PART I OF OIL & GAS OUTLINE
Do you own oil & gas interest? Many people in Texas have some sort of mineral interest. When you deal with the landman or operator, do you understand all the nuances of the oil & gas world? Many people have a basic understanding, but do not usually have enough information to feel truly knowledgeable. Therefore, I am providing a great outline in two separate blogs for your reading pleasure.
The author of this outline is Derek Fletcher a Managing Director and Wealth Strategist at U.S. Trust, Bank of America Private Wealth Management. I have not altered the context of Mr. Fletcher’s work, however, I have reduced it down to include only the basic information and broken the outline into two separate blogs.
The mineral estate is a tract of land that is distinct from the surface. It includes five primary attributes: (i) the right to explore (ingress & egress), (ii) the right to develop (executive right), (iii) the right to receive bonus payments, (iv) the right to receive delay rentals and (v) the right to receive royalty payments. Accordingly, in the estate planning context, a client may own or be willing to transfer one or more of these various “sticks.”
Steps in the Exploration and Production Process. In order to appreciate oil and gas as an asset, it is important to understand the general activities involved in the exploration and production process.
Step One: The Survey
a. Geological Maps – identifies sedimentary basins and favorable geological locations.
b. Aerial Photography – identifies promising land formations such as faults or anticlines.
c. Magnetic, Gravimetric or Seismic Studies – provides information regarding the various rock strata below the surface.
(1) Magnetic Survey – measures the intensity of the magnetic character of the rock strata.
(2) Gravimetric Survey – measures the variations in gravitational fields.
(3) Seismic Survey – measures the various reflective properties of the rock strata as sound waves are transmitted below the surface. The seismic survey is the most common assessment method.
2. Step Two: Exploratory Drilling
a. Exploratory boreholes are drilled on a promising geological area in order to determine whether, in fact, hydrocarbons exist.
b. Once drilling begins, “mud” is circulated down the borehole and back to the surface. Casing is run into the completed sections of the borehole and cemented into place.
c. When a hydrocarbon formation is found, initial testing is performed to determine the rate flow rates, thickness and internal pressure of the reservoir.
3. Step Three: Appraisal
a. If exploratory drilling produces favorable results, additional wells will be drilled in order to ascertain the size and extent of the field.
b. The economic feasibility of development and production IS determined during the appraisal process.
4. Step Four: Development and Production
a. If commercial quantities of hydrocarbon are discovered, the next step involves development and production from the reservoir.
b. If the field is small, the appraisal wells may simply be used to develop the field.
c. If the field is large, additional production wells may be drilled.
5. Step Five: Enhanced Recovery
a. Many wells are free-flowing – meaning that the underground pressures are sufficient to carry hydrocarbons up the wellbore to the surface.
b. If the underground pressures are insufficient, some fonn of additional lift may be required – such as a pumping mechanism or the injection of gas, water or steam to maintain the necessary pressure.
c. It may also be necessary to stimulate production by fracturing the formation referred to as “fracking.”
6. Step Six: Processing
a. This is the process whereby the fluids produced (oil, gas and water) are separated.
b. Oil must generally be free of dissolved gas.
c. Gas must be stabilized and free of liquids and other elements such as hydrogen sulphide and carbon dioxide.
d. Water must be treated before disposal.
With today’s electronic world, the issue of whether you can create a binding contract through email signatures often comes up in business. In Texas, the elements that are generally required to create an enforceable contract are (1) an offer; (2) acceptance in strict compliance with terms of the offer; (3) a meeting of the minds with respect to both the subject matter of the agreement and all of its essential terms; (4) a communication that each party has consented to the terms of the agreement; (5) for a written contract, execution and delivery of the contract with an intent that it become mutual and binding on both parties; and (6) consideration (the giving of something of value).
In Texas, a contract may be written or oral, unless the contract is required by law to be in writing. A written contract must spell out the agreement and be signed by both parties. An example of a contract required to be in writing is a settlement agreement in a lawsuit, which must also be signed by the parties and filed with the court to be binding.
