I have a very small share of mineral rights in Mclean county, ND and was contacted by Dynamic Resources about leasing them. The terms are 5 years, $30 and acre and 18%.
I have read several of the posts in regards to leasing mineral rights or going non-consent. I really do not want to sign something for a few reasons, 1) it is so small that it is not worth my time, 2) I do not want to give my SS number to these people since I have already been a "victim" of identity theft.
What happens if I simply ignore this and they drill anyway? Some posts seem to suggest that I will be given my full % in the well after drilling costs have been subtracted...ie. become a share owner in the well...allbeit a very small one.
I appreciate any thoughts or advice. Normally I would just sign it but I pulling back of the reigns it terms of giving up information.
Thanks..
Under NDCC 38-08-08 mineral owners who choose not to lease are provided a cost free royalty equal to the weighted average royalty in the spacing unit agreed to by all those who leased their minerals. The remaining interest of mineral interest owners who choose not to lease is a working interest in the well and can be assessed a 50% penalty out of proceeds from production of the pooled spacing unit if they choose not to participate in the cost and risk of drilling and completion.
Not sure about your financial wherewithal, but you should give it some serious thought before retaining a Working Interest. Working Interests have to pay their share of operating expenses, including the abandonment costs when the well is depleted. You will not receive any proceeds until the Company has recovered 150% of their drilling costs, which could take years. There is no guarantee that the well will be productive enough to cover it's expenses, especially in light of current oil prices. On the other hand, if you lease, your royalty payments are cost-free, risk-free, and begin at day 1.
Your concern about identity theft is understandable, but: These people want to pay you money. When they pay you money they have to report it to the IRS. To report it to the IRS, they need your SSN. I don't think there is any way around it.
Thanks for the response... Am I correct to say ....
the lease from Dynamic Resources is just the first offer. If and when they collect enough of the lease shares they (dynamic resources) can/will offer to sell the lease to an operator. At that time, the operator will have another offer to those who have not yet leased their rights? The 2nd offer will also illustrates the costs and risks of the working interest....what they are proposing it will cost, the expected production and of course the expected gains...
Thanks again
From the ND Petroleum Council. There is some good info here:
http://www.ndoil.org/oil_can_2/faq/
"In either case the paying owner(s) must make an unsuccessful good-faith attempt to lease the minerals or get the working interest to participate. They must also provide proper notice of intent to impose the risk penalty and inform the non-participating parties that they can oppose the penalty before the Industrial Commission"
I'm not sure what the standard for "good faith attempt to lease" is. Possibly, all they would have to show is that they made everyone an offer and some accepted it and some didn't. So I wouldn't automatically assume you will get a second bite at the apple. Having said that, there is no reason you couldn't make a counter offer now. If you can establish a negotiation, they might not be as quick to move into force pooling. The royalty offer of 18% is actually quite good for this area, but you could always ask for more of an upfront bonus. If your interest is small enough. they just might give it to you, to clean things up.
Since your interest is small, do NOT become a working interest owner. People do not realize that you can think your share of the ESTIMATED costs are $100 and be invoiced for $1 million dollars for the ACTUAL costs. It is NOT worth the risk unless you are loaded with money to risk. Just ask Anadarko who had a 25% ownership in the BP blowout well in the Gulf of Mexico. If you have a great well, it will easily exceed the 150% payout. However, never forget that the operator has the temptation to pencil whip you since they are in charge of preparing the payouts and therefore have an obvious conflict of interest.
Bob Malone, Malone Petroleum Consulting
Thanks for your response and input...but 10000x's the estimated costs. I do not think a court in this fine country would even allow that suit to be heard.
I wouldn't mind hearing from owners that decided not to sell their shares. I have one gentleman I work with...his family has land near Minot that is being pumped. They chose to take an interest in the well and are doing fine. He suggested that I do the same.
My family has all be located and contacted reguarding our mineral rights in West Texas some of us didn't know we had. It is 160 acres in Lamesa, TX. This land is needed to go with the rest of the Barron property to drill. Thge leases are for 3 years at $400 an acre and pays 21% . The leases where returned and received in December 2014. There has been no contact as of yet. What is standard protocal? My lease was sent back in October. The leases state they a "Paid For Lease"