There are lots of variations of a "Producer's" lease which do not appear to be designed to protect mineral owners' interests. Has anyone produced a "Mineral Owner's" lease that is not a one-of but is instead similarly reproducible? I checked LegalZoom and a search for "oil lease" is not productive. I would like to see up to date state-by-state mineral owners leases drafted by skilled attorneys--written in plain English--made available available at low or no cost. Any thoughts or suggestions? Ideally this would be a fair lease readily acceptable to lesees and lessors.
I don't believe what you are asking for is feasible (for enforceable legal protection) to be drafted and filed as an actual lease.
From my understanding of what you are asking for, is almost like a plain English translation of the legalese from a properly drafted lease form.
This article explains Legalese in detail http://en.wikipedia.org/wiki/Legal_English
The plain English part may be a bit ambitious at the beginning. I am certainly not the first to feel plain English is an imperative: http://www.languageandlaw.org/PLAINENGLISH.HTM "...A consumer about to sign a lease or to purchase a refrigerator on credit should not have to pay a lawyer to explain what the legalese in the relevant documents means. "
I would think a "Mineral Owner's" lease is very doable, however. Have a hybrid of LegalZoom and Consumer Reports crafting the documents. I want to stress how important I think it would be to have mutually beneficial lease which would be fair to producers and owners, not just a mineral owners version of a piratical Producers lease. Perhaps even invite Producer attorneys to help.
I may try to find a Texas state lands lease. I believe the State of Texas will only accept a 25% royalty. I doubt State of Texas agrees to help pay production costs beyond wellhead, etc. Perhaps others will post examples of leases which benefit mineral owners.
The problem with a one size fits all lease, even state specific, is that every mineral tract is different. Circumstances are unique. So you will need to either add tons of unnecessary provisions in some cases, or the necessary provisions are discovered to have been omitted when a problem arises in the future. The other problem you have is that court cases over leases are happening all of the time, and the language is being interpreted and made law by the courts - so I don’t feel a service like legal zoom will be able to keep up with the constant court decisions that impact how a properly drafted lease should be crafted to be legally enforceable as the lessor intends.
How do you explain a "Producer's" lease which is maybe two pages long and dated as though it was written decades ago? If it is possible to have a standardized form which is so highly favorable to Producers, it ought to be relatively easy to craft a simplified document which protects mineral owners. I would like to have examples of leases which protect mineral owners shared in this thread, leases which were accepted by oil companies. I will try to cut and paste some Producers lease language sometime.
AJ, I don't know where you live, but there are classes that will teach you everything you are asking. One program is TCU Energy Institute. Taught by George Wilson, JD, C.M.M. If you will google it, you can find where and when the classes are. I took the class, and was so pleased. You will be given many examples of leases. I am a older lady that inherited minerals, and didn't know half what I should.
That is a good suggestion, Carol Dakan. I think MineralRightsForum is an excellent potential venue for a free class. And an open source model could be helpful for the majority. Teamwork can amplify product quality. Did you sign or are you subject to Producer's leases? Care to share some wisdom here?
Carol Dakan said:
AJ, I don't know where you live, but there are classes that will teach you everything you are asking. One program is TCU Energy Institute. Taught by George Wilson, JD, C.M.M. If you will google it, you can find where and when the classes are. I took the class, and was so pleased. You will be given many examples of leases. I am a older lady that inherited minerals, and didn't know half what I should.
I'm not really an authority to ask for advice. Maybe a certified mineral manager will give some advice. As far as leases go, you can negotiate the lease. you do not have to accept what they send. Try to get "a favored nation clause", you do not want to pay post production expenses, never go more than 3 years, etc. The more minerals you own, the more your have power. Sometimes you just have to accept.
I am not soliciting legal/lease negotiating advice. Are you familiar with downloadable freeware software? It would be very interesting if even small mineral owners had access to powerfully worded and mineral owner favorable leases. Examples of excellent leases could easily be shared through this forum.
"Producers 88" or other highly favorable leases at the lessees benefit, are very easy for them to make short and sweet and get you to basically sign over all control to their mercy.
The reason you cannot develop such a "simple" lease in that short of space that is the exact opposite (all mineral owner friendly), is that no operator would ever agree to such blanket statements that give the operator extremely limited or no control of their operation. Properly drafted leases that adequately protect "average" mineral owners should still require several pages of exceptions to the original lease.
