Hi, I am sorry these are such basic questions, but I haven’t had much success finding answers online. I have received a lease offer for the oil & gas rights for a home I own in Midland, TX. It’s tiny acreage (0.18 Acres) and I only own half the mineral rights, so the total income is really small even factoring in the bonus. Since I know nothing about this and the money is so little I declined the offer the landman made. He immediately replied with “You do realize we will be drilling regardless?”. Can someone clarify this? Besides sounding like strongarm tactics, it sounds like he means forced pooling, which I believe requires a court order. If that’s right, how do I verify that forced pooling does apply to my property? It also sounds like if forced pooling is in place and the well does produce, I am still entitled to royalties, but not the signing bonus. Is this right? I tried to talk to him, but he didn’t respond. Just to clarify why I would turn down “free money”, I am worried that my lack of knowledge about this could cause me to make a mistake that would cost me far more than I receive from the lease (for example, I didn’t realize I should strike the warranty clause until I read this forum) and it’s not worth the risk to me. Furthermore, I am considering selling the property within the year, which could really complicate the sale or the lease, or both. Thanks very much for any help.
Very likely that the city tracts have been pooled under MIPA (Mineral Interest Pooling Act) after hearing at RRC. This is a way for oil companies to be able to drill in cities where there are very tiny lots. Otherwise one owner could hold up everyone else. You will be given specific choices in writing for the MIPA well. Even if MIPA did not apply and the other 1/2 owner leased, then the lot would be drilled. In that case you would be unleased mineral owner who comes into pay after the pay-out (well revenues exceed drilling and operating costs). Leasing will not hold up your house sale. If you post more information about your lot or neighborhood location, someone familiar with the oil companies and MIPA units in Midland can let you know more of what is going on.
Thanks very much @TennisDaze!
The legal description (from the contract) is LOT 1, BLK 21 OF FAIRMONT PARK ADDITION, SECTION 2, PAGE 51 OF THE PLAT RECORDS OF MIDLAND COUNTY, TEXAS
Is that the info needed?
I assume that since this is a tiny residential plot that there wouldn’t be anything placed on my property, right? Can I confirm that with the landman?
There are 2 sections of the contract that I need to strike, the title warranty and ingress/egress rights to the land. Is this something I can expect them to agree to - or is it too much to deal with for such a small amount of rights? I don’t expect them to need ingress, but i can’t agree to that for a rental house.
Thanks!
-Paul
Put a surface use waiver in the Oil & Gas lease. Their standard lease form they sent you might even already have it in it. If not, ask for it to be in the lease. I bet they’ll be fine with that.
This was a great question! And I, too, am watching the answers! I have not encounter this same situation but I have a deed where this could occur.
We also got a letter about mineral rights in Fairmont Park Addition and trying to navigate this as well! We are looking into getting an attorney to help us review and negotiate it. Do you have the May 20 deadline too?
Is the size of your NMA interest large enough in the lot and block “rooftop play” to justify spending money on an attorney to negotiate? If you’re in a MIPA unit, you get some decent options to elect at pooling.
Not really, but thanks for the suggestion. It’s half options on 0.181 acres, so 0.0905 acres! Basically a postage stamp.
The landman actually increased his offer after I first turned him down, so I think I am getting a “good enough” deal.
Is it a MIPA unit? If so, the options to elect at pooling could be better. What’s the bonus at 25% royalty they are offering now?
I wasn’t given a deadline, but the landman told me that he was meeting with the oil exploration company this week with a list of who will and won’t lease their rights. So the timing lines up. I didn’t get a lawyer since my acreage is so small - it would cost as much pay the lawyer as I would make on the rights. I worked directly with the landman and he increased their offer a little and took out some language in the lease that I couldn’t agree with. But again, I have little to lose since I have so little land. Good luck.
I’m not an expert nor a lawyer regarding Texas law. I have had experience in OK pooling. The landman has to present to the pooling judge an attempt to find and where possible obtain a reasonable lease. Usually you get a notice and several choices of bonus and royalty interests and you pick one. It would be better to negotiate with the landman. eg; he offered 1/8th RI and $100 bonus nMA. . You counter with 3/16th and $50 bonus or 25% and no bonus , add in NO deductions/ enhancements , and a depth limit clause…This area is in the Permian Basin and likely has a lot of oil. My grandfather was a geologist and said " NEVER" sell the MI’s! You can sell your surface and just exclude the MI’s.
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