Recently my cousin and I were approached by a landman concerning the lease of mineral rights we hold on a farm property. We both want to lease; however, we discovered that the man to whom the farm was sold (Many years ago) apparently was also granted 1/8 of the mineral rights, with my cousin and I sharing 7/8ths of the mineral rights. We both want to do the lease, but the 1/8 owner has refused to allow the lease as he told the landman he did not want to grant access to his farm at all. The original deal was handled (long time ago) by our uncle who was an excellent land attorney and he structured many similar deals for us regarding considerable amounts of property in TX and OK and all these deals have worked out smoothly over the years to the benefit of living members of our family. I would be surprised if he had left a loophole in this Young County farm sale that would prevent family members from exercising their rights to lease minerals. I do need to search out the original deed of sale, etc. and if warranted, would like a referral to an attorney if it seems we might find a way to resolve this problem of access.
Could anyone give some advice and possibly an attorney referral - if it may be possible that we can get around this problem we would very much like to move forward. Our uncle and other family members who had hands-on knowledge of these family land purchases, etc. are all deceased now and we would like to be able to research and deal with this accurately.
Marilyn, I suggest you not spend money on a lawyer. If you yourself are not going to pay for the rig to drill, what basis do you think you have for legal action? Leave it to the potential lessee to figure out how to get it done.
It can't hurt to look at the deed to see if there are any impediments for the potential lessee. You have to remember, if we are talking about an oil company and not just a flipper, oil companies have ways to get what they want. If you are just dealing with a flipper, they may not lease you because they can't offer a complete package to someone who would actually drill. An actual oil company could lease you, space and get a permit and force pool the holdout surface owner. If your deed waived the right to entry and egress the wellhead , roads and equipment could be on ajacent land if it's a horizontal well. I suggest you leave any legal work to the professionals.
Looking at this from an operator's view, I'd guess that getting a drillbit on this farm is a longshot. The company would have to be willing to carry the farmer's 12.5% interest, plus they'd be dealing with a surface owner that doesn't want them there. An unhappy surface owner can make an operator's life a living hell.
Thank you so much - a very intelligent reply. The landman is connected to a drilling company and I believe you when you say they have the most leverage. We will just need to wait to see.
r w kennedy said:
Marilyn, I suggest you not spend money on a lawyer. If you yourself are not going to pay for the rig to drill, what basis do you think you have for legal action? Leave it to the potential lessee to figure out how to get it done.
It can't hurt to look at the deed to see if there are any impediments for the potential lessee. You have to remember, if we are talking about an oil company and not just a flipper, oil companies have ways to get what they want. If you are just dealing with a flipper, they may not lease you because they can't offer a complete package to someone who would actually drill. An actual oil company could lease you, space and get a permit and force pool the holdout surface owner. If your deed waived the right to entry and egress the wellhead , roads and equipment could be on ajacent land if it's a horizontal well. I suggest you leave any legal work to the professionals.
Thank you. It looks like we will need to write this one off.
Tom said:
Looking at this from an operator's view, I'd guess that getting a drillbit on this farm is a longshot. The company would have to be willing to carry the farmer's 12.5% interest, plus they'd be dealing with a surface owner that doesn't want them there. An unhappy surface owner can make an operator's life a living hell.
The landman only reported to my cousin over the phone that the landowner did not want to cooperate. I'm guessing the owner was given the 1/8 mineral rights interest along with the surface years ago when the farm was sold as an incentive for him to want to cooperate in a lease later -- but, apparently we will just have to write this one off. Thank you so much for your reply.
Jeff Vincent said:
Has the landman indicated that if they can't get the surface/mineral onwer on-board, they aren't interested in your lease(s)?
Look at the deed language carefully, and maybe have an attorney look at it. Also, there may be some operators out there willing to drill with 1/8th outstanding. If they are drilling horizontal, the well site might can be located where it is less objectionable to the surface owner.
Thank you so much, Mr. Caldwell. I am ordering a copy of the deed so that we will have that information. I appreciate your advice -- the Minerals website has proven to be just great as I have had many suggestions from other members.
This sounds similar to a situation I encountered in Parker County, Texas. Seven-eighths of the mineral owners leased to me, but the remaining one-eighth mineral owner held out. We offered him more than twice as much bonus as anybody else in the proposed unit, just to get his one last interest locked in. But he turned us down, saying, "I know you guys need me to drill the well, so when you get serious, call me back." Bad move on his part.
Not only did my client refuse to go up a third time on the offer, but they "cut out" the entire tract from the proration unit because their original location for the lateral would have required that tract but by altering the path of the lateral very slightly they were able to cut out the tract with the unleased interest. So by holding out, this guy with the 1/8 interest not only screwed himself out of bonus and royalties, he screwed over his other family members with the 7/8 interest from getting a royalty payment for a generation because the proration unit that got approved by the Railroad Commission surrounded that tract on three sides, and the well was a screamer, so it will be producing for many years.
There is not a problem of access here, at least if this tract is in Texas. A mineral owner in Texas has what I have heard called an "absolute right" to develop his minerals, meaning that if he owned even a 1% mineral interest and found an operator stupid enough to drill, the surface owner could not prevent that from happening. Instead, what you have here, as in the case I specified from my personal experience, is an operator who, with good reason, wants to maximize profits. By including unleased interests in the unit, they are losing money. And companies with shareholders like to maximize profits, and are obligated to do so.