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.
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.
The 25% royalty in the University Form is because it is up for a bidding process twice a year to get the lease. Even UL has had open royalties for Culbertson county within the last couple of years. The GLO form is more like a fee owner's interest because the company has to come to them to lease it.
Feel free to come up with your own lease form that works for YOU and any Landman will gladly take a look at it. It's not that I look down on owners with small interests; hell, I wish I owned that interest. But, you have to realize that any operator is going to immediately walk away from a 1/1280 mineral interest owner that has no surface and a 30 page lease form. I know that everyone thinks they are special, but the numbers are what they are.
But, for simplicity's sake, I would say just find any Producers 88 lease form and let's start talking. I will gladly add an addendum to it containing the additional provisions that we agree to. Like someone mentioned before, the Producers 88 is a good place to start, but I don't expect anyone to sign it as-is. In fact, I'm shocked when they do. My job is to do what's best for my company. Your job is to do what's best for you. The question is: Where can we meet in the middle so we both leave happy with the lease we signed? I'm a reasonable guy and I can probably give more than I take, but I'm not 1) signing a lease that I know I cannot comply with, or 2) turning my entire company upside down for your 2 net acres out of a 10,000 acre play.
You want a Pugh Clause? Fine, let's talk about it. I'll want a continuous drilling provision in return and if you are a tiny owner within the tract that you own, I'm not going to let your lease drive the pace of drilling. You want a Royalty with No Deduction provision? Fine, I'll give you that so long as it says that it only applies if I'm selling the production to an affiliate of myself. I'm not Chesapeake. I can't sell production to one of my sister companies and screw you on the price. I will pay 100% of the costs to get it out of the ground. After that, you and I are heads-up past the wellhead. You get what I get. No more, no less. You don't like that? There's a take-in-kind provision in the Producers 88 form. If the production purchase contracts that I have used my contacts, expertise, money and time to negotiate aren't up to your standards; feel free to take your oil or gas and go get yourself a better deal. You want a favored nations clause? Each deal is different and everyone has different motivations. Be a man and negotiate your own deal, don't let the next guy do it for you.
I work in the industry and I own minerals. Dare to guess what I use as a lease form when companies call me? That's right, a Producers 88 with an addendum attached that is fair to both sides. It's much like what I described above.
With that said, I am curious to see your Union Brotherhood of Mineral Owners Lease Form.
-Knotty
AJ said:
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.
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.
Knotty, great response to AJ. That’s the kind of response that helps us newbies learn something. Granted, the learning process is a slow one and everyone needs to do their own homework. But it’s always nice, when trying to learn, to come across some small (or large) bit of information that makes everything clearer. It’s hard from a newbie’s perspective to try to understand what the other guy wants, and more importantly, if they’re trying to compromise or … pardon my language, screw you out of something. I feel like we too often, on either side, are thinking the intent of the other person is to do just that, when that may not be true at all. But, I digress. Thanks for that post, I liked it a lot. Linton
Knotty says be a man and negotiate your own deal? That with your two net acres you should put as much effort into it as someone who has much more? The logic does not stand up. Why the mineral owner with 2 net acres should go into a field unfamiliar to him and enter Knotty's playground and pull his own weight? Why not give the little guy a most favored nations clause and have done with it. How much could the lessee actually lose on 2 net acres by doing so? Sheesh.
Better to realize beforehand how little is favorable about being any one of Genghis Khan's conquered lands.
r w kennedy said:
Knotty says be a man and negotiate your own deal? That with your two net acres you should put as much effort into it as someone who has much more? The logic does not stand up. Why the mineral owner with 2 net acres should go into a field unfamiliar to him and enter Knotty's playground and pull his own weight? Why not give the little guy a most favored nations clause and have done with it. How much could the lessee actually lose on 2 net acres by doing so? Sheesh.