I have a question. What happens if you don’t lease when they come to you and you just sit and wait for them to bring in oil or gas. At that time don’t they have to make a deal with you to bring the well in? This is what I have heard. So in my mind it makes sense to not take the upfront money and just wait and see if they bring a well in and than possibly you will get more because they can’t drill without you? Is this correct? I have had an offer to lease :
$800.00 per net mineral acre with a 3/16ths royalty and primary
term of three (3) years. This lease includes a two (2) year option at $800.00 per net mineral acre.
@Candi_Choumas, as @TennisDaze indicated in the other thread containing this subject, state laws will generally be set up to heavily discourage mineral owners waiting for actual production before asking for a lease. In the fable of the little red hen, the hen does all the work of mixing and baking the bread only have others come and ask for their share when the baking is all done. Likewise, operators do not like to be put in the position of doing all the exploration, leasing, permitting, drilling and bringing the product to market and then having someone come to ask for their share. At least when you lease your minerals beforehand you are helping the operator procure a permit and you are risking something by taking your minerals off of the open market for several years and you are risking that the operator is going to do a proper job in developing your minerals. You are also showing public support for the project and helping to keep the operator’s expense predictable. If you do not even do these things, the operator will only owe you the minimum, if anything, and your earnings may depend on “well payout” and be taxed differently as a working interest. Generally, it is better for all parties if you are leased before the well is drilled.
Waiting for some competition is fine, but if you wait too long, companies may not want to drill or lease in that area any longer and then you miss out on a lease bonus. Worst of all is if your acreage is pooled and you don’t lease. They can certainly drill right through your acreage (unless it’s divided acreage, but that’s very rare). You will be deemed non-consent and not be allowed into the well until the well pays out 200-300%. So you miss out on your portion of most, if not everything that well produces. All depends on what state you are in, but being deemed non-consent is a terrible position to be in as a mineral owner. What state are your minerals in?
If they drill your minerals and you do not have a lease than you become a working interest owner in the well just like the operator which means you have to pay your share of the drilling and completion costs so if you own 20% of the unit for example and the well costs $4 million then you will get billed for $1 million but then you get your full share of the sales.