I own approximately 50% of the mineral rights beneath my 280+ acre ranch and, with all of leasing and drilling activity building up around us, I felt it necessary to become much better educated on the in's and outs of oil and gas leases. Anyway, in the process of educating myself, I decided to go through the the warranty deed history on our ranch and found one particular deed that had some unique wording applicable to 25% of the minerals that raised some questions as to what my portion of lease bonus, delay rentals, etcetera would be in the event we are pursued for a lease. The specific verbage I am referring is as follows;
"Grantor excepts, retains and reserves to himself, his heirs and assigns, a one-half interest in all of the oil, gas....... and other minerals that may be produced from the above decribed property together with the right of ingress and egress at all times for purposes of drilling, mining, exploring, operating, and/or developing said land for oil, gas, and other minerals and removing the same there from;
Any help figuring this out would be much appreciated!
You would need to complete mineral title to see for sure, but you can bet that this was done several times over by a landman and then an oil & gas attorney. I don't think you would find any other interest that you are entitled to. The language always refers to minerals owned at the time of the instrument, not the entire mineral estate. Once conveyed they are gone unless they are repurchased or in case of mortgage, foreclosure. Hope this helps.
Nick, thanks for the reply and the feedback! I really appreciate it!
When I bought the place I actually did a thorough mineral title search and was able to determine what percentage of the mineral rights I owned. I actually had an attorney confirm my assumption. We did not, however, discuss at the time what percentage of lease bonus I was entitled to. I just assumed (wrongfully)that, as the surface owner, I was entitled 100% of the lease bonus money. i have sine learned that this is not necessarily the case. And as I was pouring back through the paperwork I found the language captured above that led me to question if that was in fact the case with my property. The above language pertains to 25% of my property. No other language like this exists in the chain of title. all other reservations are referred to as non-participating royalty interests. I definitely plan to get an expert (attorney) involved in the process at some point. I just want to have a pretty clear understanding of all of the components as well as some semblance of a game plan heading in to the process. Anyway the more I dig the more questions I have! No surprise right!
The biggest question I have at this point is whether or not the language outlined above entitles a previous owner to 25% of the lease bonus money or does it simply entitle them to grant access for exploration purposes?
Thanks again for your feedback!
A mineral owner is very different from a surface owner. The complication arises when the minerals are shared, or not. If you did not own any minerals, you would receive none of the bonus lease consideration money nor any of the royalties; however, as the surface owner (only) you would work out an agreement with the oil and gas company regarding damage to your land, the building of roads, fences, restoration, etc. Since you DO own 50% of the minerals, your net mineral acreage would be (280 divided by 2) 140. If the bonus lease money was $400 an acre, you would get $56,000. It is certainly possible that the other mineral owner(s) may negotiate a different lease with the same company (they may accept less bonus money, less royalty or, on the other hand, more). In my experience, oil companies prefer that the lease is the same (or very similar) for all mineral owners to prevent future misunderstandings. So, it is best if you can work with the other mineral owners in securing a lease, if at all possible. Sometimes this is simply not practical. To reiterate, if bonus money is offered in regards to a lease, it goes to the mineral owners and not the surface owner. The rights of mineral owners to lease their minerals for exploration and production is well established, certainly in Texas. (You will find many disgruntled surface owners who own none of the minerals beneath their surface if there happens to be extensive drilling on their property).
That helps a lot! Thanks so much for taking the time to explain Ron!
Based on your explanation, the verbage in question above is basically superfluous if that same person also owns a portion of the minerals beneath the property.
Thanks again!
I have a question about a lease which was signed by the surface owner of my fathers farm. He purchased the 160 acres but only received 50% of the mineral rights, the remaining 50% was shared equally by my brother and I. The leasing company states that we are bound by the lease which was signed by the land owner. My problem is how he can we be bound by his contract when we were not a part of the negotations and only became aware of it more than a years after signing.
We had negotated our own lease with the same leasing company after a year at a much higher per acre lease but before payment was made the leasing company said they had researched the deed and had determined that the land was already leased to the surface owner and that we were bound by that lease.
How can this possibly be correct?
Thomas, you need to look at the deed to see if it granted sole executive rights to the surface owner/purchaser.
It means when they retained the mineral rights, they wanted to make sure they had access to drill. The issues regarding executive rights, etc would take more looking into.
Thomas, if all of the executive rights were included with the surface, the surface owner could enter into a lease on your behalf. I believe that unless the deed of sale of the surface expressly granted the surface owner all executive rights, then you retained the right to lease on your own separately, right to bonus/ royalty. If the surface owner did have the right to enter a lease for you, they probably would have fiduciary duties to you, to see that you received your bonus and so forth. I think you really need to look at your deed.
Thanks for replying to my post
I have looked at the Deed and the land owner has sole executive rights.
I would like to now research whether this issue can be revised giving my brother and I independant rights in the future.
r w kennedy said:
Thomas, you need to look at the deed to see if it granted sole executive rights to the surface owner/purchaser.
Thomas, I don't think that will be possible outside purchasing/convincing the surface owner to return the executive rights. You are leased now, no matter how poor the lease was negotiated. The surface owner had the right to commit you to the lease. I think the surface owner has a fiduciary duty to see that you are paid your bonus, which I think has not happened or you would have mentioned it. That is unless the surface owner was granted all bonus also in the deed. It might be grounds for discussion. If the surface owner does have a duty to see you receive a bonus, I would give them a short time to do so. I'm sending you a friend request.
Fiduciary duty depends on the state, and on the facts.
r w kennedy said:
Thomas, I don't think that will be possible outside purchasing/convincing the surface owner to return the executive rights. You are leased now, no matter how poor the lease was negotiated. The surface owner had the right to commit you to the lease. I think the surface owner has a fiduciary duty to see that you are paid your bonus, which I think has not happened or you would have mentioned it. That is unless the surface owner was granted all bonus also in the deed. It might be grounds for discussion. If the surface owner does have a duty to see you receive a bonus, I would give them a short time to do so. I'm sending you a friend request.
Don't forget to also look for Mineral Deeds in the Deed Records, the Grantor in the above mentioned clause that you quoted might have conveyed that interest BACK into the chain of title involving you and the other mineral owners. Yes, make sure that you have been paid bonus consideration for every single lease in the chain of title to which your mineral interest was entitled. I just recently came across a case in which the surface owner to a half section owned 50% of the minerals and 100% of the executive rights. Yet the owners of the other 50% Non-Executive Mineral Interest (NEMI) never got paid anything for THEIR bonus consideration. Can you spell L-A-W-S-U-I-T?