Probably a simple answer, but I cannot find it. On an area of mineral rights we have leased to them, there are two new wells drilled, each going south 2 sections. When the lease expires what happens next? If I were to want more money than they offer, is that negotiable? What if I just refuse to sign anything, what happens? How is the value of a new lease determined by anyone?
If you’ve already signed a lease, and there is now at least one well producing on the property you leased (as in, you expect to get royalty from the two wells you mention), 99.9% of leases have language that says the lease extends indefinitely until production stops. Most leases are written to where you’re frozen (for better or worse) in the terms of that lease until royalty payments stop for some reason, which could be 1 year or 100 years.
If you’ve signed a lease, but the two wells you mention drilled to the south are NOT on or pooled with your lease (as in, you didn’t get a division order and you don’t expect to receive royalties for the wells), then the currently lessee has until the end of the “primary term” to get something going. You’ll need to look at your specific lease language to see what they specifically need to do to extend the lease.
If they fail to extend the lease through production, activity, or payments, then the lease expires and you have a fresh start with negotiations. What happens if you refuse any sort of lease depends on the state your minerals are in. Sometimes not having a lease means nothing can be drilled on your acreage. But sometimes it means you’ll just be force pooled and standard royalty rates & bonuses are assigned. I recommend to negotiate a lease ahead of drilling for the best terms if you have any interest in your minerals being developed.
OK, thanks a bunch for all that, seems to make sense I guess. In my case my interest on this lease is 0.00010416 which if my math is correct, they should reap $36 million the first year, and of all that I get $3700 bucks! They only paid me $1666.30 for the “lifetime lease”. As you said, I need to read the lease to see what I agreed to.
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