Good morning,
My siblings and I were recently contacted by a landman who informed us we inherited some mineral rights from a distant relative who had passed. Apparently this distant relation had bought interest in an oil unit back in the 1940's. It quit producing in the 1950's and has presumably been dormant ever since. The landman ran down the known heirs and it turns out my siblings and I are among them. As such the landman expressed an interest in leasing our rights and has sent us the lease paperwork. Being new to this I've got a few questions. First some information.
The location of the lease is in Texas. In Rusk and Cherokee Counties. No section/township/range have been given but they are part of the Wade Walters Survey A-809 for Rusk County, and A-888 for Cherokee County. Total of 200 acres.
The lease gives a decsription of the property citing the Walters survey, the original deed owners, and the volume and page its recorded under in Cherokee County.
The landman said our relative owned a small interest in this property. Now that its made it's way through all the heirs our share has been split. According to the landman our share is so small that based on the interest we don't meet their bonus payment minimum which is $25.
So my questions are:
How can I obtain a copy of the deed and survey that shows where my interest lies? I found an online database for deeds and such but nothing comes up for the Volume and Page where its supposed to be filed. I'm in Louisiana so I can't head over there to look in person. Any idea how I can find this data online?
The landman said our portion is quite small but the lease document states 200 acres. It doesn't list and division of interest information. It doesn't list what percentage of the 200 acres I have in interest in. From the language it states 200 acres. But per conversation, and the $25 bonus payment, my interest is supposed to be quite small. Should the lease document state my exact interest?
The offered royalty rate is 3/16.
At the top of the lease document, in the header, it has some information. Producers 88, 7/69 paid-up, with 640 acres pooling provision. What does this information mean?
My sibings and I are new to all this. So just now reading up and researching the in's and out's of mineral leasing. So far it's pretty interesting. Just trying to make sense of the lease as a first step.
Any help is appreciated.
MWB
In those counties the land would not be described by Section, Block, or TSP Range. The lease would reference a deed, preferably with a metes and bounds description. You probably do have a very small interest, but it sounds like the landman is being cheap. Tell him you want a bonus check or you won't sign.
Producers 88 is a standard type lease form, 7/69 means July of 1969, or when the form was minted. 640 acres is about the standard size unit for a deep gas well. Oil units are usually around 40 acres each.
From what you described, it does have all the signs of a small inherited interest that you knew nothing about.
You can force the issue, and ask him to send you a copy of what's called a flow chart or how you actually came into it from what relations, not that much unlike a family tree.
You can also tell him you don't sign anything for nothing, and try to get enough to go buy a good steak at a cheap cafe.
The exact net acres is not stated on a Producers 88, only the gross. There is a proportionate reduction clause in the lease for reducing the royalties in proportion to your interest, which is obviously very small.
As far as the research, the Volume and Page you have could be just for descriptive purposes, and may not tell you anything about how he thinks you acquired it.
I wouldn't waste too much time if I were you, but I can understand your wanting more information.
Good luck to you, and I hope I answered at least some of your questions to your satisfaction.
Thanks for the info, Dave. You certainly shed light on some of my questions. Puts things in a better context.
The landman did offer the minimum $25 bonus payment. I can see my post didn't convey that. We didn't meet the minimum but they have to offer something in consideration so they offered the $25. Sorry for the confusion.
The language at the top of the form now makes sense.
The landman explained the chain of title. Which relatives our interest passed through. Just didn't document any of the percentages along the way. All I've been told is it's a 'small interest'. Would like to get a copy of the original deed to see what the starting interest was. I would like to know my net acres. I feel it is probably very small. Just like to have the full picture before I start signing things.
I actually work in the real estate field so I'm familiar with deeds, chain of title, and metes and bounds. I map rights-of-way. Just my first time dealing with anything related to mineral rights or anything oil/gas related. I'd like to get the original deed and property decription so I can see exactly what I own.
Thanks for your help.
MWB
Thanks for letting me know that he wasn't as cheap as I thought. I thought he told you that your interest was so small that you wouldn't even get the minimum. That didn't make any sense to me.
Press him for more info. Get to a certain comfort level, then I would advise signing it. You have nothing to lose, and sometime after the end of the primary term if it isn't producing, someone else may give you another small check to lease it. At least your name will be on a lease now.
I plan on signing. As you said there is nothing to lose and it'd be good to get my name on the lease for any future use.
The landman has been very helpful so far. So I'll ask for more clarification as I move forward. Just reading up so I'll have a better understanding of what questions to ask.
So another quick question. Under the PLSS a section is 640 acres. In which are 16 quater/quater sections of 40 acres each. If oil units are 40 acres, and pooled to 640 acres, do they normally correspond to township sections?
Also, our relative bought a small interest in a unit. If units are 40 acres then her interest is less than 40 acres. And her unit, the 40 acres, is part of the 200 acre parent tract?
