CHAPTER 22 HOW THE RINGMASTER ORCHESTRATES IN A THREE-RING CIRCUS: COMMUNICATIONS BETWEEN THE COMPANY, ATTORNEY, AND LANDMAN
| Jurisdiction | United States |
(Sep 2007)
HOW THE RINGMASTER ORCHESTRATES IN A THREE-RING CIRCUS: COMMUNICATIONS BETWEEN THE COMPANY, ATTORNEY, AND LANDMAN
Attorney
Pruitt Gushee, P.C.
Salt Lake City, Utah
Marc Randal Strahn, CPL
President
The Wolf Haven Corporation and High Story Ventures
Story, Wyoming
Angela L. Franklin is an attorney and managing director in the Salt Lake City law firm of Pruitt Gushee, a professional corporation. She is from a multi-generational oil industry family and was raised in the "oil patch" in Wyoming. She received her J.D. in 1990 from the University of Wyoming and is licensed in both Utah and Wyoming. Angela's legal practice primarily involves oil and gas law, particularly title examination of fee, federal, state and Indian lands in Utah and Wyoming. She also assists in performing curative work, preparing transaction agreements, and representing clients before the Utah Board of Oil, Gas & Mining. Angela authored Communitization Agreements in the 21st Century, Federal Onshore Oil and Gas Pooling & Unitization, Paper No. 3 (Rocky Mt. Min. L. Fdn. 2006); Landmen's Update, 48th Annual Institute (Rocky Mt. Min. L. Fdn. 2002); Utah Oil and Gas Law, a Comparison with Texas, 47th Annual Conference (Am. Ass'n Prof. Landmen 2001). She is actively involved in the Rocky Mountain Mineral Law Foundation, currently serving as a trustee-at-large and on several of its committees; Utah Association of Professional Landmen, previously serving two terms as President; American Association of Professional Landmen; and the Natural Resources Section of the Utah Bar, previously serving as the Oil and Gas Committee chair. Angela and her husband, Kip Bina, have two children, Natalie and Garrett.
Marc Randal Strahn is a Certified Professional Landman with twenty-seven years of field landman experience in the Rockies. He is currently the President of The Wolf Haven Corporation and High Story Ventures, Inc., oil, gas and real estate acquisition and divestiture companies specializing in properties in the Rocky Mountain Region. He was formerly a landman and one of the owners of Hanson & Strahn, Inc. of Cheyenne, Wyoming, until he retired from the land brokerage business on May 31, 2007. Marc attended Montana State University and was appointed in 2001, by the Governor to the Wyoming State Energy Commission where he finished his term as its Chairman. He was further appointed in 2002 to the Wyoming Natural Gas Pipeline Authority where he finished his term as their Vice-Chairman. Marc is currently in his third two-year term as the Wyoming representative to the American Association Of Professional Landmen, a member of the Rocky Mountain Mineral Law Foundation and a member of several other state professional associations. He currently resides in Story, Wyoming with his wife and life long partner Kathi Hanson.
INTRODUCTION
In the circus of title examination, the company, the title attorney, and the landman occupy the three rings. The performers in the company's ring may include various corporate officers, company landmen, division order analysts, and/or in-house attorneys. The performers in the title attorney's ring may include one or more attorneys and paralegal/clerk. The performers in the landman's ring may include the broker, contract landmen, and/or local county abstractors. Once the circus begins, all three rings will be occupied with each being spotlighted during the various stages of the title examination process. The performers in each ring must communicate with those in the other rings and the ringmaster must keep watch over all three rings to guarantee that the show will be a complete success.
This paper covers all types of title examination projects, including drilling, division order, acquisition, and financing, and are collectively referred to herein as the title project. In most instances, the discussions set forth below are applicable to all types of title examination projects. Any special considerations to be given to a certain type of title examination project will be specifically identified in the discussions below.
