The Santo Niño Ranch near Hebbronville has a long history of leasing and subleasing its land for oil wells and drilling. But over the years as the oil and gas leases have exchanged hands, the ancestors of the original royalty landowners, the Leal and Perez families, have somehow been written out of the contracts. But that’s only half of the story. Not only are the current leaseholders disregarding the royalty owners’ rights, there’s also evidence that they may have contaminated the water, resulting in injuries and even the death of the wife of a local landowner.
However, one of the royalty interest owners is speaking out about all of this. Joe A. Perez recently published the Santo Niño’s Ranch Lease History which follows the trail of lease agreements, oil wells, and corruption all the way back to the early 1970s. Here’s what he wrote:
In the early 1970’s, when Edwin L. Cox drilled the wells at Santo Niño, the distribution of royalty interest funds was done correctly.
The Amado Perez Lease (#07863) consisted of 775.44 acres with 11 wells. It consisted of 2 surveyed tracts: Survey 459 J. Poitevent Abstract 1633 and Survey 460. Severiano Perez Abstract 2113.
In the late 1970’s or early 1980’s, Ralph Rowden took over as the operator, and, in turn, subleased the property to other companies, but not before retaining a large personal interest. He would sublease the property, have others do the work and pocket a significant return, with no work on his part.
In November 1989, the property was surveyed by Watson & Associates of Midland, Inc., to identify all wells and all the surface property corners for both survey tracts.
On March 28, 1990, Graham Royalty, who was the operator at the time, asked permission from the Railroad Commission of Texas (RRC) to subdivide the Amado Perez Lease (#07863 yellow on map). It became the Amado Perez Lease (#07863) which now consists of 7 wells (Well # 1, Well #2, Well #4 [saltwater disposal], Well #9, Well #10, Well #11, Well #12) on 615.44 acres.
Another 80 acres became known as the the Amado Perez “B” Lease (#11764 blue on map), which consists of 2 wells (Well #3 and Well #14).
Amado Perez “C” Lease (#11765 orange on map) consists of 2 wells (Well #6 and Well #8) on 80 acres.
Well #5 belongs to Bruce Luttrell/Tri-Star (red on map) and is situated in the middle of the Amado Perez Lease on 40 acres.
The oil gatherer/purchaser for Graham Royalty was Koch Oil Company. The oil gatherer purchaser for Tri-Star was Gulfmark. Royalty interest owners were getting paid by them. Koch Oil Gathering was released by Mike Harvey and the new gatherer was Dorado Oil Gatherer.
For about 2 years, Dorado Oil was distributing the royalty checks properly.
However, the current oil & gas lease is written in a manner that puts us at a disadvantage, not only to the landowners, but to the royalty interest owners as well. It states that as long as one well is producing in paying quantities, or production, from any of the four different leases, from the 775.44 acres, it holds the entire royalty acreage.
In the mid to late 1990’s, Mike Wallis Harvey, known as Harvey Brothers at the time took over at Santo Niño as operator. All and/or most oil production, before he took over from Graham Royalty, was electrical – meaning all oil pump jacks were being operated by electric motors.
Harvey Brothers took advantage of the situation and used all electrical operations until it was suspended by Medina Electric Co-op for failure to pay the electric bill. Around that time, Harvey Brothers filed for bankruptcy and returned under the company name of Wallis Energy and converted from electric motors to natural gas engines.
Well #3 is located on Estela Perez de Perez property. It is known, to a few, as “La Consentida” because of its consistent production since 1972 when it was drilled. All other wells are on a separate lease.
Throughout the last 20 years, I’ve educated myself in the areas of oil production, oil gathering, oil leases, distribution of royalties, and environmental contamination and hazards. I discovered that Tri-Star and Wallis Energy have not been operating in good faith. They have failed to comply with RRC guidelines and regulations, contaminating the land and defrauding the royalty interest owners as well as the RRC.
Bruce Luttrell, of Tri-Star, has lost his operating license in Texas, due to defrauding the Santo Niño royalty interest owners as well as the RRC. He has been fined approximately $130,648. This came about as a result of consistent and thorough research by Genaro Perez, Jr., Adrian Perez, Jr. and myself (Joe Perez), whether it was out in the field, on the computer, or paying personal visits to Railroad Commission of Texas in Austin or the District #04 office in Corpus Christi, Texas.
Extensive research was done to obtain the information which has had an impact on our present position to terminate the lease.
On November 20, 2003, Wallis Energy sent out a letter stating that royalty checks were no longer going to be coming from Dorado Oil Gatherer. The checks were now going to be issued by Wallis Energy, even though Superior Gathering was the new oil gather/purchaser. Superior Gathering was questioned about he royalty checks.
They indicated that they had paid Wallis Energy for the oil, and their understanding was that Wallis Energy would be responsible for paying out all royalties. It was then that many of the checks were returned due to insufficient funds/hot checks. Thousands of dollars were never collected by family members.
The winner here was Wallis Energy. Throughout the years, I personally reported to the RRC many spills and illegal activities by Wallis Energy, which made Mike Harvey very upset; he retaliated, by suspending royalty checks to some family members.
Because of the 4 different leases, it is illegal and fraudulent to produce from 4 different leases and have them combined together into 1 production tank because of the different paying royalty interests from each lease. No meters were used to determine or monitor the oil production from the different leases. All oil production was guessed at when royalty checks were distributed. Many royalty interest owners were short changed.
This activity was also reported to the RRC in Austin, Texas and was another reason for Harvey’s retaliation against family members.
One of the most unbelievable fraudulent acts Wallis Energy has committed is reporting oil production from wells that have not been in operation, in essence abandoned, for over 20 years.
As of today, only 2 wells are producing: Well #9 and Well #3. Wallis Energy is now using a method that is called “water flooding”. The same saltwater that is produced is now being injected back into the ground with pressure to help lift the oil to the surface.
Because of this process, and negligence on behalf of Wallis Energy, one of the injection wells (Well #14) which once was an oil producer, has had its casing rupture, and the saltwater mixed with oil has contaminated the freshwater table that feeds Humberto Gonzalez’ water well.
The fresh water supply to his residence at Santo Niño is compromised.
Throughout the years, at Santo Niño Ranch, Wallis Energy and Tri-Star have had a blatant disregard for our land and royalty owner rights. It is long overdue that we take a united stand and work collaboratively to take control of what rightfully belongs to the royalty landowners of the Leal and Perez ancestors.
According to Joe Perez’s research, not only are the ancestors of the original royalty interest owners being defrauded by the current leaseholders, one of these, Wallis Energy, has contaminated a local water source using a process called “water flooding”. This situation is currently pending litigation due to several deaths and injuries resulting from this contamination.
DeSouza Law firm is a leading personal injury firm representing accident victims throughout Texas.
If you’ve been injured by a car, truck, 18-wheeler, company vehicle, or in the oilfield, call DeSouza injury Lawyers today at 361-799-2222 or visit the firm online at https://jfdlawfirm.com/.