Gary, I’ve been offered $.16/ton with 5% increase per year starting from 2008. With 50% Mineral rights, how does that compute? I’m not understanding the relationship between rights and royalties. What royalty amount is fair, and can I request the amounts being mined and the net profit from sale from lignite on my property? I hired an attorney from Wyoming, she was pretty worthless in her understanding of current royalty rates for lignite coal. John
Gary, One other note, the land I have deed to has been mined for the past 8-10 years and supplies a local Electric plant in Falkirk. Falkirk Mining Co. purchased the land, so they must know of its intrinsic value. They have roughly 350 acres including my 120 acres, and have mined 8 mil tons/ year, and are willing to give me royalties prorated from 2008. My question is, do I have room for negotiation on the royalty rate? Or am I stuck with the $.16/ton? In my thinking, asking for even just 10% of net proceeds would be a logical and fair amount, am I incorrect in this? John
John,
Respond to my PM request and I'll fill you in on some things about the coal business. I have actually opened and operated coal mines.
Unless you have a bank full of accountants, I wouldn't enter into a net proceeds arrangement with an operator. Also, the best thing you can do is protect other mineral rights. How much leverage you have in setting a royalty rate is unknown. Permitting, mine plans and quality from core drilling are tantamount to negotiating a lease or revision to a lease.
There are also additions you can make to a lease that secures you income and also helps the operator.
Best not to try this at home but get some professional advise. The mining company has it so you need to be on equal footing in negotiations. Understanding your claim on past production is also important.