The Texas Uniform Electronic Transaction Act allows for electronic signatures to create an agreement. Whether the parties agree to conduct a transaction by electronic means is determined from the context and surrounding circumstances, including the parties’ conduct. UETA allows for the enforceability of electronic signatures once the parties to a transaction have decided to carry on dealings by electronic means. In Texas, the Courts have consistently held that an email signature is comparable to a manual signature. Therefore, if someone makes an offer to settle a matter with you and you then accept that offer, all by email, then a contract has been created.
A party that agrees to conduct a transaction by electronic means may refuse to conduct other transactions by electronic means. If you no longer want to transact business by electronic means, you just need to notify the other party in writing that you no longer agree to conduct business by email.
If you want to ensure you do not create a contract by email, you might consider putting a disclaimer on your emails that states: “This email is not intended to create or form a contract between the parties”. This may be ineffective if the substantive body of the email contradict and override this statement, so I suggest starting your email out with this language.
The Texas Medicaid program pays almost half the cost of all nursing home and other long term care expenses. So in March of 2005, Texas implemented the Medicaid Estate Recovery Program (MERP) to comply with federal laws. This program allows the state to file a claim against the estate of a deceased Medicaid recipient, age 55 or older, who received payments for certain long-term care services. Claims can include the cost of services, hospital care and prescription drugs paid for by Medicaid. However, the state will not file claims in the following situations:
a) where there are estates valued less than $10,000,
b) where the costs were less than $3,000,
c) where the cost of selling the property would be result in no value.
The state will not file a claim when there is a surviving spouse, there is a surviving child under 21 years of age, there is a child who is blind or totally disabled, or where there is a an unmarried child living in the Medicaid recipient’s homestead for at least one year prior to the death. The state also allows a hardship waiver to be filed in certain situations.
The State will not collect certain types of assets that fall outside a person’s estate. Therefore it may be necessary to do your estate planning with consideration given to Medicaid rules.
The personal representative of an estate (executor or administrator) is required by law to give the State of Texas notice of Medicaid recipient’s death thereby allowing the state to file a claim. Such a claim by the State of Texas is a Class 7 claim which is paid after funeral bills, administration expenses, secured claims, child support, taxes, and it is paid before all other creditors and before the beneficiaries are compensated.
The Department of Aging and Disability Services administers the MERP and they provide a wonderful guide for those with additional questions.
The United States has one of the highest rates of mental illness in the world, including major depression, schizophrenia, bipolar disorder, obsessive-compulsive disorder, panic disorder, post-traumatic stress disorder and borderline personality disorder. The National Association for Mental Illness reports “without treatment the consequences of mental illness for the individual and society are staggering: unnecessary disability, unemployment, substance abuse, domestic violence, homelessness, inappropriate incarceration, suicide and wasted lives.”
Families with mentally ill children, siblings, or parents find that there is little they can do to help their mentally ill family member. There is limited help from both the Probate Code or the Mental Health Code.
The Probate Code allows for guardianship over incapacitated persons. “incapacitated person” being defined as an adult individual who, because of a physical or mental condition, is substantially unable to provide food, clothing, or shelter for himself or herself, to care for the individual’s own physical health, or to manage the individual’s own financial affairs. This sounds like a mentally ill person would qualify as an incapacitated person, and they do for a short period of time. Once the guardianship is obtained, the party would regain capacity and the guardianship would terminate. If you have ever dealt with a mentally ill person, the minute they are no longer forced to take medication they usually won’t take it! Therefore, there is a gaping hole in the statute concerning mentally ill people.
The Mental Health Code does not specifically address the guardianship issue for mentally ill people. The code currently defines mental illness as an illness, disease, or condition, other than epilepsy, senility, alcoholism, or mental deficiency, that: (A) substantially impairs a person’s thought, perception of reality, emotional process, or judgment; or (B) grossly impairs behavior as demonstrated by recent disturbed behavior. This statute does allows for emergency detention of those who are a threat to themselves or others, to be held in a mental health facility and treated pending a court proceeding. If the Court decides to keep the party, then they will get stabilized and eventually sent home with instructions to take their medication, which they rarely do and the process starts all over again. If the Court decides to send the party home, then they will likely stop taking their medicine and the process starts all over again.
