearly appears to hold today that the word “assign” is the equivalent of the word “grant”. Neeley v. Intercity Management Corp., 623 S.W.2d 942 (Tex. App. —- 1981) See also Luecke v. Wallace, 951 S.W.2d 267 (Tex.App. — 1997) Under the above rules of law and factual setting, if XYZ Oil Company wants to assign (grant or convey) Said Lease to a third party, it must first obtain the written consent from A to have a valid assignment of Said Lease.

Equitable Title

The term “equitable title” was referred to above under the definition of Mortgage . Equitable title is to be distinguished from legal title. Equitable title is the present right to the legal title. City of Houston v. Guthrie, 332 S.W.3d 578 (Tex.App. - 2009) Equitable title indicates a beneficial ownership in the lands at issue and entitles the owner of the equitable title to the formal legal title.

N a t i o n a l A s s o c i a t i o n o f D i v i s i o n O r d e r A n a l y s t s

its willingness to apply the following principles to oil and gas leases as well in the following dicta:

“Ownership of the equitable estate is the real ownership; the legal estate is no more than the “ shadow following the equitable estate .” In re Estate of Wright, 482 S.W.3d 650, 658 (Tex. App. - 2015), emphasis added. See also Smith v. Sumeer Homes, Inc. , No. 05-11-01632-CV, 2013 WL 2467252 (Tex.App.--Dallas June 6, 2013, pet. denied) (mem. op.) An equitable title can be separately conveyed from the legal title . Flag-Redfern Oil Co. v. Humble Exploration Co., Inc., 744 S.W.2d 6 (Tex. - 1987)

“Further, in the context of oil and gas leases that expressly define a duty, “we will not impose a more stringent obligation unless it is clear that the parties intended to [do so].” Id. at 108-09 (quoting Exxon Corp. v. Emerald Oil & Gas Co., 348 S.W.3d 194, 215 (Tex. 2011)). While this is a farmout agreement and not a lease, we see no reason why the same principle should not apply . As in the lease context, we decline to read into a farmout agreement more stringent obligations than the parties intended, as expressed by the negotiated, agreed-to language.” Barrow- Shaver Resources Company v. Carrizo Oil & Gas, Inc., 590 S.W.3d 471, 492 (Tex. 2019) (emphasis added)

Consent

Consent, as that term is used within the context of the factual situation set forth above, is the express written consent of A, the lessor, to a proposed assignment of Said Lease by XYZ Oil Company to a third party. There are numerous permutations of the consent clause other than the clause set out above. In the author’s opinion, there are as many different consent clauses as there are drafters of same. A very good article on consent, to which the reader is referred, summarized what appears to be a large sampling of such clauses. The Enforceability of Consent-to-Assign Provisions in Texas Oil and Gas Leases by T. Ray Guy and Jason Wright (SMU Law Review, Volume 71, Issue 2 – 2018). This article is not focused on the interpretation of the consent clause or whether the consent clause is or is not a restraint on alienation. What this article is focused on are the rights of XYZ Oil Company and ABC Bank both before and after default under XYZ Oil Company’s mortgage/deed of trust granted to ABC Bank. Specifically: (i) whether A’s written consent was required for XYZ Oil Company to enter into the mortgage/deed of trust and (ii) whether A’s written consent was required when the trustee under the deed of trust issued its deed to Burns Oil Company pursuant to a foreclosure sale. Texas jurisprudence, on the issue of consent, in the context of oil and gas operations, has been, in part, defined and explained in the recent case of Barrow-Shaver Resources Company v. Carrizo Oil & Gas, Inc., 590 S.W.3d 471 (Tex. 2019). The issue of consent was addressed in the context of a farmout agreement and not in an oil and gas lease situation. However, the court very clearly signaled

The consent provision in the initial farmout agreement provided in part as follows:

“The rights provided to [Barrow-Shaver] under this Letter Agreement may not be assigned, subleased or otherwise transferred in whole or in part, without the express written consent of Carrizo.” Barrow- Shaver Resources Company v. Carrizo Oil & Gas, Inc., 590 S.W.3d 471, 476 (Tex. 2019)

The farmee thereafter wanted to assign its rights under the farmout agreement. Carrizo, the farmor, was approached and refused to consent to the assignment by the farmee unless it was paid five million dollars for the sale of its working interest to the farmee. The proposed assignment of rights by the farmee failed to materialize and the instant litigation resulted. The case answered, among other issues, the following: 1. Was the above provision to be read with reasonableness implied? That is, could Carrizo refuse to consent to the proposed assignment of the farmee’s rights for any reason (or no reason) or was there to be implied the necessity for a reasonable reason for refusing to consent to said assignment? The court clearly held, absent

G r o w t h T h r o u g h E d u c a t i o n - O c t o b e r / N o v e m b e r / D e c e m b e r 2 0 2 0

Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28 Page 29 Page 30 Page 31 Page 32 Page 33 Page 34 Page 35 Page 36

Made with FlippingBook Annual report