I own mineral rights in section 14-2S-3W in Carter county. I recently inherited this from my father. I just found out that there was a lease that was signed by my grandparents back in 1947.
Is there a way to ever end or renegotiate this 1947 lease? Also, how would I know if the terms of the lease were ever broken? Curious because the royalty interest agreed to in that lease are very low. Still trying to understand this very complicated business.
Thank you!
No Firecracker there isn’t anything you can do. The 1/8th royalty for the old lease was standard for the time. It’s as important today as it was in 1947 to understand the terms of the contracts that we negotiate & sign. Imagine if you have lived in your home for a long time & the builder come back & wants to renegotiate the original sales price because the value has now tripled or more! You should monitor the lease for breaches of the covenants therein, just as your predecessors should have done.
Todd Baker,
Thank you for the reply and yes, that makes very good sense and pretty much what I had expected. I was just hoping for maybe a loophole of sorts. Lol
Thank you for the response!
Okay, I am new to all this and have been trying to sort through tons of paperwork that has been passed down to me as the 4th owner, from my mother. I don’t understand the lease from 1947 still being in effect. All the leases I have seen on the 7 properties I am wading through have only been 3 year leases. Could you please explain this to me?
The leases can be perpetuated beyond the primary term (3 years as noted) by production. The lease stays in effect until production ceases. I’m currently working on a tract that has leases still in effect from the 1920s.
So if they are producing you no longer get paid leases you collect the 1/8th royalty. Could you tell me what happens if you don’t sign a lease? How is it determined if a well is drilled what you receive?
Check your original lease to see if there was a Pugh clause. You may still be able to lease minerals that weren’t in the original lease at deeper depths.
Risnert: If your old lease has been perpetuated beyond its primary term by production, you can’t sign a new lease and receive bonus money, but you do get royalties until such time as production ceases. In Oklahoma, if a party wants to drill a well and all mineral owners haven’t leased, they will file a Pooling Application with the Oklahoma Corporation Commission to pool all of the unleased parties into a unit. The Commission will set the bonus/royalty based on testimony. Generally several options for the unleased mineral owners to choose from. As for what you receive, it is based on your net mineral acres, your royalty percentage, the unit size, the amount of oil & gas produced and the prices for the product. Most old leases were for 1/8th royalty. Mostly 3/16ths to 1/4th now.
to get down to basics, the standard lease form says that this lease shall remain in effect for ________years and as long thereafter as oil and or gas is produced.(Or some very close variant). So, even if the lease is outside the stated time period (called the primary term), the lease is perpetuated for as long as oil & gas is produced. If there is no production, the lease expires
Now, some people will ask, what if you strike the “…as long thereafter as oil and/or gas is produced” language. The answer is no lessee/oil company would ever agree to that.
Tim, Thanks for the information.
Todd, Thanks for the information.
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