In Texas, the mental health code has not been revised since 1985, but it is seriously needs an overhaul. Last year, the nonprofit advocacy organization, Texas Appleseed asked lawmakers to replace the existing mental health code with one that reflects contemporary mental health needs. The Appleseed report’s recommendations include eliminating provisions in the code that call for law enforcement to obtain a warrant to detain someone in a mental health crisis and adding explicit laws that allow officers to confiscate firearms from people who become dangerous as a result of their mental condition. Another recommendation calls for the adoption of a uniform one-page intake form for law enforcement officers to complete when they take someone in crisis to a mental hospital. Currently, forms across the state vary; some are many pages long and take hours to complete. Representative José Menéndez, Democrat of San Antonio, filed House Bill 245, which would allow hospitals to detain mentally ill people for up to 24 hours. This is because hospitals currently do not have legal authority to detain people who voluntarily enter their facilities in search of mental health care but then decide to leave.
While the suggested changes are a great start, they do not go far enough. We need to address the issue of how family members are supposed to help their loved one get the help they need to manage their life, stay on medication, find housing, etc. If your family is affected by these issues, please do not hesitate to contact your representative to voice your concern!
Earlier this month, the news reported on a 911 call that was taken by a nurse in California who refused to give emergency CPR assistance to a dying senior in her care. The refusal of this nurse to assist a dying resident is nothing less than shocking, however, the facility was within its rights to refuse care.
In Texas, facilities, even licenses facilities such as those regulated by Adult Protective Services, have the option of not providing CPR. However, they are required to notify individuals during the admissions policy process that they will not administer CPR.
The question is whether notifying people upon admissions is reasonable. It is likely that facilities around the state have a form that is signed during admissions stating they are aware of the policy of the facility. However, during the admissions process, there are tons of documents to sign and many people do not even read them. Does this constitute notice?
Does the nurses refusal to administer aid constitute a criminal case in Texas? Failure to stop and render aid (FSRA) is governed by Chapter 550 of the Texas Transportation Code. The penal code typically governs criminal offenses resulting in possible confinement and a conviction for FSRA can result in jail time, probation and a fine. However the Texas nurse is not likely guilty of FSRA because the rules are pretty clear that the facility is not required to provide CPR. If this were you or me, we would be required if we knew CPR. Funny! So beware of the facilities policy before you place your love one in a senior living facility!
This is a common question I get asked by a variety of different types of clients. The simple answer is YES! A living will is not really a will, but is a physician’s directive (also known as an advanced directive or Do Not Resuscitate). An advanced directive is governed by the Texas Health and Safety Code to allow people to choose what type of care they want if they need life-sustaining treatment. I believe that everyone should have a Physician’s Directive to ensure that they get to make the decisions about life support and not burden their family with such decisions.
Arlington police have confirmed that the body found on January 5, 2013 was that of Maria Arrocha, an Alzheimer’s patient who was reported missing in December. The Tarrant County Medical Examiner ruled that Maria Arrocha died from exposure to the elements. Arrocha was found near the 1500 block of E. Abram Street near Stadium Drive in east Arlington. Officers were searching for Maria Arrocha who has been missing since Dec. 18, said Arlington police Sgt. Christopher Cook.
More than 5 million Americans have Alzheimer’s or similar dementias, and that number is expected to rise rapidly as the baby boomers age. The Texas adult population with disabilities has grown to 1,683,350, which is a 300,000 jump in the last 10 years. As more and more of our citizens, reach retirement age there are going to be more dementia related problems.
Therefore, both the Texas House and Senate 2013 budget plans include $5.2 million for the Darrell K Royal Alzheimer’s initiative in 2014. The private fund, announced last year to spur Alzheimer’s research, was named for the iconic University of Texas football coach who died in November after living with dementia for several years.