Can oil company begin drilling without property owner signing?

I have a house in Arlington, TX and apparently an oil company is planning on drilling there. They've been sending me contracts to sign (with no discussion - basically, here it is, we're almost ready to begin drilling, take our offer, sign it and return it) for a couple of years, but I've been so busy and it's such a small lot (suburban) that I had other priorities to deal with so didn't follow up. I actually emailed them once for more information but they didn't reply, and now I think it's a different company.

In any event, can they start their drilling/extraction before they have 100% of the property owners' agreement and under contract? Or am I holding up their project? I have no idea what the law says about my rights, etc.


They can drill.


As Mr. Kennedy stated, they can drill but any damages to the surface area can resolved with the operator. Further, any future damages resulting from the well can be settled with the operator.

Dear TG,

Unless the operator begins a MIPA action against you (and you would be informed), you will not get one red cent of royalty unless you sign a lease and get into the pooled unit.

there seems to be a rumor/opinion that if one does not sign a lease and the well starts producing after such and such is paid for then the unsigned owner of the property would get 100% royalties. i am unsigned and being contacted and have a lot in that is in an area that is approved for drilling by Arlington and the pad site is sign or not to sign...

I am not an expert, but I did chat with an attorney in Texas a few months ago about this. I do not own any surface rights, so I am totally ignorant on that topic. My understanding is that an owner of minerals in Texas can sign a lease, which means he will receive a bonus and royalty payments. If he does not sign a lease, he gives up the right to any bonus. He becomes a working-interest owner, or something similar to that, and his share of the gross revenue (from sales of produced oil and gas) are applied against his share of the drilling and operating costs. After his share of the revenue has covered his share of drilling costs, then he starts to receive his share of the revenue. Furthermore, I was told that in Texas the operator can't go after the unleased mineral owner for his share of a dry hole, plugging costs, etc., which could be a downside risk of not leasing in some states.

Suppose I own 20% of the minerals under 320 gross acre, and suppose the well will be deemed to cover that same 320 gross acres, and suppose the well produces oil and gas sold for $5 million per year. If I leased at 25%, 3-year term, bonus of $2000 per nma, I would get a bonus of $128,000, and my royalty checks would be $250,000 per year. If I refused to lease, I get zero bonus, and my 20% of the $5 million would go to cover my 20% of the cost to drill. Eventually, after my 20% of revenue covers my 20% of drilling costs, I would receive working-interest (or similar) payments of $1 million per year [minus operating costs???].

My best guess is that a small-time mineral owner is vulnerable to operator accounting tricks, such as amortizing capital equipment costs and so on to the drilling. The WI owners bear their pro rata share of what I call "other deductions", e.g. transportation, etc. If the well is not profitable, the mineral owner may come to realize he would have done better to make a lease and get a bonus. If the well is quite profitable, the mineral owner might make more money over the long term by going for the WI (working interest) rather than the RI (royalty interest). If the lessee doesn't have 100% of the minerals leased, it reduces the likelihood he will drill, all other factors being equal.

Oh, one other vulnerability which I think my attorney had explained, but I am very fuzzy about this. Suppose I own that 20% of minerals under the south half of a section, and suppose the well is drilled in the NE/4 (outside the area I own in), and suppose the well is deemed to be the E/2 of the section (includes the SE/4 where I own). If I were leased, I would be in the well unit, prorata for my 20% under half of the gross acres, i.e. I owned 20% of the minerals in the SE/4 which is half of the E/2. But if I were not leased, I would get zip, because I don't own in the NE/4 where they drilled. Is this correct?

I hope Buddy will come along and comment. . .

being that Arlington has, "the mother of all monster wells" according to news reports and many other producing wells in the Barnette Shale area there is a likely chance there is going to be some gas coming out of the well that they are trying to get this tiny lot owner to sign a lease on...and who cares about the price of gas...i am going to be the one to put up with all the traffic and other crap that is going to happen when they start drilling...they are not suposed to operate during the Texas Stadium events...that make life in my neck of the woods a traffic they are going to screw the traffic the rest of the week and trash the streets so they will have to be repairmen out there to further cause traffic hell and blow dust everywhere, u can't have a clothes line outside in Arlington...wash ur car and the next day u got a film of dust on it again...and what about that earthquake?