I have a low offer on the lease I am thinking about not accepting. What happens if a company cannot lease from all the mineral owners in a section or drilling unit? I understand the forcepool practice in Oklahoma but that it’s different or rarely applicable in Texas. How does a driller proceed of they can’t lease from everyone?
That’s where an oil/gas attorney or landman comes in…to help you get a lease favorable to the mineral owner…NEGOTIATE
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In most drilling situations, in Texas, the operator can choose to move forward with the permitting and drilling of the well without obtaining leases from all mineral owners in the drilling unit. You should never feel forced to sign a lease with terms you are not ok with and you have every right not to sign a lease at all. In fact, some mineral owners choose to participate in the drilling activity with the minerals they own. Participating with your minerals is not the right options for many because you will be responsible for paying your proportionate cost of drilling and completing the well(s). Unlike, leasing and retaining a royalty, participating with minerals is a cost bearing interest which includes continuing operating expenses. The great thing about participating with minerals is your working interest (WI) and your net revenue interests (NRI) are the same. In other words, your NRI is not burdened by a royalty. Participating with minerals is riskier than leasing because rather than receiving a cash bonus you are actually paying to participate in the drilling expenses. There is associated drilling risk too, this could include mechanical issues, increased costs, the risk of drilling a dry hole etc. The risk is greater but the reward could be huge because your revenue interest is much greater than it would have been if you only retained a royalty interest. If you choose not to lease your minerals and do not choose to pay your proportionate share of the drilling and completion costs, and in the absence of a Joint Operating Agreement (JOA) in most cases the operator would pay your share of the drilling and completion expenses and be able to recoup these expenses before you would receive any revenue. This is a favorable situation for the mineral owner and prevents you from having to come out of pocket for cost of drilling and completing the well. In ALL of the situations above you should seek the advice of an oil and gas attorney. My reply is based on my experience, education, and knowledge. I’m not an attorney, just a guy who has been in the business a long time.
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Scroll to the top of the page. Next to the New Topic blue rectangle there is a magnifying glass icon. Click on the icon and enter “Judon Fambrough” Choose one of the threads and click on the link to his paper “Rights and Responsibilities of Mineral Cotenants” or just do a Google search and open the Texas A&M pdf
Also search for this thread “What happens if I do not sign a lease in Wheeler County, TX?”
Found it. Thank you both for your responses.
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