If you search this forum (and also Google) you will find many examples of good leases, or good lease provisions to consider adding to a proposed lease. I would be hard pressed to find anyone with decent mineral acreage or potential to be able to narrow that down into one or two pages to be adequate for what I consider to be "in favor" of a mineral owner. I believe Buddy Cotten has some leases now that are approximately 50 pages or more. Is that necessary for everyone? No. But do some situations warrant that kind of a lease for a mineral owner? Absolutely. Nothing is one size fits all, unless you are an operator, where you can get someone to sign away almost every right in exchange for a bonus check and whatever royalty provision they promised. Even that sometimes, is a well crafted lie.
If tens of thousands of mineral owners are empowered with "Owners" leases and say don't bother sending Producers leases, well, to me, that is a game changer. What are the producers going to do, install solar panels?
That’s just it. There are tens of thousands of mineral owners that have tens of thousands of different wants and needs. There are only a handful of producers with all basically the same needs. The producers lease is a great starting point for negotiating. They are telling you what they want and what they are willing to pay, as the mineral owner you then can negotiate what you want and what you are willing to except in payment. Like all good negotiations there is some give and take but in a successfull negotiation both sides leave satisfied. I have a feeling that my lease and what I wanted looks a lot different from a few of my neighbors. I know you don’t want to hear it but the best step in getting what you want is to hire a good attorney. They might seem expensive, but like everything in life- you get what you pay for.
Having considered leasing and exploration / development of leases myself, I would be finding a new line of work if that was the case. Operators do take on risk and make significant investments in drilling and infrastructure. If you are so inclined to protect your assets, you could always develop your minerals yourself. Drill your own well, build your own pipelines, etc. Part of the exchange for a lease is that you are not taking the risk or making an investment, but still have the right to get paid a royalty if a well produces. For the risk the operator takes, that is why you have to give them some rights to develop your mineral estate, as well as the larger share of proceeds. Back home in Kansas our wells are so shallow (cheap to drill and compete) and I have friends who can do all of the work, I probably will drill and operate my own wells some day. In my part of Texas, it will cost you a few million dollars to drill a single economic well, not including the cost to acquire leases. Operators can front that kind of money. Whether they got it from Wall Street or off a previous successful well. Not all of us have $4 Million dollars to lose on a single well. Do you think they will sign a lease that essentially nothing can be done without your permission first? Doubtful.
I have a most excellent attorney. I am contending that the Producers lease is not a good kick-off point for negotiations and that an organized base of mineral owners would be in a better position. LegalZoom works. Crowd-sourcing and CO-OPs work.
steve said:
That's just it. There are tens of thousands of mineral owners that have tens of thousands of different wants and needs. There are only a handful of producers with all basically the same needs. The producers lease is a great starting point for negotiating. They are telling you what they want and what they are willing to pay, as the mineral owner you then can negotiate what you want and what you are willing to except in payment. Like all good negotiations there is some give and take but in a successfull negotiation both sides leave satisfied. I have a feeling that my lease and what I wanted looks a lot different from a few of my neighbors. I know you don't want to hear it but the best step in getting what you want is to hire a good attorney. They might seem expensive, but like everything in life- you get what you pay for.
Please see my immediately earlier post. It seems like your logic is flawed in that Producers leases are regularly altered, yet profits are still had. A Mineral owners lease by definition and by design would be more fair than a Producers lease. The very few Producers leases I have been presented might make the pirate Blackbeard blush. I have an unmitigated dislike of bullies, black liars, and thieves. It will be interesting to see if the State of Texas puts up with any Producers lease nonsense vis-a-vis state lands. To that end, I will be posting links to leases submitted to and approved by the State of Texas.
Kitchen said:
Having considered leasing and exploration / development of leases myself, I would be finding a new line of work if that was the case. Operators do take on risk and make significant investments in drilling and infrastructure. If you are so inclined to protect your assets, you could always develop your minerals yourself. Drill your own well, build your own pipelines, etc. Part of the exchange for a lease is that you are not taking the risk or making an investment, but still have the right to get paid a royalty if a well produces. For the risk the operator takes, that is why you have to give them some rights to develop your mineral estate, as well as the larger share of proceeds. Back home in Kansas our wells are so shallow (cheap to drill and compete) and I have friends who can do all of the work, I probably will drill and operate my own wells some day. In my part of Texas, it will cost you a few million dollars to drill a single economic well, not including the cost to acquire leases. Operators can front that kind of money. Whether they got it from Wall Street or off a previous successful well. Not all of us have $4 Million dollars to lose on a single well. Do you think they will sign a lease that essentially nothing can be done without your permission first? Doubtful.
