I have received a mineral rights lease and have a few questions. The lease reads lessor's interest shall be free of all costs of production, but shall bear its proportionate part of production & similar taxes & shall share proportionately with lessee in any costs to market, transport or conditions the oil. Is this normal wording?
It also has a clause "should more that six parties become entitled to royalties hereunder, lessee may require the appointment of a single agent to receive payment for all and may withhold payment until such appointment has been made." There are already more that six involved with this lease and we a scattered all of the US, I think it would be very difficult to assign an agent, is this something we can have removed?
It also contains a title warranty, everything I have read says this should be deleted, is that correct?
It also states that should they want to renew the lease the payment would be $100 an acre less than we are getting now, is that normal?
It gives a rate of $1.00 per ton of sulfur is that average?
There is a clause regarding shut in clause of 90 days with a payment of $10.00?
I really appreciate any help, I am new to this and don't know what I am doing. Since I live in California and the lease is in Texas it would be very hard to find an attorney to help me.
Karenda:
The number of acres and the percentage of interest you have in these acres will determine your negotiating power in a lease situation. On the sharing of costs, this is normal.
I never suggest that more than one person (or husband and wife) take a single lease. This way, you alone have control over the lease as the lessor. If there are many persons who have an interest in the property they can have their own separate leases. If this lease is in your name alone then even if there are a lot of other persons with an interest in the property, the provision that talks about naming an agent is about this particular lease and therefore would not be applicable.
You are correct, you should not warrant title. Typically, there is additional language in such provision that allows the oil company to pay past due taxes, mortgages, and the like and charge them back to the lessor. I usually leave that part in because the oil company needs to protect its interest by paying unpaid taxes, etc.
I am unaware if sulfur is a substance that can be produced via a well. As such, if the lease allows them to mine as well as produce substances via wells, then you may need to review this issue more carefully.
The renewal and shut-in clauses may or may not be appropriate, depending upon other provisions in the lease.
Jean
This is not a cost free royalty.
Shut in royalty depends on location.