This is what we all want of course. The laws in Canada are not the same as in the US. I'm not an expert or lawyer. I only know what I've read up on, but the FHOA helps a lot. I think the Just Energy Company that uses the free hold friendly lease is the best way to try to get our minerals developed. Add to the royalties, the benefit of owning a share of the actual drilling company and things look pretty good. Don't sign with land men and other companies .
The hard part for us is we compete with the government of Canada, and "the crown" gives oil companies a "royalty- holiday" as incentive . Meaning they don't pay any royalty on the first 100,000 barrels drilled.
The royalty holiday is offered by the Canadian government on it's mineral rights. It's not required by me or you or the average civilian trying to get a lease.
It's explained better on the link I gave, but I believe it's been true for years. When we negotiate with the land men , they kind of ridicule us for trying. we have gotten concessions, like the best I ever got was 17 % royalty, 1500 dollars as the bonus, and a 3 year lease, and some of the other stuff FHOA reccomends-We don't offer a royalty holiday of course, but it shows the competition.( on 2 whole quarter sections of land.) Our hope is China and the surge in demand they will bring. The Canadian government aggressively is trying to develope it's resources, so we wait and see.
Other stuff to watch out for is how they write the lease up. Companies will drill and sell oil on their own land first, when prices are high, then go to Government leases for the holiday, and lastly they develope the leases they have on average Joe you and me, when the price of oil is lowest. That means we sell our oil for too cheep. It's all business to them, as it should be, but we need to know how they think.
Joel said:
Lori:
Wow I did not know that (100K free of royalty). So if you had a vertical doing about 300 bopd, you would have to wait a long time to get paid. With depletion that could leave you with getting paid nothing or peanuts.
It will help to read the FHOA website, first, so we all have the same starting point.
So to clear up the confusion I already started;
In a nut shell 3 entities own mineral rights.
1. The oil companies buy what they can, as cheeply as possible.
2. The Crown- in each province
3. Freeholders- thats you and me.
The oil companies lease from the crown and from the free holders. They have this option to go elsewhere, not just to us. They tie up our lease so that the other oil companies up there, who they compete with , can't get to the oil.
Since the crown offers the royalty holiday to these oil companies, we find it harder to compete and to ask for fair terms.
Our latest offer was so not worth our while, that we did not sign with them. 1500 in bonus - to split 5 ways in my family. 12% royalty - or something like that, and then the awful exchange rate between Canadian and US dollars. Plus taxes. And we had no guarentee that they would drill.
This is why I'm so in favor of The Just Energy Company for developeing our minerals. They use the lease that is put forth on FHOA's website. "the freehold friendly lease"
"Wow I did not know that (100K free of royalty). So if you had a vertical doing about 300 bopd, you would have to wait a long time to get paid. With depletion that could leave you with getting paid nothing or peanuts."
I want to acknowledge what you said, but I don't know what a good well produces a day. Sure seems like the government is giving away lots of oil doesn't it ?