Matthew, thanks. We haven’t gotten to the point of creating an entity, are undecided which would be best. First we need to get the mineral rights in Garvin and Lincoln Counties into the Estate, right? Have been told by a landman that we need an affidavit of Death and Heirship before we can sign a lease. Am I correct in thinking that lease should be with whatever holding vehicle we create? So first into the Estate, then into an LLC or whatever?
Pamela, I may be wrong but it sounds like Merit is holding royalties off a producing well or wells or lease money that you had mineral interest on. Just ask Merit what is the process to retrieve those royalties.
Richard, thanks. I did ask and that is in the works. They said Daddy’s act was “pending,” waiting on some info from us and would be released as soon as they get it. I was just confused when she said there was no lease, that these were Royalty Interests. So then when Merit is done, if someone else wanted to drill there, then we could sign a lease, right? I thought she meant it was a different type of ownership.
Ron, no. She said it was Royalty Interests and when I asked about the lease, she said there was no lease.
This is in a unit that goes back to 1950 something. The lease holds the tract for the term of the lease; if they don’t drill, the lease expires and you can release. If they do drill, then the tract is held by the production from the well they drilled as long as there is production. The production is what is holding your interest under the terms of the lease that was signed years and years ago, 50 something. You would have a royalty interest on the tract because your minerals were leased years ago.
The fixed term in the time they have to drill a well is called the primary term of the lease. If you have a depth clause, you could lease deeper rights after the primary term of the lease expires. They didn’t get a depth clause much in the 1950s. 1/8 royalty and some cash bonus was about all you got back at that time.
Matthew, we’ve found a copy of a doc. in our fathers’ files that is from when his father sold his farm in Lewisville, Texas. It separates out the mineral rights, leaves them to his only child [our father] and to all his descendants “forever and forever”. It states what book & pg #'s it’s filed in with the Denton County Clerk. Would this be called a mineral deed?
Finally talked to someone at Merit Energy. Turns out what our father had—we now have—with them is not a lease. It’s “Royalty Interests.” Can anyone explain to me the difference?
Pamela, it may be some production funds held because they had no address to send it to. They can hold those funds up to seven years without turning them over to the missing fund run by the state, or the state may already have those funds and they have record of them and turn them over yearly to the fund. Merit would not have a lease; it was probably pooled and since no one answered for your part you are given an 1/8 royalty and it is put into a fund till it is recovered by the rightful owners.
Are you saying that pooled funds are called Royalty interests versus mineral interests which you get from a lease?
Pam, did he say it was a royalty interest held by production?
Are all leases like that - indefinite if there’s production? I thought I read about a fixed term with possible extensions.
Ron, so you should get a depth clause - hard to do?
I am somewhat familiar with the concept. Sometimes rather than selling someone a mineral deed (all the minerals), someone will sell a royalty deed or royalty conveyance. The difference is with the latter you only have the right to get paid for royalties from minerals produced and sold from your property while with a mineral deed, you actually own the minerals. As long as the “royalty interests” are producing then you will still have the royalties from that property, you just won’t have the right to lease or produce the minerals yourself.
I see y’all talking about Mineral Deeds. So, does this mean if I have the original Mineral Deed for my legal land description that I would, or should, or can, get a more favorable lease option? I ask this as I have some very old documents and paperwork dating back well over 75 years.
Ron, now I see and that answers a few other questions I’ve been mulling over - thanks so much!
Matthew, that sounds like we need to see the actual original documents to know what we have—what if we can’t find them?
Original documents are not necessary as all ownership records are recorded in the County Clerk’s office at the Courthouse. These records will tell you who owns the surface and the minerals and the leases etc. on the different tracts of property.
This link might be helpful. Explaining the different ownership interests: mineral interest, royalty interest, overriding royalty interest, and working interest. I just searched for a better definition than what I could write and found this.
Intent to drill, OCC website, 5-07-2012, 1-29H Vesta Marie 29-3N-4W Continental Resources, 19,050 ft.