# Question about Leasing
**URL:** https://www.mineralrightsforum.com/t/question-about-leasing/33254
**Category:** Oil and Gas Leasing Help
**Created:** [September 9, 2018, 8:37pm UTC](https://www.mineralrightsforum.com/t/question-about-leasing/33254 "2018-09-09T20:37:39Z")
**Posts on this page:** 12
**Page:** 1
### Author:  [@dogslobber](https://www.mineralrightsforum.com/u/dogslobber)
#### Post date: [September 9, 2018, 8:37pm UTC](https://www.mineralrightsforum.com/t/question-about-leasing/33254/1 "2018-09-09T20:37:40Z")
I thought I read somewhere that the landman (or lessee) does not have to get ALL the mineral owners to sign a lease before they start drilling, just a majority. Is that true?
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### Author:  [@bhiggins](https://www.mineralrightsforum.com/u/bhiggins)
#### Post date: [September 10, 2018, 1:49am UTC](https://www.mineralrightsforum.com/t/question-about-leasing/33254/2 "2018-09-10T01:49:38Z")
Any co-tenant owner to a piece of property has the right to develop their interest (and therefore can be transferred via a lease to a lessee) - no matter how small. Therefore, if an owner has an undivided 1 acre out of 640 acres, they can stand a rig up and produce those minerals. It wouldn’t be the smartest move for them to take that approach because 1) they are burdened with 100% of the risk of drilling and completing a producing well, 2) after the payout of a successful well, they have a duty to pay the other co-tenants their proportionate share of the minerals from then on.
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### Author:  [@dogslobber](https://www.mineralrightsforum.com/u/dogslobber)
#### Post date: [September 10, 2018, 2:11am UTC](https://www.mineralrightsforum.com/t/question-about-leasing/33254/3 "2018-09-10T02:11:47Z")
Thank you.
Regarding your last sentence: “the payout of a successful well” - How is the royalty fraction (for the “other co-tenants”) determined? They never signed a lease.
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### Author:  [@bhiggins](https://www.mineralrightsforum.com/u/bhiggins)
#### Post date: [September 10, 2018, 2:23am UTC](https://www.mineralrightsforum.com/t/question-about-leasing/33254/4 "2018-09-10T02:23:48Z")
In my scenario, leases weren’t considered for simplicity. The other owner(s) would get 100% of their proportionate share.
**Unleased:**
Owner 1: owns 1 acre into 640 or 0.15625% of production proceeds
Owner 2: owns 639 acres into 640 or 99.84375% of production proceeds
100% accounted for
**Leased:**
If Owner 2 leased their interest to Lessee 1 for 25%, then:
Owner 2: would get 24.9609375% of production proceeds (25% of 639/640)
Lessee 1: would get 74.8828125% of production proceeds (75% of 639/640)
Owner 1: 0.15625% of production proceeds
100% accounted for
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### Author:  [@dogslobber](https://www.mineralrightsforum.com/u/dogslobber)
#### Post date: [September 10, 2018, 2:45am UTC](https://www.mineralrightsforum.com/t/question-about-leasing/33254/5 "2018-09-10T02:45:09Z")
But what if Owner 1 (1 acre) signed a lease and Owner 2 (639 acres) didn’t sign any lease? Owner 1 then drills and has a successful well. What royalty fraction does Owner 2 get?
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### Author:  [@bhiggins](https://www.mineralrightsforum.com/u/bhiggins)
#### Post date: [September 10, 2018, 2:56am UTC](https://www.mineralrightsforum.com/t/question-about-leasing/33254/6 "2018-09-10T02:56:49Z")
Owner 2 gets 100% of the proceeds from 639 acres - their proportionate interest.
Leasing is basically a partnership between that lessor and lessee. The rights assigned (leased) only affect that owner’s interest - they can’t be carried over to another owner without the other owner coming to their own terms via another lease or contract.
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### Author:  [@TennisDaze](https://www.mineralrightsforum.com/u/TennisDaze)
#### Post date: [September 10, 2018, 3:03am UTC](https://www.mineralrightsforum.com/t/question-about-leasing/33254/7 "2018-09-10T03:03:35Z")
Owner #2 is an unleased mineral owner. Will not receive any revenues until Owner #1 / operator recoups 100% of the drilling costs and interim operating expenses. Then Owner #2 will receive revenues less his proportionate share of operating expenses.
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### Author:  [@dogslobber](https://www.mineralrightsforum.com/u/dogslobber)
#### Post date: [September 10, 2018, 3:33am UTC](https://www.mineralrightsforum.com/t/question-about-leasing/33254/8 "2018-09-10T03:33:17Z")
I guess I’m thick.
So Owner 2 would have to sign a separate lease with the operator (after a well has started producing!). That certainly would change the lease negotiation dynamic. How does Owner 2 negotiate a royalty fraction (3/16, 1/5, or 1/4) on land that now has a producing well?
“Owner 2 gets 100% of the proceeds from 639 acres—their proportionate interest.” But it has to be determined what the royalty fraction is.
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### Author:  [@M\_Barnes](https://www.mineralrightsforum.com/u/M_Barnes)
#### Post date: [September 10, 2018, 6:40pm UTC](https://www.mineralrightsforum.com/t/question-about-leasing/33254/9 "2018-09-10T18:40:36Z")
It would be helpful to the forum if you would post which state you are talking about. The rules are slightly different by state due to pooling laws and other regulations.
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### Author:  [@dogslobber](https://www.mineralrightsforum.com/u/dogslobber)
#### Post date: [September 10, 2018, 7:00pm UTC](https://www.mineralrightsforum.com/t/question-about-leasing/33254/10 "2018-09-10T19:00:43Z")
Section 374, Yoakum County, Texas. I am being offered a 3-year lease for $300 per NMA with 1/5 royalty. I think it’s low, so I may pass on it.
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### Author:  [@bhiggins](https://www.mineralrightsforum.com/u/bhiggins)
#### Post date: [September 10, 2018, 7:09pm UTC](https://www.mineralrightsforum.com/t/question-about-leasing/33254/11 "2018-09-10T19:09:55Z")
I think the disconnect here is that it’s assumed an owner has to be leased in order for production (or the proceeds therein) to happen. Which is correct in most instances - most mineral owners don’t have the expertise or monetary resources to explore and develop a well. Therefore, they contract (lease) out that responsibility.
Owner2 has no obligation to lease, whether or not there is production on the property. Generally speaking, in the scenario we have laid out, Owner2 has the right to 1) remain unleased, 2) lease to Owner1 or the Lessee of Owner1, 3) lease to a completely different company. If Owner2 goes the leasing route, the revenue would be determined by the lease and agreed-upon terms decided by themselves and the company.
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### Author:  [@MRFAdmin\_SV](https://www.mineralrightsforum.com/u/MRFAdmin_SV)
#### Post date: [January 11, 2025, 7:27pm UTC](https://www.mineralrightsforum.com/t/question-about-leasing/33254/12 "2025-01-11T19:27:14Z")