I recently inherited an interest in my family's 320 mineral acres in Weld County Colorado. There are oil and gas wells in production and Kerr McGee did some seismic testing and wants to put in three more wells. The only lease we have been able to find as yet is an old one dating back to 1970 with terms that aren't very good compared to others I've seen on this site; no bonus payments and just an 1/8 royalty. My question is since ownership has been passed down and are heirs are bound by an old contract like this one and whether it's possible to negotiate more favorable terms. The location is 21-2N-66W.
Any help would be appreciated, I'm glad to have found this forum.
The short answer is that if a 1970 lease is held by production, and the entire lease is still held because of that production, you can not amend the terms unless both parties agree. The 1/8th probably sounds good to them.
Thanks for your response. By held down by production I assume you mean that the wells have been in production consistently which is the case. I would agree that 1/8th sounds good to them since I found a location not far away receiving a $4,100 bonus payment. So even with title passing to the heirs we are bound by the contract?
Isis, no matter how many times title passes between parties, all subsequent owners (via sale, inheritance, or whatever means) are bound by the terms of an Oil & Gas Lease. The parties (both grantor and grantee) are bound to those terms as long as that lease remains in effect. If your minerals were "Held by Production" then that old lease is still in effect today. The only thing left to do is compare the legal description on your minerals with that on the lease to see if all of them were included back in 1970. Perhaps they only leased part back then. Good Luck.
Yes, that's right. You will also sometimes hear the term "H B P", which means held by production. Typically a lease might be for 3 or 5 years, or as long as is producing. This means that no one else can make you an offer to lease the land if it is HBP. Of course the bonus and royalty are two different things. The bonus typically being a one time deal. Based on the facts you gave, I believe that the heirs would be bound by the terms of the original lease.
The only thing that I would disagree with is that both parties ARE NOT bound by the terms of the original lease. Amendments to leases are made all of the time. However, in your case there would not be much incentive for the lessee to agree to amend the lease.
Thank you both for the information. I’m totally new to this - as must seem apparent - and do intend to go over the contact VERY carefully. It seems to me that the contract would have to specify that its terms were binding to successors in interest.
I think you answered another question for me about bonus payments. My impression had been that they were a rental payments that were part of the income received in addition to royalties but if it’s a one time deal it sounds more like a signing incentive.
You can do that, or pay an attorney. Odds are he won't tell you anything differently, but the one advantage you or they will have, is that you can see the lease. We can't.
Bonus is usually paid at signing. If it isn't a "paid-up" lease where rentals are paid in advance and included in the bonus, then annual rentals can be written in to keep lease in effect during the stated primary term of the lease. However, after all this time, or 43 years, and the fact that it's HBP, the rental issue would appear to be moot.
Rental payments could very well have been made to keep the lease in effect at one time. Bonus, rentals, royalty - really three different things.
I would certainly have assumed you were correct regarding the terms of the lease being only available to the lessor or lessee but turns out it's a matter of public record. We couldn't find any of the lease paperwork but just yesterday I found it online here http://www.eser.org/lansdown-14-21a-wattenberg-field-kerr-mcgee-oil-gas-onshore-lp-weld-county-colorado-2n-66w-21
No, I knew it was public record. I meant that you had it in front of you.
Will look at what you sent.
OK, I looked. I was referring to the 1970 lease. That could be viewed at the courthouse, or online, if that county has scanned its records etc... I had thought you said that you had a copy of it.
The answers provided were most likely correct. You should be bound by the terms of the original lease, but you get what you pay for. (free advice) If you want to dig further, get more opinions, legal or otherwise, go for it.
You should be an informed mineral owner.
Read the lease! Was there a Pugh clause? In some leases they specify that after the original exploratory period of the lease then another lease is required to deepen below the original well. It is all governed by the lease. Read it.