I. THREE MONKEYS AND A BAG OF PEANUTS - HEAR NO EVIL, SEE NO EVIL, AND SPEAK NO EVIL: HOW TO COMMUNICATE BETWEEN THE COMPANY, LANDMAN, AND ATTORNEY
The ultimate success of the title project begins with that very first telephone conversation between, or scoping meeting with, the company, the attorney and/or the landman requested to assist with the title project. We have entered into that era once again where every party involved in the title project is already working at a frenetic pace. Although the work keeps coming, we no longer have enough company employees, qualified attorneys, or landmen to meet the demands placed upon all of us. Yet the title projects and the work associated therewith must still be accomplished and at the same level of quality. The company, attorney and landman are a team. Communication is imperative between all team members. Arrogance, intimidation, fear and uncertainty need to be set aside among the team members so that no one is afraid to ask questions and share information. The circus is in town and the show must go on.
To make this happen, the requests by the company must be detailed, accurate, realistic, and properly conveyed. The following questions should be asked and answered (even if not asked) during that initial telephone conversation or scoping meeting.
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A. Why is the title project being requested?
Never assume that the drilling, division order, acquisition, and/or financing "labels" for the project given by the company in its request mean the same thing to all people. The person requesting the work may not have the same regional knowledge of what is customarily included in a title project under one or more of these labels. The company, attorney and landman must make sure that they are talking about the same thing. Many times we believe one thing is being requested, when something else is needed.
Assuming an acquisition title project is to be limited to the interest being acquired may not be the only reason the company is requesting the title examination. The company may also want a report on all interest owners for future acquisition opportunities or to be able to utilize the information for future drilling operations. Assuming a drilling title project is to be limited to drilling issues to a certain depth may render the title opinion worthless for division order purposes or for future drilling in other formations.
A full understanding of the company's needs for the title project can only be acquired from the company. If the company does not initially fully disclose its expectations and uses for the title project, then it is left to the attorney or landman to ask the question above, making no assumptions. All parties involved should confirm their understanding of what is actually being requested in that initial telephone conversation or scoping meeting.
B. What are the realistic deadlines for the title project?
Timely delivery of the final title opinion or report and timely communications regarding the title project are imperative. Failure to do so can result in wells not being drilled, penalties for not paying proceeds timely, or an acquisition not being closed. The ultimate impacts are sometimes unknown to those outside of the company. It is critical that everyone involved understand the timing requirements and the ramifications for missing those deadlines. For instance, there are frequently windows of time in which drilling proposals must be submitted to the other working interest owners. If the opinion is not timely received and the window is missed, the well may have to be proposed again. At that time, the rig may no longer be available or in order to keep it, the company may have to pay expensive stand-by costs. In an acquisition, the purchase and sale agreement may require the purchaser to notify the seller of all defects thirty days before closing. If the company only informs the attorney and/or landman of the closing date, they may assume that the acquisition title opinion can be delivered right before closing. It will then be too late to complain about and receive an adjustment for any defects.
We all need to understand that significant investments are being made by the company and the title project is being requested in order to protect its investment. Although accurate information is crucial, it will not matter if it is not delivered in time to aid in the company's decision-making process. If the attorney or landman is unable to complete the work requested by the deadlines established with the company, then the attorney or the landman must immediately communicate with each other and the company to determine whether the deadlines can be modified. Sometimes the title project itself can be altered in order to still meet the company's needs. However, failing to alert the company to a timing problem can prevent the company from being able to make adjustments when possible.
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Hopefully, the deadlines set by the company will be realistic. Unfortunately, they frequently are not. The company is relying on your expertise and experience to advise it if its deadlines are not realistic. See below for the discussion of uncontrollable influences and their effect on deadlines. Problems with meeting the company's deadline should be addressed in that initial telephone conversation or scoping meeting and communications regarding the deadline should continue throughout the examination process. The company must be kept informed.
We encounter most of our unrealistic deadlines in acquisition title projects. The problems with acquisitions are discussed throughout this paper. The problems always arise when the company wants you to examine 600,000 acres in two weeks. The company should always consider previewing the title data available prior to setting the deadline in...
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