There is another option, don’t lease.
Tom Bay said:
I can and have seen both sides of this coin. I am willing to do escrow, most are not. Here is the reason why most companies will not pay at signing. Because running mineral title is hands down 100 times harder than surface title. Another reason is so many mineral owners think that they own minerals when they do not, because someone years ago in their family had royalties then passed on and their family would convey them as minerals etc. And realistically when that happens, “& it happens a lot, usually months down the road. How many mineral owners still have the cash in hand from the transaction? I would say, maybe 1.” and the rest of them declare bankruptcy or get sued, and then the oil company is the monster once again. So while I am for escrow when available to put the lessor at ease, will they want to keep it in escrow for as long as due diligence takes to clear title? “SandRidges Kansas acreage for instance will take a firm three years” it is 367 pages on a CD." So honestly, the system works good. When dealing with a company who is reputable and has been around. I rarely hear of two things: an oil company not paying a bonus, even if it takes longer than you would like, and mineral owners handing the bonus money back when it turns out they were a stranger to title. I am not really picking a side, just showing you a different view. Thanks
regina redmond said:
Ok, here is the history. I was told back in 2009 that no oil lease would go through escrow. Period. That, what I was asking was not how they did business in Weld County. I even hired a landman to look out for my interest and that of my brother and sister. He even said this is not customary. So…all of my family signed with Exterra and yes eventually, they were paid. Leaving me looking like a jerk. Remember they would not back me and use one voice to negotiate 320 acres. Exterra did the title work and found all the cousins. Over the years, like 80 or 90, our family was asked to lease the land for oil. Our family (my grandparents etc) did. No oil. So when this hit, the cousins were not concerned that oil would be found. Whether or not oil would be found, was not my issue. As a real estate broker with 40 years experience in two states, I knew this was a land transaction, pure and simple. I don’t do anything without an escrow being set up. So I was floored when my offer to open escrow on my poor little interest was refused. Flat out, no deal. So, I just let it lay. My relatives said ‘whatever’ and moved on. I am the loose cannon in the family. Now, if I told them that the last, written offer to me was $500 a mineral acre, plus 18.75% when they settled for $65.00, a MA, and 12%, they would be dumbfounded. Not to mention my Aunt, who doesn’t have that many years left, could use the better offer. But they all signed. Then comes Exterra who tells me that EOG, who wanted the leases, flipped them over to Noble. What a surprise. The fact that payment was made does not influence me. Good on them. But I come from the real estate world where the money hits and the documents are handed over. And when they signed, no relative was at the debtor’s prison doors. There was no urgency to do this, other than the history of over the years leases were given and expired. The way business has been done with landmen and oil companies may need to change to protect the mineral rights and land rights holders. Remember, you cannot manufacture more land. Another weakness is who do you look to when your lease is flipped? There needs to be notice that your lease has changed hands and to me, you need assurances that the party taking the lease is able to perform.
The part of the lease that says at the end of the term of the lease if there is a producing well, …more technical terms (check your lease, it is standard boilerplate), they pay you $1.00 per acre and the lease cannot be terminated (check your lease). I couldn’t believe those terms. Who would do that? Then the collection of monies is a complicated matter. All of this in favor of the oil companies. Now I get that they put up the money for the drilling and all expenses related to the development of the well. But from what I see they hold the mineral rights owners hostage forever, rolling over the lease year after year with the original percentage etc. I read all the drilling permits and pending drilling permits in Weld County, and found leases from 1970 as being in effect as right to drill. Of course if the wells hit, everyone wins, but do they? The lease states that expenses are first before any monies are given. That’s great. Who is in charge of the expenses? The oil companies. And anyone who has had a business knows expenses can be manipulated. They can expense that well down to zero, meaning no profits. In the meantime, I wait for Exterra to send me the new docs. Or maybe not. I did the first of the “Things not to do”, by pissing him off regarding his e-mail address. Anyway, that is the story.