Myself and other home owners on small lots of land in our small town here in southeast Kansas (Fredonia) have received offers from a company to purchase our mineral rights for horizontal drilling at 4 cents a square foot. I believe they are after oil since the letter says they are restoring "the historic Fredonia oil fields" It also states they will be doing horizontal drilling. I want to know if refusing to sell will get me offers for a lease and royalty payments (or if I can successfully pursue something like that) or if refusing to sell will just mean that the oil down there will be drained and my profit lost since other land owners around are selling their rights? There is only one company involved as far as I know and they've already begun work outside of town from where they will do their drilling. Thanks for any help you can give. -Les
Les:
If you own the mineral rights in a spacing unit designated for a well, you should recieve royalty payments from the well (if production occurs). You can lease your minerals or perhaps be pooled into the well. On the other hand, you can opt to sell your mineral rights thus not recieve anything but the money for the sale of the minerals.
Charles thank you very much for responding . . . I think I need to clarify my question for you or anyone else that will weigh in. My property is inside of town with our house on it as are most all of the properties who have owners receiving this offer (and there are a lot). I don't think the city will allow property owners or this company to drill an oil well inside city limits. The drilling is being done outside the city and then it goes horizontal underneath our properties. I'm assuming this kind of thing has been done elsewhere and I'm wondering what the ramifications are of refusing to sell my mineral rights. Can the company then choose to drill around my property underneath the neighbor's property thus getting my oil anyway? Can they file some sort of eminent domain suit and go after my oil anyway? Or would the company possibly need my mineral rights bad enough that I could get them to make a leasing offer that would have the potential to eventually put more money in my pocket? I'm not sure if this is hearsay or true, but I'm told property owners receiving the offer hold properties that together form a cone shape that fans out from the drill site into town. Thanks again for your help.
charles s mallory said:
Les:
If you own the mineral rights in a spacing unit designated for a well, you should recieve royalty payments from the well (if production occurs). You can lease your minerals or perhaps be pooled into the well. On the other hand, you can opt to sell your mineral rights thus not recieve anything but the money for the sale of the minerals.
I've been told that what this company plans to do under our town is called "fracking". If no one wants to or can stop the "fracking" and the company is going to succeed without my cooperation I'd just assume sell. I know the city is behind the company being here because it brings business to our struggling economy. I won't have the nerve or will to fight the desire of the town, but if it's probable that I could easily negotiate a lease offer that might in the long run get more money in my pocket then I want to pursue that.
You need to contact the State agency that is in control of drilling in the State of Kansas. Ask someone about the rules for drilling within the city limits and other matters of your concerns. Most likely, this agency has or will issue a drilling permit on a specified spacing unit and the well will have to be drilled according to their rules. The fracking procedure is common in the drilling industry as part of the completion method for wells. Don't feel obligated to sell as if you decide to lease, this will be your option. Again, consult the agency for their opinion in this matter.
Charles, your help is much appreciated. I will try to find out what agency it is and contact them to double check on this stuff; but your answers and that of another Charles on this forum have given me hope for something better than the buy out offer. I'm willing to risk that relatively small amount if there is opportunity for a significantly better deal in the long run. Thanks again.