Mineral Rights (Denton, Southlake, Howe: leasing, attorney, transfer)

[friendship]

Can someone give me advice on how to handle the mineral rights of property that was owned by a distant relative? We have been recently contacted about mineral rights that were kept by a distant relative for his heirs. There are only four living members of the family left. A company searching for the owners of the mineral rights is who contacted us. We had no idea this was a possibilty, and we need to know who to contact for help. I think it is a large piece of land in Denton County Texas.

[Lakewooder]

If it is a good landman he can determine who currently owns the rights and the percentage of ownership.

[DFF]

If you own the rights or part of them, you will be contacted by representatives (landmen) trying to lease them for development. At that point they will generally give you a lease draft to reveiw and the rest is up to you. Either you like the terms and sign or you don't.

Most will find that they should not rush into a deal. Terms and conditions should be thoroughly reviewed by legal professionals. Most of the leases offered have standard clauses that are greatly in favor of the developer. DON'T sign anything until you understand it and want to sign.

When you sign, you transfer most of the rights and value of the minerals to the developer and will never get them back. In this area, the developers are so eager to get land leased that they are paying HUGE bonuses that are rapidly increasing.

However, the bonuses are typically less than 2% of the value of the minerals. See enjoy it! to understand the value being transferred to the lessee and some assessment of when and what royalties will be paid.

Caviat emptor is the operative phrase. They know what they are doing but without a lot of help you will not know and will have a weak negotiating position. DO YOUR HOMEWORK BEFORE you sign.

[berliner]

Hi,

Today I received such a lease offer letter and plan on taking it to our company attorney to give it the once over. Am I reading correctly here then, that I should hold out for more then is being offered? Does the company contact the homeowner again after the initial communication or will they just put you into the old "file 13" if no action is taken on your part?

Thank you,
Berliner

[loves2read]

talk to your neighbors--the best power is in getting consortium of people/mineral owners in same area where the company wants to lease contiguous blocks of land for well-drilling pool
if more people hold out it is likely to raise the bonus money offer and allow more bargaining power on side of YOU vs the company--there might be other companies who would offer competing bid--
acting as solo--you have little weight to any propositions you want

while you might ben signing away control of your minerals--you also are not committed to pay any of the costs of drilling/maintenance for any oil/gas ventures--you are only getting profit---that is something to consider when wells can cost up to 7Million or more to drill--with NO certainty there will be a makeable well---no matter how good the drilling is in the area around your property...
Your company attorney-unless you work for an oil and gas company--WILL NOT BE in good position to give you INFORMED opinion and he or she REALLY SHOULD NOT give you an opinion--
would you go to a podiatrist to have hernia surgery or an OB/GYN to have a root canal--
oil and gas law is a speciality practice--and you should consult someone with that knowledge...

BUT YOU MAY BE SELLING--NOT LEASING--YOUR MINERAL RIGHTS WHICH IS AN ENTIRELY DIFFERENT KETTLE OF FISH--THIS COMPANY WHO SENT THE LETTER MAY BE TRYING TO POSITION ITSELF BETWEEN YOU AND ANY DRILLING OIL/GAS COMPANY LIKE XTO OR CROSSTIMBERS!!!!

IT IS POSSIBLE TO LEASE MINERALS FOR ONLY ONE DEPTH/WELL VENTURE--WHICH MEANS RESERVING ALL OTHER MINERAL INTERESTS/DEBTHS TO YOU...YOU SHOULD ALSO ASK FOR A SHORT TIME TO PROVE THE WELL--LIKE A YEAR--AND IF THE COMPANY WANTS TO NEGOTIATE THE RE-LEASE AT THIS TIME -- MAKE SURE YOU GET MORE MONEY FOR BONUS AND PERHAPS INCREASED % OF ROYALTY PAYOUT...

[ORD/DFW]

Consider hiring an attorney - likely money well spent. We live in a Southlake neighborhood which has banded together with other local neighborhoods. The current offer is $24K per mineral acre and 25% royalties.

[jimboburnsy]

Originally Posted by berliner

Hi,

Today I received such a lease offer letter and plan on taking it to our company attorney to give it the once over. Am I reading correctly here then, that I should hold out for more then is being offered? Does the company contact the homeowner again after the initial communication or will they just put you into the old "file 13" if no action is taken on your part?

Thank you,
Berliner

The problem that most people have is that they do not know what they own. It is very difficult to become a sophisticated lessor overnight and if you don't own a considerable interest or an interest in a large portion of land then the oil & gas laws of Texas do not grant you much of a bargaining position. Also, an attorney who is not familiar with oil & gas probably will not be much help and can actually hurt you.

If you just own the minerals under 1/4 acre in a subdivision, if you want different terms and bonus than what has been accepted by a majority of the mineral owners around you, then you are probably going to be left out of any pooled unit and will collect no bonus and no royalty while the minerals under your tract are drained and you have no recourse. An oil company will not usually drill on or under unleased property, but they certainly do not have to include you in a unit.

On the other hand, if you own an interest (for explanation, assume 10% interest) in a larger tract of land that a company wants to drill on, you have a better bargaining position. If you do not lease, they can still drill a well on the property but when the well pays out (i.e. all the costs of drilling and completion have been recouped by the operator) you will be entitled to 10% of the well revenue per month minus 10% of the expenditures attributable to the well per month. If you have more than 5% of the minerals under a big tract, this can hurt the operator's economics enough to give you a real bargaining position. Otherwise, they are just as likely to tell you to find a rope to pee up.

You can run your own title at the county courthouse where the land is located, you can consult one of the title companies in that county or you can hire an independent landman to run your title. In any case, if you own land with Barnett Shale underneath it, you need to know what you own to get a good deal.

[elephantear]

What department do you go to in the county courthouse to research mineral rights? I have an 84 year-old mother that has mineral rights from her father and great-grandfather's property. We discussed this with an Texas elder-law attorney and he suggested we get these out of her name. I do not know which wells she has an interest and uncertain which direction to go to find out. Sometimes I think these leases can do more harm than help an individual. I'm not certain if all the taxes are paid up on these rights. She has not received any type of tax statement for the rights, but I am positive she has an interest in the mineral rights.

[loves2read]

sounds like you don't know too much about your mother's business interests---why don't you ask her about her royalty checks and where the wells are
if she owns mineral rights that are under production she is getting a periodic payment depending on her porportion...if she owes taxes she has probably received a delinquent tax notice...

why would you think owning royalty interest does more harm than good---
you need to be very careful transferring property if your intent is to hide assets to qualify for Medicare/Medicaid or to escape the estate provision ...
an attorney whose specialty is elder-law might not be that conversant with income tax/estate law...