In the process of buying property which has the mineral rights included in the sale. It is a large tract of land and home with 40+ acres. Come to find a couple months before we got on contract the seller leased out the mineral rights with a paid-up lease (property was on market at the time).
Read through the agreement and it gives the company all rights to modify and enter the property in any way that is “reasonably necessary” for them to obtain and store minerals.
Seller says he will be transferring the lease, with a primary term of 3 years. I want to terminate it somehow as I was purchasing the land to use it and a well pad, roads, and new power lines will get in the way of that.
Is there any way I can contact the company to request termination? Nothing has begun YET.
You wont be able to terminate the lease. Its 40 acres, IF they drill a well, the drilling unit will be 100’s of acres, so they chose your land for the drilling site, they will have to contact you about using your surface for the drilling location, you tell them no and then they turn to your neighbors to pay more money to drill a well.
Many leases expire without drilling. Should it expire, you could negotiate a no surface use clause or other restrictions next lease.
Also review your purchase contract. Look for “seller warrants no contract will be produced” during due diligence, and check if the lease was of public record.
Most operators try to accommodate the surface owner. But maybe do not go to great expense to develop the property until you know more.
Most operators try to accommodate the surface owner. But maybe do not go to great expense to develop the property until you know more.
That’s a relief to hear. I hope they’re accommodating to our request. I figure I will call them to ask if they can modify the lease to add a no surface use clause.
I won’t have any trouble for telling them no? The lease explicitly states they have the right to come use the surface as they wish. I worry by saying no they’d seek action against me.
IANAL. Unfortunately, mineral rights trump surface rights. If they want to drill on your land, they can drill on your land. You can tell them no; but they can drill anyway. The best you’re going to be able to do is negotiate surface damages; but even then they can generally pay you whatever they think is fair; or whatever is stated in the lease.
The potential good news is that if the entirety of minerals are owned by you (in other words, a portion hasn’t been severed), the 40 net mineral acres has the potential to give you a very nice royalty going forward if a well gets successfully drilled and put on production.
if you’re interested, you can post the legal description and folks on this forum are typically pretty good about looking at the location of the acreage and minimally offering thoughts on whether it’s in an area that’s been drilled in the past.
When you state “has the mineral rights” does your contract reference that all minerals are being transferred or, is the seller holding some back? You need to try and find out if any prior owner(s) reserved any minerals. An abstract will show this. An inquiry to the leasing company inquiring about the mineral ownership they show can also be added to your attempt to modify the lease. Until the title is changed as the close of the sale don’t expect them to talk to you.
If you look at the lease you may have a clue if the prior owner’s (your seller) decimal interest indicates something less than 100% was leased by him. You should ask your seller what he knows about the minerals he says he owns and is including in the sale.
I would suggest getting a copy of the oil and gas lease to inspect and see the terms. The seller may only own a portion of the mineral rights! Transferring the lease and selling you the mineral rights are two totally different things.
Yes. I’ve done my research. All minerals will convey and no prior owners have reserved any decimal interests in the rights. I’m well aware of the ins and outs of this.
Is it an oil and gas lease only [no coal, sand, gravel, or uranium mining]? If so, and if horizontal wells are the norm in Cass county, even if a well is drilled, the company may have no intention of using any of your surface. It seems odd that the lease was not disclosed earlier. You can request termination of the lease, but a request has no force of law of which I am aware. Would you be willing to pay the company to recapture the surface use rights?
I have leased several times in the past where some of the surface tracts that I also owned minerals on were excluded from surface operations. Also retained the rights for pipeline right of ways from wells drilled on surface tracts that I owned 100 % of the mineral rights along with road easements.
You have valid concerns. The leassee has the right to extract those minerals, pay royaltys and according to the lease language you stated above, can drill on the surface wherever they feel is a good spot. I’m guessing they will discuss the location with you and hopefulll, you can give some input. They have money out on the lease, so terminating it, without consideration to them would be hard to believe.