Regina:
What Tom says has a lot of merit; but, just remember where he stands. He may have great ethics and I’m sure he does, just remember. Also, as with buying or selling a property, there are positives and negatives to both sides of every situation. If my house is worth $400,000 and the market has bottomed out in my area, I’m not going to get that much, the same goes with the lease. In addition, if you own your minerals by yourself or you can call all the shots without interference, you have one thing in your favor. If you have enough acres for a good horizontal well or multiple wells (>640 acres) you have another strong point in your favor. Now if you can say yes to these two elements, and you have done your homework and feel strongly about a specific point whether it is $$$'s for a bonus, percentage royalty or other lease provisions, then remember the important word from above. If Tom’s company wants the lease they will talk, if they want to flip, they will probably walk; but, in my opinion, I would thank him. You were probably not broke when they came a courting, and you will get by without the offer that wasn’t pleasing to you in the first place. If they wanted your minerals, they had a reason. If the offer is bad, then you probably haven’t lost much anyway. Now you still have the minerals if they ever drill and if it is relatively good, you will get your day and it will be worth the wait.
Now, back to your scenario. 300+ acres, lots of relatives that can’t come to an agreement. I think you have to look your lease over and be very reasonable and very cautious. I don’t believe you should ever forget your magic word though. As Tom said, I hate mandatory pooling; but, it does have a place. I don’t like the mandatory pooling rules, they are written to punish the unwilling mineral owner, in fact, I believe it is legalized theft; but, who am I to fight multimillion dollar oil companies, railroad commissioners and bought and paid for judges.
As the old saying goes! At least on this subject, “That’s all folks”!
In closing!
This is in the Mineral Rights Forum Newsletter; but, I’m too lazy right now to look this up again and it is too late to worry about it. Chesapeake is in a lawsuit in upstate New York, where they are worried about losing leases because of a moratorium on fraccing. Originally, Chesapeake paid mineral owners $3/mineral acre for a large portion of their leases. Many of the leases since then have gone for $5000/mineral acre. I leave you with that thought.
regina redmond said:
Yes, an attorney would be helpful, but keep in mind their stock in trade involves over the top language, statements that the average person would find hard to follow. In recent years the trend has been to have clarity in contracts, meaning “in plain english”. Our consumer credit laws have changed drastically because of the desire to present terms in language everyone can understand. So should contracts like the lease proposed to me by Exterra. It should be clear, definitions should be given to words that the “trade” uses, like a shut in well. I think the biggest misunderstanding would be the “forced pooling” or pooling concept. In most cases, especially my families, the average person would not understand some clauses in the contract without giving it to a lawyer. It has been my experience, hiring someone close to the community is not always getting the best advice. I don’t want to say the “good ole boy” network, but it does exist. Today, in this forum, it was posted that she was offered $750. per mineral acre and three sixteenths in Weld County. And that was just for 1.4 acres. I was told just a week ago, that $500 was the best Exterra could do and they went back on their word on the three sixteenths and reverted to 1/6. I think there should be a comp data base for this stuff, just like there is for real estate. I would like to know the value of the leases that did become effective in the last year. I read all the drilling permits and the drilling applications just to find a lease that was recorded. When I did, of course they had as consideration $10.00 +, thereby hiding or making confidential what the bonus was for that transaction. I did find what the royalty payment was because it was part of the lease. Mineral rights owners are at such a disadvantage when it comes to knowing the market. Then, how do you know if who you signed with is able to complete the lease, or did they just flip it. That is huge with me. I don’t mind the assignment part, I just want to know who is at the end of the tail. So, yes I will be having fun trying to convert the legal jargon into “plain english”. Regina: