Hi, I have been offered a Paid-Up mineral lease in Leon County from Surprise Valley Resources related to the new wells near Marquez in the Deep Bossier play. I was wondering if anyone has been successful in getting cost-free royalty from them (at least free of post production deductions).
I only have a few acres, and the well is already completed. Any other terms/considerations or experiences from other folks would be very helpful in working this out.
Thanks in advance!
Given the current level of gas prices, I would say it is essential for mineral owners to obtain royalties free of post production expenses. For April production, Comstock’s marketing expenses (post-production) on their Bossier wells in Robertson County equaled 50% of the price they obtained for the gas produced.
I’m sure Surprise Valley is trying to avoid a cost-free royalty, but that should be an absolute requirement.
Thanks Alan for your reply! I have found your posts throughout the forums to be very informative and helpful as I have had to quickly learn what’s happening in the area and the ins and outs of mineral leases. Whew, yes, seeing the numbers on the post production costs really puts that potential difference in royalty into focus.
One of my concerns at this point is not having the leverage to get cost-free, given that at this point the well (Dinkins) will start producing soon with or without my lease. I’ve already gotten them to increase the per acre and royalty percentage, and I’m wondering if at this point I need to just count my blessings.
It sounds like they messed up bad by leaving your interest unleased! You are most likely in the “drivers seat”!
Where would you suggest that the price that the mineral and royalty owners want the price they will receive to be calculated or determined on the Comstock wells?
A mineral interest may be small, but if it is drillsite tract you have a lot of leverage. This link may help. But you should know what you are dealing with when negotiating. Drilling plats are available under TRRC permit query https://webapps.rrc.texas.gov/dpimages/img/6600000-6699999//PR0006684979_0001.pdf is just one online.
To get a cost free (No post production costs) lease in Texas the language of royalty “at the wellhead” must be replaced with “gross proceeds” clauses. We always use an attorney to draft our clauses. And if you are afraid of their saying “no”, consider hiring a professional to negotiate.
Thanks J_Walker. I’ve checked out the drilling plat and specific unit plats, and while I am at the edge of one of the production units, the horizontal well indicated by the red line does not directly cross my property boundaries. I guess that makes me not a drillsite tract?
I believe you would need to be within 330’ of the bore to be drillsite, but I am not familiar with Leon county.
We just signed a lease here in leon couty marquez, tx near the new well comstock oil gas dinkins jg #1h what says on the sign located on cr 429. We have no clue whats next or where to begin on royalties…is the new wells around us producing and how close do they need to be before we start seeing royalties? We only have 20 acres…We looked at contract it says we in the boulware survey A-126. Any help would greatly appreciated.
Hi Neighbor 
We’re also in Boulware A-126. My guess is you are in the Gerlach production unit of the Dinkins well. Here’s a plat of the Gerlach, which may include your lot: https://webapps.rrc.state.tx.us/dpimages/img/6600000-6699999//PR0006684988_0001.pdf
The well drilling plat (which includes three production units) can be found here: https://webapps.rrc.state.tx.us/dpimages/img/6600000-6699999//PR0006684979_0001.pdf
If you are within a production unit then you should start seeing royalties once production commences. The landman that is handling our lease said that the well “goes to market” possibly later this month. Your royalty percentage should be detailed in section 4 of your lease. If it has wording like “X% of the amount realized from the sale thereof, after deduction of a proportionate part of the production, severance…” etc., then you are your royalty percentage is calculated from their net proceeds, rather than their gross.
Neighbor i just want to send my gratitude to this forum and especially YOU. It looks like we are in the gerlach plat. We meeting with landman this weekend to get more clarity.
Great! Let us know if you find out anything that would be good for us to know too. We’ve only have a little plot, and only 50% of the mineral rights, but it’s still all very exciting. Quite the learning curve though!
Not necessarily. They don’t have to lease the interest and the owner could become a working interest owner if they want to be unreasonable.
If a mineral owner in the unit leased for say 30% then any other unleased mineral owner in that well or unit is “entitled” by Texas Law to get that amount for his unleased interest from what I understand. I may be wrong.
That is incorrect. I believe UMIs that don’t lease and don’t participate will get carried through well payout and then come into the well as if they were a Working Interest owner
The company under Texas Law will in court have to Pay the same as the best lease in the unit! Force Pooling in Texas does not work very good! It’s sort of like forcing someone to sell you a tract of land for what they want to pay you.
There’s some incorrect information in some of these comments.
If the unleased interest was in a drill site tract, then the mineral owner would be an unleased cotenant and have some leverage. They could either sign a Lease or remain unleased and receive nothing until the well pays out (if that ever happens) and then at that point would receive their full share of production after operating expenses. The unleased cotenant doesn’t automatically somehow get the best lease terms of the unit.
If the unleased interest is in a tract within 330 feet of the well (assuming the spacing rules for the well are 330 feet from unleased tracts), then the operator will need to get a Rule 37 exception permit from the Railroad Commission. The mineral owner would get notice of the application and the right to object - but would probably lose. And then the operator would drain the minerals and the unleased mineral owner would get nothing from the well - unless it signed a lease (assuming the operator was still willing to offer one).
If the unleased interest is within the geographic boundaries of the unit but not a drill site tract, then the operator doesn’t have to pay the interest owner anything from the well(s).
There is forced pooling in Texas but it is rare and used mainly in West Texas these days, to my knowledge. It is a complicated process that is likely too expensive for a mineral owner to force its way into a unit - but the operator may be able to use it to force pool interests. If the operator uses it, then unleased interests can be forced to be leased on market terms - that the Railroad Commission ultimately approves.
All of these scenarios are more complicated than the brief synopses provided above but this is generally how it works.
I was offered 500 per acre with a 5 year lease and 20% royalty. Does this sound right?
$850 plus and 1/4 cost free royalty with a 3 year max. In 45 plus year’s of leasing I have never been paid the option terms. You MUST have a good lease form, especially if you have a large tract of mineral rights. If you don’t have a good lease form you are “almost” deeding them your minreal rights! My opinion.
Sure hope they keep coming east to eastern leon county. Some of my place is tie up in the Alabama ferry field but the state is taking over the field for cleanup and plugging these old wells of the 80’s. I do have over 300 acres thats not leased or tie up in this old field.