I am trying to obtain all records of Paid Up Leases from our Companies/Operators to get an idea of what kind of money has been paid to our trust over the past decade before I became involved. Initially, I was asking for all lease agreements, which resulted in a document from 1926 and mentioned a payment of $.10/ acre. Not exactly what I was looking for…
I have since learned that I am wanting all Paid Up Lease agreements. Some companies have complied without much trouble. Others either don’t respond (which seems rather unacceptable??) or I get a this kind of reply:
" We do not have an oil and gas lease from the _____ Living Trust because 100% of the mineral interests currently owned by the trust were already leased from the trust’s predecessors and production was already established on the lease long before the trust inherited it’s mineral interest in the mineral rights covered by the lease. The lease is held by production and will remain held by production until production ceases. If the old lease does terminate due to cessation of production and another company has a prospect on the land it will attempt to obtain an oil and gas lease from the trust in order to pursue the prospect via drilling a new well."
I’m confused. In a previous email, this same person informed me that the terms of lease was for 5 years. So shouldn’t we have to renegotiate a lease every 5 years? How is it that this company operates under different standards than others? Is it due to an error on my ancestors part awhile back or???
Any help or insight on this is highly appreciated.
If the drilling was done in the primary term of the lease (usually three years or five years) and production was established, then the lease is held by production and moves into the secondary term. The secondary term lasts as long as there is production under the terms of the lease. There is no re-negotiation. If you have VERY old leases, they may not all be “paid-up” leases as the early ones quite often had yearly rentals. The title at the top of the lease is not necessarily meaningful. The ultimate repository for the lease is at the county courthouse where the minerals are located. You may have to get a landman to hunt them down. I usually start with the operator since they are supposed to keep a copy, but not all do-especially ones that bought leases from other operators. In Texas, there may not be a full copy of the lease, but only a memorandum which has the bare minimum of information required.
follow-up to what Martha said. Even if the lease is not a paid-up lease, but provides for delay rentals, there is usually an initial bonus paid to the lessor. So, if you are trying to capture all bonus money paid to the Trustee, then you need records of all payments made, not just those with paid-up leases.
Now, if you are trying to get copies of all oil and gas leases, you don’t want to limit them to paid-up leases.
I will suggest this is going to be a Herculean task, and may not end up being accurate. If you get 25% response, I would consider that to be a success.
Thank you both for your reply and insight. I may have confused things a bit by posting from my other profile that I was trying to discontinue, @RoyaltyRookie208. Guess I’ve been outed… by myself?! Oh well.
Wow. Thank you for the information. It certainly helps put things into perspective. It’s also a bit discouraging but inheriting mineral rights is full of peaks and valleys isn’t it? LOL!
So, let’s take Sabinal for example. They too have a lease that has been carried on from production from over a 100 years ago. The poor woman spent days digging up the original lease for me; which in terms of what I’m looking for, was almost irrelevant. I feel awful.
I have been able to find lease agreements and memorandums on TexasFile.com but as you mentioned @M_Barnes, they provide minimal information. I suppose I could request the 1099’s for the past 10 or so years from each company? Doesn’t give specifics of payments made but it might a good place to start maybe?
@tim_dowd Yes, my goal is to capture all bonus money paid and any other lump sums of payment that we received from companies over the past decade. I take it that obtaining that is not going to be as simple as sending an email “requesting all bonus payments” eh?
Is there any particular verbiage either of you suggest I use that might help elicit the information I’m seeking?
Really appreciate the advice and input btw. Love this forum!!!
In regards to bonus money paid at the time of the lease, as far as I know there is no public record of it for a private landowner . Possible sources from the trust’s files might be be an offer letter; a deposit slip or check stub; review of the bank account statements, old tax returns.
Most bonus payments we’ve received were handled by the landman service that took the lease, sometimes from their account. So the O&g company may not have a direct record of it.
My goal has been to keep a spreadsheet with multiple tabs, one being a Lease tab where each lease is entered with all the pertinent information, including bonus, so that the next generation does not have to go through this. Right now they aren’t very interested but I know they will appreciate it when it’s their turn.
Good luck to you and I would encourage you to join NARO and their Mineral management program for education and ongoing support!
RR said: I suppose I could request the 1099’s for the past 10 or so years from each company? Doesn’t give specifics of payments made but it might a good place to start maybe?
Two things with that statement. Keep in mind that operators turn over. So, company M may be the operator in 2022, but they were probably not the operator in 2012.
Secondly, they probably won’t provide them, or will ignore you.
RR said: I take it that obtaining that is not going to be as simple as sending an email “requesting all bonus payments” eh?
TCD: No, it won’t be simple. And it won’t likely provide you the total picture of what payments were received. You might give it a try, but I suspect you will come away frustrated.
Bonus payment is made only once, at the time the lease is signed. As long as there are producing well(s), almost payments over the years will be royalties on the production. The 1099s will have been issued to the Trust under its federal tax id number and annual tax returns should have been filed which would report the income and whether it was retained by the trust or paid out to the beneficiaries. The trust and/or beneficiaries will have had to pay income taxes. If you are the successor trustee, then you or your CPA can request copies of the tax returns from the IRS records. Most companies can send you the 1099 for the last year, but I am not sure how likely you would be to get data from a decade ago.
Thank you all for the help. @J_Walker, being the next generation, I can assure you that you being organized and detailed will definitely be appreciated. Cuz I certainly wouldn’t be going through half this battle had I had records or confidence that our trust was handled properly.
I’ve considered joining NARO but they charge quit a significant fee so I’ve hesitated. If they have educational opportunities however, sounds like it might be more than worth my while. Thanks again!
NARO has an introductory first time membership this year at $75. And we are having a convention in Tulsa on Oct 10-12. If you are able to come, this might be a perfect year. Here is the link to the convention agenda.
There are quite a few members that are part of a family trust or LLC. Great way to network, take classes to learn how to “do all this stuff” . I am speaking on “Mineral Data-How to get Organized in the 21st Century” as many of us inherited piles or boxes of paper and are pretty paralyzed when we first start to untangle the mess.
They have an excellent class taught by Glenn Webb called Minerals Management 101. I have sat through it at least three times. Once for myself and twice with two of my kids so they could learn the basics. It is on the morning of the 10th. They both came away with a much better handle on “what Mom does”.