In preparation for the upcoming legislative session, NARO-Texas is looking for good examples of the “royalty lease scam” being perpetrated these days. This involves approaching someone with an active lease and producing well, usually elderly, and presenting what looks to be an oil and gas lease. In return for a lump sum payment, the document is actually selling 75% of the royalty stream in the lease. The document is usually presented as a top lease. If you know of anyone who this has happened to, please contact Wade Caldwell at [email protected]. NARO-Texas is working on a legislative solution to stop these scams.
Wade-
Look into Texas Shale Leasing, LLC. They do exactly that and should be put in prison!
Well aware of them. Thanks!
IMPORTANT UPDATE ON HB 3838 – ROYALTY LEASE SCAM BILL
The Texas House Energy resources Committee had a hearing on the bill yesterday, and it went well. Committee members seemed sympathetic to stopping this scam, and there were no witnesses that spoke against the bill. NARO and TIPRO spoke in favor of the bill, and TLMA registered support.
Of course, it is not the public speakers we have to worry about, it is the people going through back channels. We need to get this bill out of committee and on the House Floor ASAP, so we can also get it through the Senate.
The major issue at this point is that TexOGA has a competing version of the bill they want to push which has some unacceptable limitations, which made the old law, Sec. 5.151 of the Texas Property Code, ineffective.
We are asking EVERY Texas NARO member, or if you want to see this scam stopped, to call, email, write, or visit the members of the Energy Resources Committee and urge them to:
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Support the current version of HB 3838 supported by NARO and the others, and not TexOGAs version;
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Vote HB 3838 out of committee.
Below are links to: a) the current committee substitute bill HB 3838; b) the members of the Energy Resources Committee with contact information; and c) talking points about why this bill is necessary. We need to get this practice stopped! Please go to and Follow the following thread, because other updates about this bill will only be posted in the NARO Group. Litigation Status Update.
The TexOGA version is too restrictive because: a) a 2 year statute of limitations is too short; b) limiting liability to the initial purchaser allows the sellers to wash liability by running it through a shell company; and c) it keeps the ridiculous limit that the law does not apply as long as they send the offer and the lease in two different envelopes.
Proposed Committee Substitute (NARO backed version)
#Seismic Permits and Agreements – Watch Out!! "… The Option to Lease clause inserted into many Seismic Agreements is a sneaky way for the oil company to enter into an Oil and Gas Lease on very cheap terms.
For example, hidden within a 2 or 3 page, small-print, seismic agreement, there may be a clause stating that the oil company has the option , but not the obligation , to lease your land for oil and gas development at $50.00/acre. If the seismic research is favorable, the oil company will want to drill, and you will have to accept the $50.00/acre bonus, even if other companies are paying 5 times that amount. If the seismic research is not favorable, the oil company does not have to lease or make any additional payments. It is “win-win” for them, and “lose-lose” for you."
AJ- Thanks for that warning! Could you email me an example if you have one?
HB 3838 was voted out of committee. Please call your State Rep. and tell them you support HB 3838 to stop the royalty lease scam!
You’re welcome, Wade. I had never heard of such a ‘seismic’ lease scam so that is why I thought the blog post might be of interest to you and other forum members.
Not sure if this is what you are looking for but these individuals may have some information:
Beware of Delivering Lease Without Payment:
Failure of a company to pay a lease bonus is a theme that has been raised in this forum far to often. Below are a few discussions on the topic. It is always best to exchange a lease for a check at the time of the transaction. This may not always be possible because of distance. In such cases it is probably better to have an escrow company or attorney to hold the lease until the consideration is paid.
Sometimes companies file leases without payment of bonuses.
There have been cases were companies take leases but never file them. They return the leases later stating that they were never funded by the company. In the meantime, the mineral owner cannot sign with another company.
It is much easier to prevent the issue than to remedy it after the fact.