AJ,
Linked below is the Texas General Land Office Form. It took about 6 seconds to find. Also, linked below is the University Lands form. That took around 3 seconds.
http://www.utlands.utsystem.edu/forms/pdfs/LeaseAgreement45.pdf?201410
Notice that the Royalty is left blank on the GLO form. Yes, they will take less than a 1/4 royalty depending on where it is. Also, yes, they are both tough lease forms for an Operator. However, AJ, when you get +/- a million acres that you own fee simple to lease, you can use the same form and have operators gladly accept it. Until then, there's negotiating to be done if you want your bonus and future royalties from production. But, by all means, lead this little revolution of yours. I'm sure unionizing will work flawlessly, because nobody's special or unique. Please try to throw one of these forms at the next guy trying to lease your 2 net mineral acres and see if he can keep a straight face as he walks out.
One of the benefits from taking on such a tough lease form is that an operator only has to deal with one form and we know exactly what we are getting into. The State/University doesn't have 50 different owners in a single tract that all hate each other and all want something different. They don't get in fights with the neighbors preventing production from moving out. And they don't decide to randomly lock the gate when they think there are too many trucks on the ranch or, worse, set a tank battery on fire. They know where their bread is buttered. They understand that a single oil well requires a huge amount of capital and that drilling is where the money is made for the mineral owner/State. In turn, operators treat them fairly.
Kitchen, nice response. I disagree that your logic is flawed, it's perfect.
Thank you for sharing the lease links, Knotty. Would you mind sharing the Producer's Lease you prefer to use? I see the UT lease has what appears to be a non-negotiable, indelible 25% royalty. I think section 3.(f) "NO DEDUCTIONS" is very interesting reading. Is it true that Producer's Leases which allow deductions can actually reduce the royalties paid to the lesee by up to 25%? I recognize that I do not have the assets or skill set to produce my minerals. They way you describe how a landman should treat me with my "2 net mineral acres" as compared with the grudging respect that must be paid to the State of Texas is very telling. I believe it supports my contention that mineral owners should organize, for individuals own much more land than the state [in Texas, anyway].
Housekeeping note: I may change the title of this thread to "Fair Lease Project: open source mineral owners lease" if space allows.
Knotty said:
AJ,
Linked below is the Texas General Land Office Form. It took about 6 seconds to find. Also, linked below is the University Lands form. That took around 3 seconds.
http://www.glo.texas.gov/what-we-do/energy-and-minerals/oil_gas/per...
http://www.utlands.utsystem.edu/forms/pdfs/LeaseAgreement45.pdf?201410
Notice that the Royalty is left blank on the GLO form. Yes, they will take less than a 1/4 royalty depending on where it is. Also, yes, they are both tough lease forms for an Operator. However, AJ, when you get +/- a million acres that you own fee simple to lease, you can use the same form and have operators gladly accept it. Until then, there's negotiating to be done if you want your bonus and future royalties from production. But, by all means, lead this little revolution of yours. I'm sure unionizing will work flawlessly, because nobody's special or unique. Please try to throw one of these forms at the next guy trying to lease your 2 net mineral acres and see if he can keep a straight face as he walks out.
One of the benefits from taking on such a tough lease form is that an operator only has to deal with one form and we know exactly what we are getting into. The State/University doesn't have 50 different owners in a single tract that all hate each other and all want something different. They don't get in fights with the neighbors preventing production from moving out. And they don't decide to randomly lock the gate when they think there are too many trucks on the ranch or, worse, set a tank battery on fire. They know where their bread is buttered. They understand that a single oil well requires a huge amount of capital and that drilling is where the money is made for the mineral owner/State. In turn, operators treat them fairly.
Kitchen, nice response. I disagree that your logic is flawed, it's perfect.
I love Texas.
In Texas, you own the minerals and you are free to do with them as you please, which includes not leasing them at all.
In Texas, we get to horse trade on our lease forms.
In Texas, we do not have landmen saying "Go ahead and turn us down. We will just force pool you." In Texas, you are not forced pooled, because the state "knows best is what for you." Like hell they do.
In Texas, we embrace our eccentric citizens.
I just love Texas.
You tell 'em, Buddy Cotton! I know, I know, I know, DQ, there is no Buddy Cotton here! 
Linton
Excuse the dyslexia!
The phrase should read ..."knows what is best for you."
And before anybody gets thinking too deep, I do consider myself one of Texas's eccentric citizens - and doggone proud of it.
Buddy Cotten said:
I love Texas.
In Texas, you own the minerals and you are free to do with them as you please, which includes not leasing them at all.
In Texas, we get to horse trade on our lease forms.
In Texas, we do not have landmen saying "Go ahead and turn us down. We will just force pool you." In Texas, you are not forced pooled, because the state "knows best is what for you." Like hell they do.
In Texas, we embrace our eccentric citizens.
I just love Texas.