Carter County Lease Questions

Our family has been approached to lease in Carter County in 3 sections. We hold our interest separately as individuals. The company has ownership wrong for sure on 1 of the Sections. Their title is cursory but imho very sad cursory. Completely left off 3 siblings referencing the probate when it’s extremely clear it passes to 5 people. They are also demanding a 2 year option on a 3 year lease but originally pushed for a 5 year + 2 year option. We never do options but these guys completely will do no lease without it & in doing so says they will try for a 150% of initial bonus for that option. Also stating they will Not run full titled to specify acreage without a signed agreement & at the same time saying they are drilling a horizontal well through 2 sections. Since when is it demanded you sign a lease before title & before you tell the mineral owner what they own. I know I’ve heard of this in selling minerals but I don’t understand it if you’re leasing. Have things changed that much. Didn’t even get to clauses but I’d bet my life they expect warranty clause to stay in place. Been awhile since I’ve been on this site but any feedback would be appreciated. Thanks in advance!

You have quite a few options.

Do not lease all three sections on the same lease if you choose to lease. You do not have to lease. If they are going to drill horizontal wells, then you can wait for the OCC cases to finish and be pooled instead. Depending upon whom the operator is, this is sometimes a good alternative. I frequently prefer pooling. You also may get offers from other agents, so you may be able to get better terms and clauses from them.

I never agree to an option time frame. Too much can happen in three years, even more in five years. The most critical lease clause for me is not post production charges at all. Always good to get an attorney to look over their draft lease as it usually needs quite a few changes.

It is common for agents to want a signed agreement before they run title. It is very expensive to run title. However, there is a way to mitigate the issue. If I decide to lease, then I negotiate all of the bonus and mineral owner favored clauses before I lease. Then upon getting the lease notarized, I make a copy and mark on every page- COPY DO NOT FILE. I let my attorney or accountant hold the lease until payment is received and cleared. Then they will turn over the signed lease to the agent. I also give a fairly short time frame such as three weeks for the title search to be completed or the lease is to be returned to me to be destroyed.

Are you able to add depth, pugh, no costs clauses under pooling? Problem with waiting until pooling is if you miss the deadline, which I learned the hard way and many others do and get stuck with a 1/8th and no protection clauses.

No you may not add any of those clauses in a pooling unless you have attorney attend the hearing and get the judge to add them. A pooling has a reservoir(s) listed so that acts as a depth clause of sorts. There are usually several royalty options offered. You have 20 days in which to answer the order. You can still lease within that time frame.

Hi Martha - can you give some examples of when you prefer pooling? Thanks - Kit

Martha thank you again for your feedback. I did forget a couple of things like does the pooling demand a 2+ Option or are they able to extend it in anyway AND also they came back & told us that they were going to try & get 150% of original bonus on the lease for the 2+. I have no intention of doing that but when they said that they tried to pin us against each other ( there are 4 of ys now bc 1 sold all their minerals) saying that would only be IF everyone signed on to it all. That also has never happened as we are all individuals & we do what is in our own best interest at any given time…of course. Thank you again & enjoy your day.

No, pooling does not have any options. It is usually for 180 days or for 365 days.

If you inherited independently, then each of you can make your own decision of whether to lease with a company or go to pooling.

If I cannot get a good lease with no post production charges from the operator (along with about 15 other important clauses), then I do not mind leasing with a third party that will give better clauses or going to pooling as the pooling is usually or a particular reservoir and the horizon above and below just in case the well bore wanders. It has a short time frame and it is usually gross proceeds (in my experience.)

Thank you so much for the information. They refused to back off the 2 year option so I guess if they do drill I’ll have to be pooled. Thank you again.

Poolings are extended all the time. When they are, the original pooling bonus terms usually apply. Most of the time pooled parties are bound by their original elections.

Thank you for the information

Let me clarify a bit. The pooling does not have any two year options that you were asking about. The pooling order may be extended if drilling does not take place in the original time frame. Sometiimes, they will pay a bonus again. Sometimes they do not.

The pooling does have options on royalty/bonus pairs based upon the competition in the area. When you answer a pooling, you pick one of the options for your reply within the 20 days. Most of us prefer the highest royalty. If you do not answer the pooling in the correct time frame, then they will assign you the lowest royalty.