Mineral Lease in Grayson County

General Mineral Rights Discussion
1

I have some questions about a lease that my family and I have been contacted by a leasing company about, leasing our mineral on some land in Grayson County that has been passed down to us. There are 5 of us and each share is 4.085 and they are offering us each $200.00 per net mineral acre for a 3 years paid up lease with 15% royalty. One of the things in the lease shows that the (Lessee shall be subrogated to the rights of the party to whom payment is made and, in addition to its other rights, may reimburse itself out of any royalties or shut-in royalties otherwise payable to Lessor hereunder and the retention of such royalties or shut-in royalties by Lessee shall have the same effect as if paid to the Lessor.

(1) Will we still get royalties for shut-in wells, or will the royalties stop? I do not understand this part of the lease.

(2) What does this mean reimburse itself out of any royalties or shut-in royalties?

(3) The company name is Concord Land Services, I cannot find out too much information about this company.

(4) Also can one family member lease land that is also deeded belonging to the other heirs of the mineral right estate without letting the company know and letting the family know anything and keep all of the royalties?

(5) On the 15% royalty can this part be struck or removed or changed to 20%?

Any help is appreciated. I just need to find out before we sign. Thank you Dessie Orona.

2

I suggest that you hire a Mineral Manager or an O&G attorney, namely, to protect your interests.

3

At this time I am unemployed and without any income I cannot hire anyone. My brothers have already signed and mailed out their papers. But I just wanted to know if anyone can answer any of the questions?

Thank you.

4

Dessie, it’s all negotiable but they don’t have to agree. You could strike the 15% and put in 20%, but with or without striking the 15%, it’s customary to add a page, an addendum that says no matter what was said before, the royalty actually agreed to is 20%. The preceding is not legal language and I would suggest having someone with legal experience draft it.

As I said, they may not agree to it. The risk is that they walk away and you receive nothing.

In your situation I would demand payment before you send them an executed lease. If you don’t have cash for a lawyer, you certainly don’t have cash to sue them if they record your lease but not pay you, you could literally wind up worse off than you are now and I’d hate to see that happen…as it did to me at one time.

5

Dessie,

  1. The language you underline most likely refers to property tax or mortgage payments. Leases generally say that the company can pay your property taxes or mortgage payments to prevent foreclosure of your property, and generally you have to pay them back for that. This is standard language that you do not need to worry about.

  2. Their first offer is probably not the best they can do. You should at least ask for more royalty and bonus and see what they might agree to. 15% is on the low end of the spectrum.

  3. You should NOT hand over a signed lease until you have a check in hand. You should not accept their promise to pay you later, nor should you accept a “draft.” You should let the company’s landman know in advance that you will need to be paid by check before they get your lease.