Standards of Professional Conduct -- Landmen

Landman Discussion
21

Like any profession there are good and bad folks who ply this trade. I personally have seen a “professional landman” lie under oath in court. Blatant perjury. He suffered no consequences for his action (on the other hand he is presently unemployed and no one in Texas will give him a job, so word does get around). I have several different professional registrations I must keep up. Lots of continuing education hours every year. One of my registrations wants to know every year if you had any legal problems greater than a traffic ticket. Given the importance of what landmen do and the large sums of money involved, leaving this open to anyone with no regulation guarantees problems.

Mr. Cotten, I like your comment on the actual size of land sections. Surveying in the early 1800s was not as exact as now and a lot of sections in Arkansas are not precisely square.

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Are there any states that do regulate / license landmen?

23

Maryland and North Carolina do. They really brought the industry to its knees with those regulations…

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24

Have any of you ever asked a landman that was interested in leasing your mineral acreage to show you the entire area that they are interested in leasing and what did they tell you?

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25

Dear MO,

No, I have never asked that. When I worked on the industry side, nobody asked to see a copy of my area map. Those maps are protected like they are treasure maps (or at least they should be).

Best

Mineral Owner said:

Have any of you ever asked a landman that was interested in leasing your mineral acreage to show you the entire area that they are interested in leasing and what did they tell you?

26

What I have experienced over the last forty years or so is that a lot of the oil companies, lease brokers and landmen act as if they have a right to your mineral rights. The way I feel about it is that I have a right to know what the company plans to do with the leased acreage. The United States is about the only country in the world that I know of where the citizens can own the mineral rights. We are very fortunate. Texas is one of the states where individuals and companies can own the mineral rights.

In a lot of instances the lease some people sign is almost a deed to the minerals! From years of some experience is that most local attorneys in large and small towns don’t know as much as some mineral owners. I have seen that a lot of people think that any kind of an attorney is an expert on mineral rights.

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27

Like I have said in other forums, I do not like forced pooling. In Texas you get to negotiate your form and have the ability to not lease if you so choose. Not so in forced pooling states.

Canada has limited ownership of minerals.

As to a lease being almost a deed to the minerals, in most jurisdictions an oil and gas lease is a conveyance of all the minerals in the nature of a determinable fee, with the lessor reserving a royalty interest and possessing a possibility of reverter.

Buddy

Mineral Owner said:

What I have experienced over the last forty years or so is that a lot of the oil companies, lease brokers and landmen act as if they have a right to your mineral rights. The way I feel about it is that I have a right to know what the company plans to do with the leased acreage. The United States is about the only country in the world that I know of where the citizens can own the mineral rights. We are very fortunate. Texas is one of the states where individuals and companies can own the mineral rights.

In a lot of instances the lease some people sign is almost a deed to the minerals! From years of some experience is that most local attorneys in large and small towns don’t know as much as some mineral owners. I have seen that a lot of people think that any kind of an attorney is an expert on mineral rights.

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If you spend enough time reading/participating in this forum, you should be able to conclude that the statement you made below is correct. I have many friends who are attorneys. But I can honestly tell you, there are several people on this forum that I have personally contacted by phone, and I will continue to contact, before I contact an attorney regarding an issue of this nature. My other comment I will share is that the dynamics of oil and gas have changed dramatically with horizontal drilling and hydraulic fracturing. There are many situations now that did not exist 20 years ago, and so there is a lot of active litigation taking place to address those issues. From a mineral owner standpoint, the days of simple (easy to understand) leases are long gone. If you don’t fully understand what you are getting into, you should seek professional help before you sign. And by professional, I didn’t say it must be an attorney. I have met some very, very wealthy people who have all the resources in the world to have the best leases drafted and approved, but they chose an attorney who made a mistake on one sentence of the lease that will cost this particular owner millions of dollars in post-production costs over the life of those leases. I cannot confirm, but I am willing to bet the attorney they used for their leases does not practice oil and gas on a routine basis if he missed the most important sentence in the royalty calculation. What is the best way to avoid something like that happening? Educate yourself, and find subject matter experts when you need additional help. Spending $500-$1000 before signing away your minerals by getting professional assistance will most likely pay for itself and far more over the long run. Even if your lease doesn’t end up producing, the knowledge you will have learned from the process will prepare you for future endeavors in leasing. Knowledge is power.

