I'm new here so please bear with me. What information should absolutely be included in a lease agreement that was sent to me by a landman? Also, what should be removed? I inherited mineral rights but I know nothing about the process. Thanks.
Al:
This a broad topic that you are asking. There are many things that you might include in a mineral lease such as "pugh clauses", transportation cost matters, etc. I would first advise you to read some past posts dealing with this matter. You can google in "lease agreements" in the box at the top of the page and there will be numerous posts on this topic. Also, click on the "Mineral Help" at the top and there is a list things that you should not do in regards to negotiating a new lease.
Thanks for the reply Charles. Really what I meant was not what 'can be' included but what 'should be' included. For instance, should my percentage of mineral rights, in decimals, be included or is that done on the division order? Or both?
Al:
I agree wtih Charles that this is a broad subject. With regard to lease provisions it likely depends upon where your minerlas rights are located as well. In California, they typically include a warranty of title provision which I always strike when reviewing leases as many mineral owners inherit their interests and cannot (and should not) guaranty their ownership given that their predecessors may have done something with title of which they are not aware. Also in California, the percentage of interest usually is not included in the lease but the gross acreage is listed and occasionally they do include the net mineral interest.
If you own enough of an interest that it make fiscal sense, you might consider having a lawyer in the state in which the minerals are located review the lease for you. An oil and gas lawyer will know the ins and outs of the particular provisions in that state and what to look out for.
Good luck!
Jean M. Pledger
Jean, thank you very much. That's the anwer that I was looking for and that's exactly what I've done. I'll be getting with the lawyer Monday. By the way, the lease is in Texas. I live in Arkansas.
Dear Ms. Pledger,
Since Mr. Winkebach's land is in Texas and not California, I have a question concerning California law and your post.
You said that you always "strike" the warranty provision. Does that protect the Lessor in California from warranting title? In Texas, it does not.
Thanks in advance for your answer.
Jean M. Pledger said:
Al:
I agree wtih Charles that this is a broad subject. With regard to lease provisions it likely depends upon where your minerlas rights are located as well. In California, they typically include a warranty of title provision which I always strike when reviewing leases as many mineral owners inherit their interests and cannot (and should not) guaranty their ownership given that their predecessors may have done something with title of which they are not aware. Also in California, the percentage of interest usually is not included in the lease but the gross acreage is listed and occasionally they do include the net mineral interest.
If you own enough of an interest that it make fiscal sense, you might consider having a lawyer in the state in which the minerals are located review the lease for you. An oil and gas lawyer will know the ins and outs of the particular provisions in that state and what to look out for.
Good luck!
Jean M. Pledger
Ehrlich Pledger Law, LLP
Buddy:
Sorry about the delayed response. I believe that the striking of that provision does protect the mineral owner from warrantying title. Thus, a mineral owner would not have to expend money to obtain good title if found that he/she did not have this. There is a caveat, however. If the oil company finds that the mineral owner does not hold title, until the mineral owner does have good title, he/she won't receive royalties.
Here, the oil companies often take leases knowing that the mineral owner does not hold record title. Also here, an Affidavit of Heirship is NOT a recordable document (which I understand is used extensively in Texas). It is only when the oil company decides where it wants to drill and obtains a drillsite title opinion that it will seek to have title cleaned up before drilling. As such, once the Monterrey shale play hits here I anticipate being very busy cleaning up title for mineral owners.
Hope this helps!
Jean M. Pledger
EHRLICH ∙ PLEDGER LAW, LLP
Buddy Cotten said:
Dear Ms. Pledger,
Since Mr. Winkebach's land is in Texas and not California, I have a question concerning California law and your post.
You said that you always "strike" the warranty provision. Does that protect the Lessor in California from warranting title? In Texas, it does not.
Thanks in advance for your answer.
Best,
Jean M. Pledger said:Al:
I agree wtih Charles that this is a broad subject. With regard to lease provisions it likely depends upon where your minerlas rights are located as well. In California, they typically include a warranty of title provision which I always strike when reviewing leases as many mineral owners inherit their interests and cannot (and should not) guaranty their ownership given that their predecessors may have done something with title of which they are not aware. Also in California, the percentage of interest usually is not included in the lease but the gross acreage is listed and occasionally they do include the net mineral interest.
If you own enough of an interest that it make fiscal sense, you might consider having a lawyer in the state in which the minerals are located review the lease for you. An oil and gas lawyer will know the ins and outs of the particular provisions in that state and what to look out for.
Good luck!
Jean M. Pledger
Ehrlich Pledger Law, LLP