OMG! Send some of that good luck this way, will you please? No pooling is unheard of in California, and 27.5 % cost free royalty would be a dream come true! I would be very happy to deal with that kind of accounting nightmare!
Best,
Nancy
to all! You know, it suddenly hit me in the wee hours of the morning that my brain was thinking 20% and my hands typed one twentieth! the royalty is one fifth, or twenty percent, of course.... please excuse the brain gas!
Nancy
Hi Nancy,
Your advice was "right on". I talked to Bruce today, and he confirmed the lease details and $$/acre as well as the royality %. Oxy is leasing in this area and from his knowledge, that is the company that my lease will be re-assigned. He said that his lease is the "standard" California lease, and that I should expect the same form from my land company. I got the impression that it could take 2 yrs to sign up all the owners of the 1700 ac involved. At any rate, I did Google the parcels, and it was nice to find the exact location in Kern where the property is located. I would have never know how to do that if it wasn't for your advice.
So I will try to get the best deal possible, and hope for the best. Any other input?
Thanks,
Richard
Nancy,
Just a follow up on my last post to you: Had a lenghty conversation with the land company(s) in Bakersfield and elsewhere in reference to my Kern mineral lease. Your advise and contact information was very helpful in starting a bidding frenzy between the parties, and I was the benificery of all the fireworks. I was offered a highter royality % and a much more realistic $/ac up front. The only issue that I am not sure of is the wording of the lease itself; it is full of legalese, and I am sure that it is favoring the oil company. I did not find any information in the lease on pass through rights, but there is a lot of details on Vertical Well Spacing and Horizontal Well Spacing. Any other pit falls that I should watch out for before I sign. They are "hot to trot". Over to you, Richard
Richard, I am so glad it helped... bidding wars are fun, and always beneficial. Steve Bruce is very knowledgeable, and if he said the lease will be re-assigned to OXY, he very likely knows all about it! Oxy is good to work with; although obviously secretive about their exact plans, they do have nice services like being able to sign up for direct deposit and withholding (if you choose the option) and checking your royalty account/1099s etc. online. An added advantage is that you can actually speak to a human being if you have any questions.
And yes, the leases do favor the oil companies to a certain extent, which is logical given they are investing the development money. I'm glad they have given up on the pass-through rights, I suppose from their viewpoint it was worth a try, but Lessors aren't going for it in Kern! On Vertical Well Spacing, it is pretty standard and regulated by the DOG, so not much to question there. On Horizontal Well Spacing, my understanding is that it is more regulated by their cost of development/potential production. The only possible pitfall is the pooling clauses. They can designate pooling from 60 to 600 acres, but the bottom line is that it is left to their discretion. They spell it out very clearly, then state that the actual pooling will be up to them and can change at any time. Definitely to their advantage, and you can fight it or refuse it, but it is a two-edged sword when the oil company owns adjoining land in fee simple. Sometimes it is well worth your while to go for pooling. If these are majors, their leases are pretty standard, but I'm happy to send you one of mine if you want to compare them... but by private email. You can also compare yours to other leases filed in the county by that particular oil company, but the filed copies are the "Short Forms" and only touch on each clause in the Long Form.
So glad you are enjoying the adventure!
Best,
Nancy
Nancy,
I have tried to send a private message to you but the "send" button doen't send. Any suggestions?
Richard
weird… I’ll try to send you my private email…
RichardM said:
Nancy,
I have tried to send a private message to you but the "send" button doen't send. Any suggestions?
Richard
I see that I'm late to enter this thread, and would like to ask whomever might be available on this topic of Pass Through Rights.
I read the sample lease given to me by someone who clearly is a broker, who said they only deal with the five largest companies, and generally one of the top three, Oxy, Chevron, and whomever... I struggled with wording, and nothing seemed too stand out as offensive language, until I got to the end, where it had this "Pass-Through" language, as you've mentioned in this thread.
Probably like some of you, this land was a Fresno County farm that my great grandfather plowed in the 1800s. Out of nowhere I hear from someone who I feel wants to push this lease through quickly with me, my brother and a cousin.
Pass-Through language, as well as some other language, suggests that they can opt out of portions of the land that they don't want to use, moving forward, only keeping the portions they use, with some various criteria listed such as set backs, etc.
Then, combine that with the Pass-Through wording, it's clear that the oil companies now days will simply drill through your land to get to a desired spot, locating their platforms and equipment on one piece of land, drill through your area to tap a spot some distance on the other side of your land, passing through your land with a Pass-Through that they claim to be willing to offer, in this case, $100 per acre for a five year lease term.
To me, this sounds crazy, because it seems that while they're tapping the pool of oil or gas, from land on opposite sides of your land, via adjacent sides, they can pass through your land and you get next to nothing. They're tapping the pool that in essence is likely also right under your land, but with a long straw that allows them to sip from one side to pull from the other.
Then again, I doubt that if I scratched out the Pass Through wording, as suggested, that it would mean they would actually drill on my parcel, much less simply just find another way around your land, one way or another. It seems to me that more people stand to lose than win with this language.
But, I am a total novice in regards to all of this, so please let me know if anyone has any better view of this topic. I will upload a document that has this wording in their sample lease, if anyone can read it and advise me.
Thanks in advance for any help. 2985-DrillThrough.pdf (9.82 KB)
You are absolutely right in your assessment of pass-through rights. You can end up having the oil field under your property drained from their access to another parcel next to yours (which they are likely to own and therefor don't pay royalties), and leave you without one red cent. I have scratched out all references to pass-through rights on all of my leases, both those in long form and the short forms (which are the ones that are recorded), and made sure both I and the oil company initial each cross out. From what I understand, not many people are falling for this, so if this lease has been brought to you by a landman, I highly recommend you tell him to either negotiate a lease without pass-through rights, or find himself another piece of land to hawk with the oil companies. I deal directly with a major oil company, so there is no question about it. No Pass-Through Rights, period. Hope this helps
Best regards,
Nancy
Awesome. Thanks. The Landman said, "if you can get the signed lease back to me right away, I should have your money to you by Christmas. You'll be able to buy Christmas presents".
