Help! I'm being forced into action on small share of minerial rights in Burke County, North Dakota

Hello everyone. Earlier this week, in the late evening, I recieved a phone call from a man saying he was sending me a lease on my share of a portion of mineral rights I have apparently inherated from my father. The lease arrived the next day along with a check for I was to sign and return to them. I haven't even had time to read through the lease when today fedex delivered papers from EOG Resources telling me I have 30 days to opt in for a sum of the cost of a test well that will start operation on the 25th or face a risk penalty if I don't.

First off, I do not know a thing about all this stuff and feel like I am being pressured to either pay my share of the cost for the well or the penalty before I had a chance to look over the lease and decide if I wanted to sign it or not. The lease was a Paid-Up Oil and Gas Lease through EOG's leasing agent Contex Energy, and seems to be off the table now. By the way, the lease is dated November 22nd if that matters, but I wasn't contacted until this week and not by EOG or Context but by someone from SJE Land Consulting.

I really don't know what to do. The lease and the letter from EOG are conflicting on just what my share in the rights are. They aren't big, less that 1% and I guess I'm more worried about my liablilties with this stuff since I can't even afford a lawyer to look into this.

Any and all advice is whole heartly welcome here. I feel so worried that I am heading into big trouble here over something that is going to cost me big time and I don't know where to turn. Is this normal for these company to come at you like this and not give you anytime to think?

Hello Ms. Goess. First thing take a breath, there isn't as much urgency as they would like you to believe on your part. You could sign a lease with the operator a year after the well is drilled. I presume that if you can't afford a lawyer, participation is irrelevant, so the 30 days to decide to participate or not doesn't matter, it is a requirement of the state that they offer participation before they can impose a risk penalty against your share of production, if you won't lease. If you won't lease and can't participate, they will force pool you, it sounds alot worse than it is. If you are force pooled in ND and choose not to, or can't pay for your part of the well, you will recieve a royalty from the first barrel of either the weighted average of what everyone who did lease received or 16%. 1/6th is 16.66 and 3/16 is 18.75% so we aren't talking about you getting nothing if you don't sign the lease. Not paying your way up front is called being a carried interest. The operator has the right to recover from your produced minerals 100% of the cost of your portion of the well plus a 50% risk penalty. The penalty sounds like alot, but they can only recover it from your production, whatever is left over after your weighted average or 16% royalty. If the well never paid off you could be carried for it's entire life and when they plug and abandon that well, they can put a lien against your minerals, the minerals they failed to find in the first place! I am carried myself. I didn't consider a possible lien against my minerals to be a big threat. If the minerals aren't there they can put a lien on nonexistant minerals if it makes them feel better. I think if you want to make a reasonably fair lease agreement you need to get up to speed fast or hire trustworthy help in negotiating a lease, preferably both. You also need to get competing offers if at all possible. EOG would not make the money they would like to make from your minerals under a profitable well if you lease to someone else and they participate, so you should solicit other offers if for no other reason than to find EOG's best offer. I think worst case you could sell your portion of the well later, should it produce. There may not be an eternity to deal with this, but there is time to make a fair deal and avoid mistakes. I will answer any questions I am able, and be happy to do so.

Thank you so much for the fast reply. I do feel like I can breath now. I have to sit down and read over this lease and I know I will have a bunch of questions. My interest is only .004% which I realize is next to nothing but I want to make sure I do the right thing and that I will not have any liablilities to worry about later. Is there anything that I should watch out for in the lease?

Thanks again, Pam

Pamela Goess said:

Thank you so much for the fast reply. I do feel like I can breath now. I have to sit down and read over this lease and I know I will have a bunch of questions. My interest is only .004% which I realize is next to nothing but I want to make sure I do the right thing and that I will not have any liablilities to worry about later. Is there anything that I should watch out for in the lease?

Thanks again, Pam

Pam: I was going to reply.. as I have some background with a lease in Wyoming.. But the quick response you received is far better than what I could have offered. My opening line was going to be : "Take a deep breath ! " No one can or should try to rush you into anything.. From my understanding the advice you received quickly is very good. The good news is someone thinks you may be sitting on oil... That's a positive... So far the oil belongs to you.. If someone finds it you'll wind up getting paid something... with the small amount you mention.. Do not quit your day job.. just cross your fingers and there could be a few nice dinners in your future. Good

Ms. Goess, there are so many things to watch out for! I think it would be best to negotiate no deductions for transport and conditioning of oil and gas. Also, if you think .004 (about 5 acres in a 1280?) is small, your effective interest after leasing will probably be 20% of that, and far less after taxes. I think you need to market the lease of your minerals to operators in your area and even to companies that invest in the wells of others, if you wish to lease. I would search this site for lease examples and compare them to the lease you received. I also believe that if it cost you part of your signing bonus to hire help to get a better lease, you would be ahead, because as they say, the money is in the ground. I also like the carried option in ND. While you are carried, there is nothing for you to do, just as in a lease but you still get paid. If your well pays for itself and the penalty, your checks could be 4 times or more after expenses what you would have received from a very good lease. Carried, if the well is a flop, you arent out anything but the signing bonus and possibly a lien against your minerals they couldn't produce anyway. Even if you aren't interested in going carried, it is still a good negotiating point, because if you are carried it effectively caps the maximum amount the operator can make off your acres, should you have a good producing well. If you can hire someone who will actually negotiate a good lease for you and not just rubber stamp the oil companies lease and collect a fee, ( there are horror stories ) you would be ahead. I do think if you deal with one company alone that you will not get the best deal, why would they offer more, they are pretty sure they aren't going to lose your acres to someone else. The dynamic changes if you have other offers. I think you would do well to study as much as you can, even if you hire someone, how would you know if he is doing a good job? Where it says MINERAL HELP at the top of this page is a good place to start. The more you know, the more and better questions you ask, and the knowledge builds upon itself. I'd be glad to answer any questions that I can.

