Group mineral right ownership

Hello—3 sets of cousins own mineral rights on our grandfather’s former farm in Lincoln County. Carla Petroleum is currently offering my brother and me a lease for $20/min acre. They’re paying another set of cousins $150/acre, and the third set $10/acre. We’d like to prevent them from drilling with all these discrepancies. Is that possible? They’ve indicated that under CO law, they can drill even if we don’t sign a lease. Is that really the case? Thank you, Minlman

Generally speaking an owner of a small mineral interest would have a very difficult time preventing the development of minerals. The dependency of consideration paid for lease bonuses or royalty interests would likely not be a factor considered. If there are unleased minerals, the company would likely resort to pooling by filing with the Colorado Oil & Gas Conservation Commission. They provide a pamphlet available here.

It states “pooling en-sures that a mineral owner who refuses to enter into a lease does not prevent the development and pro-duction of oil and gas minerals owned by others.”

You may want to consult with a Colorado Attorney for advice for your specific situation on whether to lease or take a chance with pooling.

If the other cousins have not signed already, you can often do a multi-tract deal and get more for all involved. Tell the landman that you know about their offers and expect the same (or better). Just remember that the terms of the draft lease that they offer you are usually all in the operator’s favor and not in the mineral owner’s favor, so getting an experienced oil and gas attorney can often get you a better bonus on the front end and a better lease. In general, the mineral rights are dominant over the surface rights. Yes, they can drill without your permission due to the ability to force pool. The bonus amounts will depend upon the royalty chosen, number of acres and oil and gas prices at the time of the lease. If you have a 1/4th royalty, the bonus will be far lower than a 1/8th lease. I would take the 1/4th in most cases since the royalty would be for all wells drilled under that lease.

Thanks so much for your seasoned replies! MM

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