Fayetteville Shale Play FAQ

by Arkansas Business Staff  on Monday, Aug. 27, 2007 12:00 am  

In Arkansas, mineral rights are considered part of the sale with surface rights unless they have been specifically reserved. A review of the property abstract should indicate if the mineral rights were reserved by a former property owner. A review of the warranty deeds at the circuit clerk's office also will indicate mineral ownership. In addition, an attorney, abstract company or a land professional may be contacted for assistance.

If I don't own the mineral rights to my property and a company wants to drill on my land, what are my rights?

It is not uncommon for part or all of the mineral ownership to have been severed from the surface ownership at the time of the land sale. In Arkansas, mineral rights are dominant over the surface rights, and state law requires surface owners to allow a reasonable portion of their land to be used for drilling and production. Most drillers will negotiate payment for surface damages, though Arkansas law does not require damage payments. If the gas company's activities are excessive or the company is negligent in restoring the surface area, the surface owner can seek legal advice and relief through the court system.

When can I expect my royalty check?

At the end of a well's initial month of production, a grace period of six months and 20 days is allowed before the royalty payments are to be made to the mineral owners. Royalty payments may be postponed until the royalty revenue reaches a minimum of $100 or until the end of the calendar year when royalties total less than that.

What should I do if I've signed a mineral lease and am not receiving a royalty check?

The first step is to confirm that you own the minerals by researching your property deed. If you own the mineral rights, contact the operator and inquire as to why royalties are not being paid. The operator will research the issue and make the necessary corrections. The Arkansas Oil & Gas Commission can provide contact information if necessary; simply contact one of the commission offices with the legal description of the property.

The company that operates the well I'm receiving royalties from has sold the well to another company. Will this affect my royalty checks?

It's not uncommon for a well to have changed hands several times during the course of its life. Those receiving checks might notice a different looking revenue statement, payment schedule or some other visual change. However, the responsibility for royalty payments is still intact and is passed on to the new operator. You will still receive royalty payments; they will just be from the new company.

What kind of economic impact will the Fayetteville Shale Play have in Arkansas?

According to the only formal study done to date, a project completed by the Center for Business & Economic Research at the Sam M. Walton College of Business at the University of Arkansas, it is estimated that operators will make direct expenditures of about $3.8 billion in leasing land and mineral rights, drilling and other activities. They will be responsible for total economic activity of about $5.5 billion in the state of Arkansas. Associated with the $5.5 billion of economic output will be the creation of about 9,683 jobs in the aggregate by 2008 and about $357.7 million in state and local tax revenue. More recent research, however, indicates an even greater economic impact.

(Sources: Schlumberger Oilfield Glossary, Arkansas Oil & Gas Commission, Arkansas Geological Commission, University of Arkansas)



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