It does seem like the carried option might be the way to go, at least right now I am sitting tight until I understand more about all this. I see I have a ton of reading to do and again I can't thank you enough for you help. As you might have guessed, I was a wreak with fears yesterday when I first posted about this. It all came out of the blue and so fast I didn't know what to do. They sure know how to word things to make you feel that way too.

Thanks again for calming my panic and I'll get to reading through all the helpful information here and keep you all posted.


To dj -

Thanks dj. I never had a single thought about getting rich off this, I just didn't want to get in trouble. When we were young, we used to tease my dad about his "oil well" and laugh. Not laughing now but thanks to you and rw, I am smiling alittle. :)

This site has a cooperative extension bulletin that may be helpful.

NB: This site treats cut and paste differently that others I have used. Going to take some getting used to.

Ms. Goess, Mr. Taft makes a good point, that the money isn't unimportant. Of course production and seperation taxes, ND state income taxes, the difference between ND income taxes and NY taxes that you will pay to NY, I wouldn't worry a great deal about the federal taxes as you will have a 15% depletion allowance, if the cash strapped govt. doesn't abolish it, after all that you don't need to be having alot of deductions. I can easily see that $172 dipping below $140 from taxes alone. Make the best deal you can and if the well produces it will pay you more every month than it would have. There is also a chance of getting more wells in your pool, as one well usually won't drain one of the spacings the size they use in ND. Whatever deal you make will bind you and your heirs until production ceases or they stop making good faith attempts to produce oil and gas, that could be the next 50 years. If you sign a lease, make sure it's a good one, worthy of the eyestrain from research on the computer.

Mr. Babcock, in my opinion, since they have already presented Ms. Goess with the option to participate that a well is going to be drilled very soon. In my experience, they don't present that option far in advance of drilling

I don't manage a company, but as an individual, I would offer her $1,500 and 25%

or $2,200 and 20%. 2yr seems safe since they are drilling this month according to what I read.

Ms, Goess, this is what I mean by marketing your minerals, when you have two or more horses a race can develop at any time. I would be greatly surprised if these tentative offers don't dwarf those you have received to date when EOG thought it was between just you and them.

Ms. Goess,

With everything going on and the speed at which these people want everything done, I agree with RW. You need a professional to help you sort through all this. If you think that's a good way to go I would suggest Buddy Cotten. His fees are VERY reasonable and there is no one better. His web site is located here:

There you will find his number. I have never heard of anyone who was not ecstatic about what he did for them. I wish you much luck, even if you make your own luck.


Wes Luke

Thank you all for your responses. It does sound like the 3 year Paid-Up lease their agent, Context Energy Company, sent with a royalty of 18% and $500 per net acre might not be good enough for consideration. There is also a few clauses I didn't like including giving them the right to deduct all cost from the royalty for compressing, treating, purifing and transporting off the leased premises including fuel. (I did a little reading already)

What I have discovered so far is that EOG Resources recieved permits for 4 wells back in April on the section just south of the one I have the share in and it is part of a 1920 Spacing unit made up of 3 sections, including mine, in Township 159 North, Range 91 West. The paperwork they sent me said they are planning to spud a horizontal Brakken test on or about December 25th. The total cost for the well is $7,584,250. My share of that cost would be $328.98. My small percentage of interest is only .004338%. This well is the Vanville 17-1213H.

With the holidays coming I don't have a lot of time this week to keep researching but luckly I am off work all next week and you can be sure Kennedy, my eyes will be aching from computer strain. Again, thank you everyone. I have a lot to learn and you are helping more than you can imagine. I really appreciate it.


I thought I read...( I easily could be mistaken) that you had close to 5 acres? But that can't be because my share on 2.5 acres for a $7,275,000 EOG well is $13,428.19 If your share is $328 and this is your only mineral interest in the world, I think you should send them the check. Fractalization sucks. Also seriously, if you have that small of interest, you should enjoy your holidays and not make this much of a priority. Someone do the math but could she get $100 every 3 months with this?

I paid more for my X-Box 360 and one game. They won't send her a check until it hits $100 or she can request a once a year check. Leasing this would be crazy. Seriously, how much could she get in a year even if the well produced 300bopd the entire year? I hate math...but am I close with this, the lease offer is $41.50? and 18%?

Why wouldn't EOG just offer to buy this?

You are being bullied by a 3rd party - don't sign anything - contact a good oil/gas attorney in your area. Don't assume that .004 is nothing either - it is all based on your decimal interest, production and the price of oil/gas for the month of production AND very important, the royalty you negotiate

. The price of an attorney is very well worth it and could be very inexpensive when compared to what you could lose. 25% royalty is more like it. Don't know what signing bonuses are in your area, but I would imagine considerable because of the proven boom there. Go to the county groups in your state under GROUPS and see what information you can find - sometimes people share this information - it is good when they do - sometimes the bonus is several hundred dollars and upward to several thousand. Good luck.


Our company is interested in leasing or buying your mineral interest. If you are interested please feel free to contact me at 706-296-3444. You can find more information about our company at I feel we could offer you the best deal possible and I hope we can speak at some point if you have time. Thank you.

I hope you don't sell your mineral interest - once they are gone - they are forever gone.

There is nothing wrong with giving her options and advice but it should be specific to her situation, for example, you can't really believe it would be "very well worth" hiring an attorney in this situation. The most money she should invest in this effort is the $328 to participate. Any more than that would be my opinion.