Mineral Owner said:

From years of some experience is that most local attorneys in large and small towns don’t know as much as some mineral owners. I have seen that a lot of people think that any kind of an attorney is an expert on mineral rights.

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29

Very, very well answered and explained. Thank you and continue to help in the future.

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30

I share Kitchen’s well-stated views. The two most important things any mineral owner can do are 1) educate himself on mineral ownership so he’s able to diligently manage his own minerals, and 2) where issues are beyond his sphere of competence, hire qualified advisors that specialize in his area of need.

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31

One thing I will add is that the geological nature of oil and gas creates far different scenarios from one place to another, even in the same state. The financial, technological, and legal aspects of the different areas are unique as well. Even if I am the most knowledgeable person when it comes to Barnett Shale leasing and development issues, doesn’t mean I am prepared for everything that should be addressed in a lease for the Permian Basin. Certain areas have issues unique to their area, and that is why this board is a great place to find answers and educate yourself. But contacting a professional who knows the area in question is also important.

Something I am newly aware of is a case in the Permian Basin of an operator of wells that is utilizing CO2 injection for Enhanced Recovery of oil. That is something I have never heard of in the Barnett. There are disputes about the cost of the CO2 injection, recovery, and processing that relate to royalties. My point is that a person may know the “vast majority” of situations that need to be addressed in a lease here in the Barnett Shale, but that does not make that same person an expert for leasing in a different area.

Even if you don’t have someone write up your lease, you can always ask (and potentially pay) someone to give you some background on what items you need to address specifically for your lease in question based on the operations of oil and gas development that are specific to that area. Better to do your homework up front than live with a mistake you can’t change after the fact. And somebody always knows about a unique situation that could impact you, that you have never dreamed of. I learn something new every day!

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32

Great points Mr Kitchen, there is no substitute for local expertise. Yesterday I had a conversation with a friend who told me that her uncle had taken upon himself to learn as much as he could about the situation with the family minerals and now he is the go-to guy for the neighbors when they have questions. This is greatly helping the community to organize in a way. As knowledge spreads in a community there will be less potential for abusive operators or landmen to get away with things. A greater share of work will go to local landmen, local O&G lawyers, anyone who has the particular local knowledge and connections unique to an area should flourish. Word on who is good and who is not will get around. A long time local expert will have the interest of his community above operators who may come and go. He will have to continue to live with his neighbors. Landowners do have the right to refuse to deal with pushy landmen. If all landowners refused to deal with anyone who is not a member of the organized association it would give the organization a lot more clout. I agree with Buddy about forced pooling. I think it is abused and where it is allowed landmen should be regulated.

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33

Interesting story on a Landman

http://www.pleasantonexpress.com/news/2014-12-03/Oil_and_Gas_Report/A_landmans_story_of_lease_acquisitions_before_leas.html

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What I have experienced over the last forty years or so is that a lot of the oil companies, lease brokers, and landmen act as if they have a right to your mineral rights.

I would like a nickel for every landowner who has been threatened with pooling if they don’t sign. Often pool leases by the regulating commission are superior to that being offered. I am seeing company men and pumpers filling up their pickup natural gas tanks from local owners’ wells under the clause that allows the lessee to take gas free for use on the well. Frankly, that is stealing and such clauses need to be outlawed by the government.

Unfortunately, the attitude expressed above is common. I think what would help isn’t more government regulation. It never helped appraisers prevent a housing crisis, did it?

What would help is a sap. If you take a blackjack and place it up the side of one of these smart-azz landmen at high velocity, then you have his attention. Politeness follows. I don’t know how companies like Dudleys can hire so many pricks.

35

I got a landman’s attention today without “rammin” him from behind. A short version is that for the last few months, we had been negotiating on the bonus and royalty, so I decided to amend his onerous lease to how I wanted it to read, and included a top-notch land use agreement from Buddy Cotten. Then, he amended my lease, and had the nerve to call it “onerous.” Today, as I was amending his “review” lease, I decided that I really didn’t want any wells drilled on my land or strangers drinking out of my house water faucets. So, I emailed him and told him so. Did he freak out or what?

