Gross acres as to net acres

How can I convert my gross acres to net acres??? I have a Lease which has three(3) sections within the Lease. The total gross acres in this Lease is 560 acres. How do I compute the net acres??? Thank You for your assistance and enlightening me in tis business… Respectfully Pamela F Peterson

Pamela:

Your lease should specify the "net" mineral acreage in the lease. This net mineral acreage is what your bonus amount will be based on.

Charles S Mallory, Thank you for you reply. I’m aware that the lease has both gross & net acres. I would like to know how the Lease company arrived at the net acres. Is there a formula or procedure that they follow to arrive at their answer??? I’m from Missouri, I need to know that their result is the same as mine??? Once again Thanx… Respectfully Pamela F Peteron

Pamela:

Most likely the lease company acquired the net mineral acre figure from the records on file at the County Clerk's office. Landmen research records at this office where all mineral information is on file. On the other hand, if a landman is working for a particular company whose interests is in a particular section or sections, they may only reflect the net mineral acreages in these areas even though you might also have additional acreages. In other words, the leasing company is not interested in all your mineral acreage.

Here is how you would calculate.

Sample:

Gross acres = 253

Your ownership 1/2 of 1/3 of 1/5 ( = 1/30 or 0.0333333)

253 ac x 1/30 (your fractional ownership) = 8.43333 net acres (same as 253 x 0.03333 (your decimal ownership = 8.4333 net acres

same as 253 divided 2 = 126.5 divided by 3 = 42.16666 divided by 5 = 8.43333 net acres

Bonus = \$250 p/acre

253 x \$250 = \$63, 250.00 total pay out by Lessee

\$250 x 8.4333 net acres = \$2108.33 your bonus lease consideration money

As Mr. Mallory pointed out, the company may only want to lease 130 of the above 253 acres, so the math results would of course differ.

Does this help?

Pamela, To confirm what your net is requires searching the county records from the orginal US Patents to the present (or to the point you acquired it). Sorry but there is no other way to confirm what your net is. The calculation Ron shows is correct once you know exactly what you own. You'd work through this calculation using "1/2 of 1/3 of 1/5th", or 1/3rd of 1/2, or whatever YOUR particular ownership interest is. That requires the record search.

Since it involves land in three sections it's possible you have a somewhat different percentage of ownership (or fraction) within each of those sections. As an example, your 560 acre GROSS may have been 160 ac in Sec 1, 320 ac in Sec 2, and 80 ac in Sec 3; These three pieces were probably homesteaded by three separate individuals then later combined into one farm or ranch. At each sale prior to the combination of these parcels, some portion of the minerals may have been reserved (possibly a different portion on each section).

So you can't look for the deed to you (or grandpa) which says you acquired "half" of all minerals. The "half" which was conveyed is only half of whatever amount the seller owned when they sold. It may be 50% of the minerals under Sec. 1, yet only 25% under Sec 2, etc... So once again you will need to research all deeds (on each separate section) from the US Patent until it reaches your hands. Once you've done that process you'll not need rely on anyone else's word. It may sound complicated but the records will lead you to your answer.

Pamela, Not to make your eyes glaze over, but you should also check to see if any of your acreage is in a unit, as this dilutes your net acres. Otherwise, Ron is correct.

Really good advice from Eastern MT and Mr. Caldwell. There are many variables to factor in, for sure.

I don't recall ever specifying net mineral acres (NMA) in a lease that my client offered to a Lessor. There is a very good reason not to do so. If you specify an exact amount for NMA and you are short, then you have not leased all the minerals that Lessor owns, and there is no way to know which mineral acres you actually leased. Also, you would have to amend the original lease or execute a new lease, more work involved, and pay more bonus consideration. We always specified that we were leasing whatever minerals the Lessor owned underneath the gross acreage, "more or less." Of course, we always had a figure for NMA that we were pretty sure was correct before we paid the Lessor his bonus consideration, but if for some reason we were short the interest would still be leased (and if we underestimated the NMA we would not have to pay any additional bonus consideration)!

Pete, You are correct. Leases don't specify net mineral acres for that very reason. However, from our perspective as the Lessor, we are very concerned to know our actual "net" acres prior to signing. Just look at it from the other side and it is obvious why.

