I have a small amount of mineral rights in White County, Illinois. I feel that the term of this lease is too long. The lease would be four years with a four year option. Does anyone have an opinion about this?
Ginger:
I am not familiar with this area in Illinois but the lease term is quite long. If the area becomes active, your minerals would be tied up for a total of possibly 8 years. I would insist on a lease of no longer than 3 years in order to protect yourself in the event drilling activity increases.
Thank you, I have been countering with a 3 year term with a 2 year option. The landman says that cannot be negotiated.
charles s mallory said:
Ginger:
I am not familiar with this area in Illinois but the lease term is quite long. If the area becomes active, your minerals would be tied up for a total of possibly 8 years. I would insist on a lease of no longer than 3 years in order to protect yourself in the event drilling activity increases.
Ginger:
The decision is up to you but possibly 8 years is long time to have your minerals leased.
Ginger,
If your area is in development, 3 years at a fair price and competitive royalty to you is reasonable. If it is a wildcat area and you are dealing directly with an operator, 5 years may be what it takes to get a well drilled. Get the money up front for 5 year lease and at a rate that will be far more than it will cost you to clear title into your name. Anything less to you should be non-negotiable. Have an oil and gas lawyer review the lease and don't take a draft. Do some MRF research.