We are looking to purchase 112 acres in Cameron,TX located in Milam County. Currently we are working to reach terms of the agreement for the mineral rights. The seller has stated that they own 50% mineral interest and 50% executive rights on the full 112 acres.
I posted last week asking questions about surface rights in regards to a purchase of property with very valuable information provided. We have continued to push the Seller to convey a percentage of the mineral right but they will not budge.
Now as part of the agreement the Seller has stated that they will convey the 50% of surface rights and 50% of executive rights. Our main interest with the mineral rights is not to receive payments but to have the ability to protect our investment of the surface. With that being said it is our understanding that having 50% of the surface rights doesn't provide us any real protection as the oil company could approach the remaining 50% share to contract a lease. However, just recently the Seller has also agreed to give the 50% of executive rights.
With ownership of 50% on both of these right what protection do we have for the surface of the property? For example, On such a small property will a company attempt to negotiate a lease without involving us in which we would be able to negotiate clauses to protect the surface. (i.e. surface damage reimbursement).
The seller can't give you what you want, which would be any control at all in the possible drilling of a well on your surface and necessary roads and possibly pipeline. 50% executive right would be no more valuable to you than the 50% waiver of ingress/egress and in fact may put you in a bind. It could be that if you held the executive rights that the former surface owner could sue you if you didn't accept a lease offer. I think you are going from the frying pan to the fire. If you can describe the waiver of 50% of ingress/egress rights as a bucket with no bottom in it and add 50% of the executive rights to it, I'd say the bucket had also now started cracking up the sides. The seller can't give you what he does not have. The seller could not block drilling for himself, he can't give you the right to do so.
Point taken but maybe I have been unclear, I'm not against blocking anyone from drilling and their rights to access the mineral. I just would like to have some say in how it is done to ensure there are steps taken to protect and restore the surface.
The Sellers argument was that by doing this it would allow us a seat at the table during any lease negotiations where we could incorporate surface reimbursement term for damages. (i.e there is a 4 acre lake that is feed by spring water and would want to protect the ground water.)
I'm just looking to see if this is true and how likely it would be to have that say in a lease under the current situation.
The other 50% can allow whatever they want that is within their power and their rights will be equal or greater than yours in the eyes of the law and backed by operator money if they decide to drill. On the matter of water, you should have control of that with purchase of the surface unless you give that up. I guess with the executive right to leasing for 50% of the mineral rights the oil company would have to talk to you to lease the 50%. That does not mean that the mineral owner will not sue you if you do not lease. You will probably be executing the lease before the well is staked also and once you do that your part will be done. I'm not trying to be a smart jackass. I am poking holes in what you bring so you can make it tight as possible so you may have some benefit of your effort. I don't want you to get half way there and sleep soundly for a couple years and then have seeming disaster strike. I do not believe that you will have any more say than any landowner would if you don't have 100% of the ingress/egress rights so all leases could have a no surface use clause in them. At that point you don't have to deny the operator acess to the surface, but you likely couldn't be forced to allow them to use your surface. Nothing you have said so far will, I believe, advance you beyond whatever normal courtesy that an operator would show the surface owner. The fact that someone is trying to convince you that you would have a place at the table that you wouldn't have anyway as the person the operator has to negotiate with for the pad, road and possibly pipeline easement sounds almost dishonest. If you depend on what you are offered right now you are no farther ahead, in my opinion. What if the operator wants to lease before even seismic is done, long before anybody has any idea of where the best spot for the well is? Are you going to withold your permission for the lease and possibly get sued? So far, getting 100% if the ingress/egress rights is the only thing you've come up with that I would rely on. I wish you well, I wish the guy trying to sell you the surface well, I even wish the operator who may drill in the future well. I'll shut up now. Whatever you come up with I hope you run it past a lawyer to see if he can find a hole you could drive a car through. Good luck.
Actually, In Re Bass, there is no liability on the holder of the executive rights to not lease. The fiduciary duty occurs when they do engage and lease. This overturns the law in the Champlin case.
SB 332 was passed by the Texas Legislature and became effective September 1, 2011. It "recognizes that a landowner owns the groundwater below the surface of the landowner's land as real property."
In my opinion, your objective should have been to try and garner only a 1% interest of their mineral rights to have the controlling interest, as noted in my earlier response. I believe it was assumed that I was referring to surface rights, but not so, because mineral rights ownership "trump" surface rights.
Thank you.
Pat
Phillip luce said:
Point taken but maybe I have been unclear, I'm not against blocking anyone from drilling and their rights to access the mineral. I just would like to have some say in how it is done to ensure there are steps taken to protect and restore the surface.
The Sellers argument was that by doing this it would allow us a seat at the table during any lease negotiations where we could incorporate surface reimbursement term for damages. (i.e there is a 4 acre lake that is feed by spring water and would want to protect the ground water.)
I'm just looking to see if this is true and how likely it would be to have that say in a lease under the current situation.
Philip / RW Kenedy / Ms. Pat Malone. Following up on the Question that was posted I have a similiar scenario. Local ranch presently has 10 wells recently drilled on his 5000 acres since March of this year. The owner is willing to sell his ranch but he wants to retain 100% mineral rights and give the new owner 100% surface rights. Their are a number of ponds and my concern is as follows; Will the new owner have 100% water rights if wells are drilled for SWD or fresh water by the new owner. ? If new drlling activity continues what revenue will the new owner benefit from since mineral rights were retained by the owner. If the area where drilling is taking place leased out to oil companies what rights will the new owner have and will the new owner have the right to decide wether drling can or cant continue on the different parts of the ranch. Appreciate a reply. Thank you, Mark
Mark, if you own the surface, I believe that you own the water rights as long as you have not given them up. If mineral rights and therefore the right to produce them including the right if ingress and egress are the only things reserved in the sale what is left should belong to you, water rights, pore space, wind, easements. When you see anything mentioning that the sale is subject to existing leases, I would read the leases to see what was granted to the lessee because the seller can't sell you what the seller no longer owns. If the seller in their lease granted a pipeline easement and you buy the surface subject to the lease, I think you bought the surface subject to a pipeline easement that nobody may have bothered to mention. I hope you have a good lawyer look things over.
Mark, if you own the surface, I believe that you own the water rights as long as you have not given them up. If mineral rights and therefore the right to produce them including the right if ingress and egress are the only things reserved in the sale what is left should belong to you, water rights, pore space, wind, easements. When you see anything mentioning that the sale is subject to existing leases, I would read the leases to see what was granted to the lessee because the seller can't sell you what the seller no longer owns. If the seller in their lease granted a pipeline easement and you buy the surface subject to the lease, I think you bought the surface subject to a pipeline easement that nobody may have bothered to mention. I hope you have a good lawyer look things over.
Water rights do generally follow the surface rights. However, negotiating what the mineral owner can do can be very important, and you should have an attorney look at it. For example, spacing requirements from houses, limiting slush pits, prohibiting gas pumping stations, etc. should all be looked at.
I think there is some semantics at work here. When you say that "Seller has stated that they own 50% mineral interest and 50% executive rights," surely you mean that they own 50% of the minerals and 100% of the executive rights on that 1/2 interest, right?
It appears that Seller is wanting to retain an undivided one-half (1/2) Non-Executive Mineral Interest (NEMI), and convey to you 100% of the executive rights that he owns on that 1/2 mineral interest. If that is the case, then YOU have total say-so on what happens to your 112 acres with respect to that 1/2 mineral interest only. Whoever owns the executive rights on the other 1/2 mineral interest could still affect the surface of the property. If you were to receive 100% of the executive right for BOTH 1/2 mineral interests, then you are in the driver's seat!