Lol. I guess that kind of talk works well with some people.
Thank you very much. This forum is great.
(My name withheld until lease is negotiated) ;-)
Next question: What about Surrender and Partial Surrender clauses in the lease. There are three of us, my brother and a cousin, who, if the oil company has this wording, see attached, it seems to me that they could exclude some of us as time goes on, only leasing land that is viable to them from the parcel of land, if we three sign individual lease agreements, potentially dividing up our shares as they like.
As it's a small mineral rights parcel in the first place, maybe I'm getting picky.
2984-SURRENDER.pdf (22 KB)Here’s another question. In an article I located on this forum, under Oil & Gas Leases: 10 Common Mistakes During Mineral Lease Negotiation, it states, and I quote, "Don’t Warrant the Mineral Title.
The first draft of an oil and gas lease presented to you likely states that you warrant and defend the chain of title to your minerals. Simply stated, delete the warranty clause. Don’t warrant the mineral title."
End of quote.
Please see wording in the lease given to me, in attachment, and see if this too is something I should strike from the contract.
Thanks in advance,
Novice Lessor
2983-WARRANTYOFTITLE.pdf (18.3 KB)Novice Lessor said:
Awesome. Thanks. The Landman said, "if you can get the signed lease back to me right away, I should have your money to you by Christmas. You'll be able to buy Christmas presents".
Lol. I guess that kind of talk works well with some people.
Thank you very much. This forum is great.
(My name withheld until lease is negotiated) ;-)
Getting it back by Christmas? hahahahahahahahaha... you can buy some Christmas Presents... As you say, may work with some people... Wasn't it Barnum who said there was one born every day?
On the Guarantee of Title, NO! I would never sign that because I live abroad and have no idea what may have been filed against my title, legally or illegally. IT is up to the oil company and/or landman to do a full title search to guarantee title.... NOT you!
On surrender, that has nothing to do with partials meaning one of your family members being singled out... these are terms between oil companies... it is standard for companies to buy and sell leases, in which case the selling company surrenders all mineral rights to the purchasing company, and has nothing to do with the lessor. I have never had a Partial Surrender come up in any of my leases. I do not believe I would personally sign anything where partial rights might be surrendered and others not... could mean they might drill on 10 acres and want to surrender the other thousand acres? As I said, it has never been an issue on any of my leases, but I probably would not sign it either.
Best,
Nancy
Wow. This so called "standard lease" is sounding pretty sketchy the more I read it. At least I know some of the questions to ask now, should we move forward, and/or talk to an oil lease attorney. Thank you again!
Novice
I also wonder if my brother, cousin and I shouldn't enter into a new business entity, as was suggested in the section of this website talking about ten things you want to do when negotiating a lease. It would be less easy for them to divide and conquer, which is probably why they hurriedly sent out individual leases for each of us to sign separately, for what seems to be combined and adjoining property.
All my concerns are probably overstated, as I've done some research and see that the location of our land for oil is probably very doubtful, as the nearby (mile away) oil field is no longer producing, from what I've read, with less than one percent of the oil still in the ground that was there in the early part of the last century. But, there's always some new technology, and the means to drill deeper, perhaps. I shouldn't alienate them with too many road blocks, as without them there may be no new exploration in this area.
Separate leases are the norm anyway... unless you were all to pool your rights, title and interest to a LLC or Family Trust... but don't see where it would make any difference. I share mineral rights with five family members, and we have been signing separate leases for over 20 years. And you are right, many oil field once considered dry actually are not, and with new technology, they can still produce a lot of oil. Good luck!
Novice Lessor said:
I also wonder if my brother, cousin and I shouldn't enter into a new business entity, as was suggested in the section of this website talking about ten things you want to do when negotiating a lease. It would be less easy for them to divide and conquer, which is probably why they hurriedly sent out individual leases for each of us to sign separately, for what seems to be combined and adjoining property.
All my concerns are probably overstated, as I've done some research and see that the location of our land for oil is probably very doubtful, as the nearby (mile away) oil field is no longer producing, from what I've read, with less than one percent of the oil still in the ground that was there in the early part of the last century. But, there's always some new technology, and the means to drill deeper, perhaps. I shouldn't alienate them with too many road blocks, as without them there may be no new exploration in this area.
Thanks for the help. We’ll see if they’ll let me cross out the Warranty of Title and the Drill-Through clauses. It’ll be interesting to hear their response.
What if the funds to defend a Title (in the Warranty of Title clause) states that the costs are paid from royalties, and only if there are royalties?
Doubt that they'd go for that, but it's a simple question that I don't know the answer to.
Even if they eliminated the "Warranty of Title cause, there still could be a time when the title might be challenged, now unforeseeable, unless we probate it now, which I don't think they want to wait for, nor do we want to bother with. Title is currently in my father's and our deceased aunts (without descendents or heirs) names. Probate could solve that, but the mineral rights are small and our pockets not deep, that is, unless there were royalties to cover such costs in the future.
If and when defense of the title might happen, I am guessing that the oil company may need to defend our title, as their lease is subject to our claim of title.
It also comes to my mind that if that happened, they would like to go after us to prove our claim of title, or, to recoup the costs of their legal fees relative to the defense of our title claim.
Does striking the entire Warranty of Title simple extend any liability that we might have to defend the title to a later date?
And, if so, do you or does anyone have any language that they might suggest for us to use?