Michael, If it's that small, you might not want to own it, I would consider selling it. The operator might make you a decent offer so he could reduce his paperwork. Just a thought.
That's part of the reason why I'm trying to figure out what my interest is. Be nice to know exactly what I own.
Does the thinking in my above post make sense?
Either way I plan on discussing this with the landman. Just trying to come up with questions.
Thanks for all the help....
My question in regards to the PLSS was I noticed the 640 pooling acres, and 40 acre typical unit, match PLSS section and quarter section acres. So I wondered if there was a connection....or just coincidence.
After reading your post I have a better understanding of things.
Michael
If you ask the Landman how many net acres that you actually own, he'll surely tell you. If not, then he's up to something.
I wouldn't make any decisions or sign anything until I knew.
Michael Breaux said:
That's part of the reason why I'm trying to figure out what my interest is. Be nice to know exactly what I own.
Does the thinking in my above post make sense?
Either way I plan on discussing this with the landman. Just trying to come up with questions.
Thanks for all the help....
Yes, I certainly plan on speaking to the landman again. I figured I would wait until I had the lease, to see what the terms were, before I started asking questions. Now that I have the lease, and it makes no mention of my what my interest is, I have a better idea of what questions to ask.
Found your article, Wade. Great information there. Thanks!
Michael,
1. Rusk and Cherokee Counties don't use any semblance of the PLSS system, so any unit that might be formed around your property won't be based on section lines, since there technically are no sections (or Townships or Ranges). The unit lines will be drawn in whatever way includes whatever tracts the operator feels like including, subject to limitations discussed below in #3. Many NE Texas units look like gerrymandered voting districts from days past.
2. Oil and gas units are typically multiples of 40 acre increments. In states that are organized based on the PLSS system, units are usually rectangular and often correspond to section lines. Haynesville Shale units in NW Louisiana are a great example - every section forms one whole unit. However, in areas where the land is not based on PLSS, or where there are fine geological between an oil reservoir and dry hole territory, units may be formed on non-rectangular bases. The river parishes are a good example of an area with no PLSS, but units are still rectangular. South of I-10 in parishes such as Acadia, Evangeline, Calcascieu, etc units that look like amoeba are more common.
3. In Texas, as well as many other states, it is customary for pre-printed leases to provide that oil units can be no larger than 80 acres and gas units can be no larger than 640 acres. There are two important caveats to these limitations. 1) Usually the same pooling clause allows a 10% tolerance over those limits, so in reality maximum unit sizes are 88 acres for oil and 704 acres for gas. 2) Those limits typically only apply to conventional vertical wells and not horizontal or "unconventional" wells. This will usually come from language similar to this
"Provided, however, that a larger unit may be formed for an oil well or gas well or horizontal completion to conform to any well spacing or density pattern that may be prescribed or permitted by any governmental authority having jurisdiction to do so."
If this clause is in the lease, the only limitation on the size of the unit is the state oil and gas regulator's tolerance for large units. Encana just applied for two 1,550 acre units in St. Helena Parish that would fall under this category.
4. Who dat.
I really hate to admit it but Dave is right that there would be no Section/Township/Range in those counties, so don't bother looking for them.
You ask where your interest lies. It's impossible to know without examining the Title Runsheet, which the landman might or might not be willing to provide you, and inspecting the actual documents. My guess is that your interest lies across the entire 200 acres, in other words, you have "an interest in 100% of the 200 acres" (not to be confused with "a 100% interest in the 200 acres"). In other words, my guess is that you do not have a 100% interest in any physically separate portion of that 200 acres.
But Dave is wrong when he says that "the exact net acres is not stated on a Producers 88, only the gross." While that is customary in a very large majority of cases these days, it is not universally true and is certainly not required to my knowledge. I have seen leases, mostly from decades ago, but a few more recently that that, that specify the exact fractional interests of the gross acreage being leased. It is wise to do so, however, so that the Operator does not have to come back later and clean up any mistakes in the ownership.
In other words, if you own a 1/4 mineral interest in 200 gross acres, it would be wiser for the Lessee to state that they are leasing WHATEVER mineral interest you own in those 200 gross acres instead of stating that they are leasing your 1/4 mineral interest in 200 gross acres or stating that they are leasing your 50 net mineral acres because if it later turns out that either the 1/4 or the 50 NMA is wrong, then the Lessee will have some headaches and some paperwork to contend with, and probably will lose money too.
Michael, I had the pleasure of speaking to Mr Caldwell He was very generous with his time and answered a lot of my questions. I have a similar situation to yours very small interest lots of passing down in family Your Landman has the information for some of the questions you have been asking My Landman answered all those questions. Wade gave me direction of what 3 important things to ask my Landman. Call him he will return your call. I wish you luck I signed my Leese you have nothing to loose it will be fun to get a check at any amount that i did not even have to work for unlike my other check I work very hard for.
Michael Breaux said:
Found your article, Wade. Great information there. Thanks!