Are All Owners Equal?

Something I have not seen addressed, is where there are like 5 mineral rights owners, and a company is proposing to lease the rights. In my case I just accepted the offer, but am guessing the other 4 individuals bargained for a better price/terms. Is that just the way it is, or is there any process that makes each owner equal? Are we allowed to demand to see what other owners are receiving?

Agree, unless you got a “Favored Nations” clause included in your lease, meaning if the folks you lease to give someone within a defined area and time period a better deal that they have to revise yours. A clause companies aren’t likely to agree to unless you’ve got a large, or for some other reason particular valuable, mineral interest.

To avoid the problem you asked about, and possibly increase your negotiating leverage, it can be worth the effort to contact other mineral owners in your tract, or who are around you, and try to get everyone to agree to negotiate together, if possible through one spokesman, or at least to share information before agreeing to lease terms.

So if four of the five all negotiate different terms than that was proposed and the fifth could not agree to anything. Then there becomes a pooling as I understand it, and the person who could not agree then gets forced into some rate. With four rates on the table already, what does the pooled individual get for a rate?

The pooling does not affect what each individual gets. every mineral owner still gets the royalty they agreed to for their mineral acreage. The pooling just aggregates different mineral acres into a well.

Excuse me for being a bit dense about this whole deal, but if he did not agree to anything, who and when and in what amount does that uncooperative owner get paid? I had thought from other postings, that he would be forced to accept some amount determined by others.

The unsigned mineral owner can be “force pooled”. Forced pooling rules vary from State to State. I am not current on Texas rules, so I will let someone who is chime in.

I should have stated - I am only concerned about New Mexico actions.

Not sure about New Mexico either. I can tell you that in the States I work in, an unleased mineral owner will be sent an Authorization For Expenditure (AFE) to pay for their proportionate share of the costs to drill the well. Most mineral owners will not want to put that much money at risk, but if you have the money to participate you might consider it. Get some professional advice before you do, though. There are numerous risks associated with taking a Working Interest as opposed to a Royalty Interest.

If the Mineral Owner declines to participate, then they will be deemed “Non-Consent”. In that case, the Operator goes ahead and drills the well, paying your share for you. However, you will not be entitled to receive your share until the Operator gets their money back with some level of profit. That is deemed the “Non-Consent Penalty” or “Risk Penalty”. The penalty varies from State to State. A quick Google search turns up a 200% penalty in New Mexico, but I don’t know that to be true.

This may seem pretty complicated, because it is, especially if you’ve never been through it before. You should seriously consider engaging a knowledgeable attorney or landman to advise you.

Free advice you get on the internet is worth every penny you pay for it.

No Mineral Owners are not equal. Thanks to the MineralRightsForum those who take the time to learn and understand the minerals and property rights are in a better position to make a better deal or even to tell the party making an offer to take a hike. MRF members are also more likely to understand when professional help if needed. Whether that be appraisers, geologists, landmen or attorneys.
This site helps level the playing field for holders of smaller interests. The expertise offered for free is amazing.

Thank you Richard for your useful advice!