How difficult will it be for me to receive my proper lease bonus payment if: I already sign a lease, and am paid for 25 net acres under 160 gross, then later determine I actually owned 40 net mineral acres. How anxious will the company (lessee) be to pay me for my additional 15 acres after the fact? They may have subsequently determined this isn't a 'hot' area for them, or flipped the lease to another lessee. Or, if they're still interested in the area, they already hold a lease for all my minerals there. In short they have little incentive to pay me the proper amount after the fact. If they refuse my only recourse is taking on the expense of a lawsuit. That is why we need to know our actual net acres prior to signing anything.

So, ultimately, it is incumbent upon the Lessor to determine his NMA from the County Clerk, otherwise, the Lessor may lose profit from Lessee's under-estimation or built-in wiggle room?

Amy, yes it is our (Lessor's) job to know what we own. Typically the Lessee will properly calculate our interest. Most of them are trying to determine the exact ownership. Yet if they don't it becomes a big problem for us (Lessors), not them (Lessee).

How accessible are the County Clerk files and are any OK counties available on line? Does most research take place at the Clerk Office itself?

Thanks--Amy

Don't have any interests in Oklahoma so don't know what the state has online. You might put up a separate post on the home page asking that question. There are dozens (hundred?) of OK mineral owners on this site. No doubt several will let you know.

Though in person I have run records in dozens of counties in a handful of states. The files are always "accessible" though it can vary from county to county how they keep them. I've found County Clerks offices mostly friendly, and often helpful in showing how they file their records. They are good folks. Good Luck.

Amy:

Typically, all record research has to be conducted at the county clerk's office. This does become a problem with alot of us mineral owners as a large number live far away from these offices. Best way is to hire the research be conducted or do it yourself which can be very time consuming especially if you are not familiar with this type work.

Yes, I can see how you would want to know exactly how many net mineral acres you have before signing a lease. In a huge majority of cases, whatever the landman tells you is correct. But they are human too. I have negotiated many hundreds of leases and can recall only twice when I got an acreage amount wrong. So it's rare.

The only way to know for sure what NMA you own is to have the research done yourself to verify what the landman is claiming, which could easily cost you hundreds of dollars if you hire somebody or several days of your life if you do it yourself. You might try asking him for his Title Runsheet so that you can review it and be confident in signing the Lease. I will tell you that in most cases he will not show it to you because it is work product that belongs to his client. But occasionally a client won't care if you look at the Runsheet and give the landman permission to show it to you.

If you don't want to pay for the research or do it yourself, and you don't want to trust what the landman is claiming you own, just ask the landman to specify that they are leasing a specific number of mineral acres underneath the gross acreage amount stated in the Lease. Again, in most cases he will not do so. If he says "No," then you have to decide whether or not to trust him and take the money or not trust him and lose the money.

You may want to look at this article. Lists OKla. online resources. http://www.mineralrightsforum.com/profiles/blogs/internet-resources-for-mineral-owners

Amy, See this article for online resources. http://www.mineralrightsforum.com/profiles/blogs/internet-resources-for-mineral-owners

Well done Ron. I thought I had invented the NMA calculation you used! Apparently not. Thanks for your respectful posts.

Ron Hicks said:

Here is how you would calculate.

Sample:

Gross acres = 253

Your ownership 1/2 of 1/3 of 1/5 ( = 1/30 or 0.0333333)

253 ac x 1/30 (your fractional ownership) = 8.43333 net acres (same as 253 x 0.03333 (your decimal ownership = 8.4333 net acres

same as 253 divided 2 = 126.5 divided by 3 = 42.16666 divided by 5 = 8.43333 net acres

Bonus = \$250 p/acre

253 x \$250 = \$63, 250.00 total pay out by Lessee

\$250 x 8.4333 net acres = \$2108.33 your bonus lease consideration money

As Mr. Mallory pointed out, the company may only want to lease 130 of the above 253 acres, so the math results would of course differ.

Does this help?

The net mineral acres is simply the number of surface (or gross) acres in which you own the mineral estate. For example, if I own 25 acres of land and all the mineral interest, and I sell 3/4 of the minerals, it leaves me with 1/4 of the minerals on 25 acres, which is 6.25 net mineral acres.

Thus, title work has to be done to determine who owns the minerals. Title work is often started with the patent and then traced forward. The net mineral acres is determined by examining title to the minerals related to the surface acres.

As someone above stated, if your land is in a drilling unit, then your net mineral acres will be based on the acres in the unit.