My family purchased a ranch in the 60's and as part of the deed the owner did not reserve or retain any portion of the mineral rights, which prima facie evidence of a check being received from a couple of wells for like 1/32d interest on properties that are not on our land.
What I would like to do is to bring the lease up to date with the latest in common, statutory and RRC administrative law rulings and update the royalty payment from 1/8 to at least .225% and include provisions for a bonus royalty in the primary term and at the beginning of the secondary term should there be producing quantity above (?).
The question is how hard will it be to update this lease, and how long of an effort should I be prepared for and how much should I be prepared to pay in lawyer's fees?
Thanks in advance.
Oh, and in answer to questions that some already may have...yes...we have documented proof of the lessee not living up to their end of the bargain as stated in about two major provisions of the existing lease.
I think it’s going to come down to what the " provisions" are. I think there are things the operator should do and you can sue and receive damages/lawyers fees, but not terminate the lease. There may be other things that the operator must do, or the lease terminates on it’s own language, although you may have to sue to get the operator to admit that it has. All depends on the lease form. I don’t think anyone can tell you how much it will cost you. In my case against a lessee, my lawyer told me it could cost 15k to 60k and up, but I never received any compensation from my lessee at all and I think I’m on firm ground. Your situation may not be as clear cut. Good luck.
Dear Jack Ross:
Termination of lease cases are fact specific. You should obtain advice from a competent O&G lawyer. While a Landman cannot render legal advice, an old hand such as Buddy Cotten is also a good source. With respect to the cost to draft/negotiate a lease, it depends on the status of the mineral ownership, the size of the property and who the proposed lessee is. But, i have found that a figure of approximately $4.00/acre has been a useful marker. It could be a lot more or somewhat less. Lawyers hate to be asked 'what's it gonna cost' because it is being asked to price the cost of digging a ditch where you don't know how long, deep or wide it is to be.
Hope this helps,
Ernie
I agree with Mr. Bruchez, that Buddy Cotten would be a good source of information. I also would like to say that I didn’t ask my lawyer how much it would cost, it was my lawyers idea to warn me. I had already determined that I was going to set things right, whatever it cost. In another instance I did persuade KOG to release a lease, that they recorded and never paid me for, but as above, they didn’t want to release it, and did not until I convinced them I would do whatever it took, pay however much it took. Once again, I was on firm ground and likely would have recovered my lawyers fees.
I have already consulted an oil and gas attorney, and I have sufficient just cause for terminating the lease agreement, without going into lengthy specifics. I can say the lease states in very plain terms the obligations of the lessor, which have not been met in every detail of the lease (this is not an exaggeration on my part, and even my attorney is in agreement. However, I did broach, as I should have, what he thought the costs would be to terminate the lease, because I was too wrapped up in the case that had been made, the fact that we would prevail (it’s there in black and white) to ask what the dollar amount would be in fees, because I felt just too good about having my own two years of law school not go down the damn drain for naught, by finding fault on the part of the lessee in breaching the lease. Poor excuse for not asking but this was a four hour meeting 3 hours which I laid out the cause of action as outlined in my complaint, and the remedy I was seeking. I was surprised to find that O&G lawyers charge approximately $100/hr less than trial lawyers, who begin by negotiating a settlement and then if they have to go to court the costs can equal up to $10,000 per day.
Dear Mr Ross,
"Oh, and in answer to questions that some already may have...yes...we have documented proof of the lessee not living up to their end of the bargain as stated in about two major provisions of the existing lease."
That might mean something if the end of the bargain that was not being held up was a condition of lease as opposed to a covenant of lease. For example, you are not paid on your royalty share of production. Can you sue for lease cancellation? Sure, you can sue for anything that you want. But being successful in that particular suit would be difficult unless the scrivner of the lease made the payment of royalties a condition of lease. Most leases, the payment of royalties is a covenant of lease, not a condition.
Commercial leases are drawn to have savings clauses - - - clauses that allow the lessee to save the lease in case of a business faux pas. And as the years have passed, the more typical commercial forms have a savings clause for everything.
As Mr. Bruchez pointed out, the devil is in the details (fact specific) and your opinion of right and wrong may not meet judicial scrutiny to set aside a lease.
Dear Mr. Cotten,
Thank you for your input. The details you specified above have already been scrutinized and passed the litmus test. We have just cause for termination.
Regards.
Jack