He said that I didn’t trust him, and I told him not to take it personal. It’s just business. Then he said that his client might call me. I told him I would sign if they would accept my amendments, pay me what I want, and give me something in writing stating that his client would not drill on my land.

He said that I would be hearing from him again. I bet I will!

Thank you for listening.

Pat

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36

It doesn’t have to be that way and the ethics provisions of AAPL do not need to be strengthened so much as enforced. And landowners should refuse to speak with any landman who is not a certified member and shows a card. And all conversations should be recorded by law. Then when the lies are provable, you have actionable evidence of fraud and lying.

The world changed when deregulation came about and since 1992, leases are pro-industry and anti-landowner and folks need to remember WHO actually OWNS that mineral. The federal government dictates leases to the potential lessee but on private land that whip hand has changed.

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37

One of the things I have started doing a few years ago is to have them email you everything in EDITABLE FORM.

Have them identify the lease broker they work for. The company the broker is working for. Have them email you the lease form they want to offer you. All contact information of the landman, broker, and company the broker is working for. Most all landmen don’t want to go to the trouble to type it and email it to you. I have found out that a lot of them don’t know how in a lot of cases.

I have started to try to get a lease agreement that is acceptable to them and the mineral owner in writing before agreeing to the lease bonus and length of the term of the lease. About 75% of the time a landman will tell you things like the company won’t accept your lease, but they never presented it to the company! I have been told so much BS over the years that it’s disgusting! I like to get right to the point and not waste my time or theirs; it’s common respect that is often not returned.

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38

I say, “When dealing with Landmen, expect to be cheated because ‘THERE BE DRAGONS OUT THERE.’”

A Cheated Nanna.

Dave Quincy said:

For your own info., it is not really a fresh issue. It may be fresh to you if this is the first time you have heard of it. Several years ago a state rep. or senator from South Texas, maybe Laredo, introduced it and it failed to pass as well then.

It could be one of those things where the devil is in the details like Prohibition. When Prohibition was first made law, there were religious exceptions, i.e. wine could be used for religious services. All of a sudden, and not surprising, there were applications for wine by people named Rabbi O’Malley for use at Temple, or a Father Shapiro to use in a Roman Catholic Mass.

The function of a landman is not limited to negotiating oil leases. They often use public records to search ownership. You need a license to do that? Well, fine, then all of a sudden I am only searching personal family history. What’s a landman?

I am assigned to go pick up a lease from Farmer Brown. Many landmen also hold the office of Notary Public. Guess what? I am not going to notarize that lease as a landman, but only in my capacity as a Notary.

Negotiating a lease? That may be harder to get around if a license is required to do that specifically. Maybe it can be said that it is some type of spiritual experience, and that the person is only exercising his freedom of religion instead of effectuating land work.

Am I in favor of it? NO, simply because I would prefer to keep the annual license fee that the state would want from me in my own pocket. I’m guessing it would be in the neighborhood of $350.00 per year if you look at the Texas Occupations Code and other license fees.

Lagunaroy said:

Actually the words are employer Or Clients knowledge and consent. If I hired a landman to represent me and he has an ORRI in the same well that I have an RI in would you think that was ethical? I found that via the CAD.

I am not saying all landmen are unethical, and I would not believe anyone who said they were all ethical. And yes you are correct I did misspell Mr. Cotten’s name, I apologize for that.

I think the point of this discussion was whether or not the state should regulate landmen like we regulate doctors, nurses, lawyers, real estate folks, law enforcement, and many I’m sure I missed.

What say you?

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39

How do you find a CPL that can help the mineral owner?

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40

There is also another quasi designation. It is called a CMM, or Certified Mineral Manager. The certification is through the National Association of Royalty Owners. I have some doubts personally about the not so stringent requirements of the program.

The CPL designation is through the AAPL, or American Association of Professional Landmen. You might want to contact the AAPL and ask if any of their CPL holders service the mineral interest owner side of the business. Most do not.

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