I live in Northeast Louisiana, Richland Parish. I own 4.79 acres. I've been offered $150/acre and 3/16 production by some guy in Eldorado Ark.
There is an existing well approximately 200 feet from my property corner (600 feet from my house). I estimate 8-10 years since it last produced (since it ran at all).
The neighbors all signed but they have hundreds of acres and this is a nice windfall. it is a meer $718 for me. My bills are paid and I make a decent living. This is just not enough money to make me run and sign up.
I THINK $150 is low even for large acreage, but that agreement is between the others.
Where can I get an idea of what is normal for small acreage? Does anyone here have experience in this area? What impact will I have on my neighbors if I don't bother with this? What impact does it have on me?
If you do not execute a lease with anyone and a well is drilled, your acreage will probably be force pooled. I am not in Louisiana any longer, but I believe the force pooling provision calls for a 12.5% royalty. I think the well would have to pay out twice, and then you have the option at participating at 100% royalty on your acreage. By participating, you will have to pay your proportionate share of all of the costs of operating the well. This is in very simple terms. You can probably get the force pooling rules from the Louisiana Department of Natural Resources website:
This will have no impact on your neighbors and will not affect their individual situation at all. They entered enter their own lease agreements and they will be held to that agreement. I suggest you look into this more and seek help from someone who knows more about the situation in that area (bonuses, production, force pooling, etc.). I hope this little bit helps.
With acreage that small, surrounded by larger owners - beware of getting cut out completely as well. They may have enough distance from your property lines to lease up all around you and not need your small piece of the pie.
If you are force pooled in LA., you will receive the best offer made to anyone in the unit, not 12.5%. And if you decide to participate, there is no penalty in LA. either. If they are establishing 640 acre units or larger, there is no way for you to be "Cut out completely." Don't make your decision on mine or anyone else's advice on here.
jeremy gautreaux said:
If you do not execute a lease with anyone and a well is drilled, your acreage will probably be force pooled. I am not in Louisiana any longer, but I believe the force pooling provision calls for a 12.5% royalty. I think the well would have to pay out twice, and then you have the option at participating at 100% royalty on your acreage. By participating, you will have to pay your proportionate share of all of the costs of operating the well. This is in very simple terms. You can probably get the force pooling rules from the Louisiana Department of Natural Resources website:
This will have no impact on your neighbors and will not affect their individual situation at all. They entered enter their own lease agreements and they will be held to that agreement. I suggest you look into this more and seek help from someone who knows more about the situation in that area (bonuses, production, force pooling, etc.). I hope this little bit helps.
Assuming $100 per barrel (for ease of calculations)
5 acres out of 640 recieving 3/16 = 14 cents per barrel. The wells I have seen around the area make about 5 barrels a day. Not much.
The access road to the well is on my little parcel of land. So people with more acreage benefit from royalties while I make pennies and get my road destroyed. I count on that road to get me around my property.
I would say to negotiate your own lease with what is really important to you, that they not use your road. I would not strike a deal that they use and maintain my road because they won't maintain the road unless there were some draconian penalties [that they would never agree to in the first place] for failing to maintain the road.
Navy Bennett said:
Assuming $100 per barrel (for ease of calculations)
5 acres out of 640 recieving 3/16 = 14 cents per barrel. The wells I have seen around the area make about 5 barrels a day. Not much.
The access road to the well is on my little parcel of land. So people with more acreage benefit from royalties while I make pennies and get my road destroyed. I count on that road to get me around my property.
$150/acre is as high as any bonus I've ever heard of being paid in NE LA. Richland Parish is an especially quiet parish as far as oil and gas activity go, so I'm a bit surprised a company is even offering that much. On a smaller tract under 5 acres you may be able to get more royalty from a company, but 1/4th would probably be the max any company would pay.
As for what happens if you don't lease your minerals, there will be no financial consequences imposed directly on you, and you can't be forced to lease your minerals if you don't want to. However, if your property is pooled in a conservation unit, you can't do anything to prevent drilling, and you'll be considered a part owner in any wells drilled in that unit. The operator has to pay the unleased unit owner's share of the well costs out of his own pocket, and he can only recoup that money from that well's production, so the unleased unit owners will never be personally responsible for paying those costs. Your neighbors will get the exact same share of production whether you lease or don't lease, so don't worry about them.
The real drawback to being "carried" by the operator instead of leasing is the opportunity cost. The unleased owner gets nothing until the well's revenue = 100% of well costs (a.k.a. "payout"). While the unleased owner would then get 100% of the revenue from her interest (in your case 4.79/640 of a gas well), the reality is that most wells drilled will never reach payout, or they only do so after several years. The risk of going unleased is that you may wait for payout to occur for several years, whereas lease royalties are paid on all production from day 1. And if a well is a dry hole, there wouldn't be any future payments in either scenario, but the leaseholder would at least have a lease bonus in hand while the unleased owner would have nothing. Even with Louisiana's "free carry," leasing is the more financially rewarding choice in the vast majority of cases.
Some of the earlier responses have a few common misconceptions as well.
There is no royalty for unleased owners who are forced pooled in Louisiana, they only get carried as a part owner in the well.
As for penalties for not paying in advance, leaseholders who don't pay their share are assessed with risk charge equal to 200% of their share of well costs, on top of their share of the original 100%, but this penalty does not apply to unleased mineral owners.
You CAN get "cut out" of a unit if all of your neighbors voluntarily agree to it, but in Louisiana it is extremely rare for units to be formed other than the ones the State establishes (and they like squares and rectangles in North LA, not gerrymandered blobs).
A unit operator is under no obligation to make you the same offer as your neighbors, or to offer you anything at all. In fact, you could offer to pay him to lease you and he can still decline for no good reason. Of course, most operators would much rather have an expensive lease than carry someone's investment in a well for free, but there's no law saying they have to.
640 acre units are for natural gas, not oil. Oil units can't be any bigger than 160 acres. Those rules don't apply to horizontal well unit for either product, but horizontal wells are extremely rare in NELA (there are 0 in Richland Parish).