Montana oil and mining journal. [volume] (Great Falls, Mont.) 1931-1953, 1936-02-29

producing grOuuus the OpchfstOf may OON-
tinue to renew it during the life of pro
duction. It is our belief that the opera
tor must continue to pay the overriding
royalty, with the issuance OF each new
lease but that is a point that has not
been determined in court. It is risky
business TO buy overriding royalties on
state leases.
In the case of government lands the
government used to encourage prospecting
nv giving a permit to a prOspectOr to
seek oil on government lands. The pros
rector was rewarded for a discovery by
being allowed IN % royalty on one fourth
of his permit which part he might de-
signate after the discovery The gov
eminent retained so on one fourth the
permit and the remaining three 1Ourths
of the permit carried a sliding scale
ROYALTY from 12k% to $3.50. So
there was considerable royalty sold
on the preference area" from the
Dermitee's IL %. This is good title roy
atty. wherever production is found, for
the government respects the rights OF the
perInitee The Moore permit was one OF
the more famous of the Kelvin permits
which made fortunes for investors who
bought part of John MOOre's royalty.
The permit law has been changed so
that government leases are issued quite
like state leases. No longer is there
any inducement for a prOspector to hunC
for oil on government lands. He VIII
have to either operate such lands himself
or be content with modest overriding
royalty.
The one factor that has done more
harm to the oil industry than any other
Is the overriding royalty. Many an tn-
weston hasput his money into company
which has faithfully drilled a well and
zof production. Then the investor found
that his investment brought him no re-
Turns. The reason was that the opera
tor was burdened down by overriding
ROYALTIES. In Cat Greek some leases car
ried only co., of the oil. Many leases
i'm Kevin-Sunburst carried only 1919 of
the oil The only operator who could
make any money on 1910 lease was one
who struck gushers. That luck was the
exception rather than the rule.
Burdensome overriding royalties were,
accordingly, injurious to the landowner,
because many times the operator was I'M
able to go ahead with development ana
good oil land stood idle, and nothing
couId be done about it. Now Kelvin
Sunburst field has been pretty well purg-
ed of excessive overriding royalties and
operators can today get commercial leases
which make it possible to make GOOD
profit on fO-barreI wells. Ten barrel
wells i'm turn will make a nice return 10
the owners OF the landowners share.
Cat Creek, on the other hand, is gong
to remain as it is for many years to
come as a result Of excessive overriding
ROYALTIES Not until these leases are put
nm to SOgo or more win there be any
deem drilling i'm Cat Creek. Deeper sands
are likely to carry lower gravity oil than
the present crude production OF Cat Creek.
No operator can afford to lift that oil
when he has to deliver so to 40 barrels
ont of every 100 to someone else free OF
cost Cat Creek, incidentally is covered
chiefly by government leases which run
for 20 years. An interesting day is COM
inc when these royalties are to be re-
adjusted.
There is nothing complex about all this.
II takes common sense and nothing
more TO Judge royalties. The simplest
and surest is LANDOWNERS ROYALTY.
The man who sticks to this kind of roy
atty will make no serious mistake. There
are certain considerations as 10 utie'
which will be discussed next week.
re now going out, descriptive of
V who has not received one. of these
or wire and we will get a copy out
price is so low as to place % roy
ch of every investor. One per cent
lie of a dozen developed farms we
,vin-Sunburst has meant a liberal
wish that we could get 10 OF this
Is of every member.