mineral rights

[AR Transplant]

the landman thread made me think of this.
We own our mineral rights here in north west Arkansas. This is a rare thing from what I hear.

We were offered about a thousand dollars for the lease of it about 8 years ago and passed, our neighbors did it but we didn't feel good about it.

my question, is this a good time to look into leasing our our mineral rights?

thanks

ar

[pookiethebear]

Sure if you want your land ruined.

[Old Vet]

A lot of acres has been bought for minireal rights in our area. They are for gas wells. If they put a gas well on your property it will take about 5 acres to build and less than one acre after it is in.Can you lose the rights to 5 acres for one year or loose the rights to less than 1 acre for a lifeitme?

[ErinP]

That's about right for our area, too. But at the same time, you have to grant access to their acre. And in some cases, they need considerably more than that...
Be very careful to read the stipulations of anything you sign and have an attorney look it over. This is one area where you do not want to make mistakes!

[EasyDay]

AR transplant, we haven't leased ours yet, but we are literally surrounded by those who have.

Old Vet is right that the pad will be about an acre square. So, if you have the land available and/or need the money, go for it.

Just to use our existing road, which is a county road, they paid all landowners $3/ft based on road frontage.

Locally, they will pay you for: the road they must build on your property to get to the drilling location, any timber that they must remove, $3/ft to run a gas line across your property, about $15,000 per pad upfront, then you receive royalties on all gas pulled (well, once they're overhead is paid...it usually takes about 6 months to start collecting).

It's based on a section of land (640 acres). So, by NOT leasing, here's where we (DH and I) stand:

All land in our section is leased except ours. We got the $3/ft for road frontage. We put up with the traffic/noise/dust (YUCK!). They are getting ready to start drilling on our neighbor (over 1/2 mile away). Because he is in our section, we will also get royalties. The amount paid goes by how many acres you own within the section, and it's based on a daily rate. Areas around here are ranging anywhere from $1-$3 per acre, per day.

I'm okay with our decision, so far... but money isn't everything to DH and me. We'll settle for just royalties for now because we don't want to give up any pasture or our hay field.

Know that you can also sell them water if you have a sizable pond, or are willing to let them build a pond on you (they're usually about 5 acre ponds).

All income is taxable EXCEPT for the money they paid for road frontage. That is considered compensation for damage, so isn't taxed. We made them put a culvert in one area near our house because they were tearing up the road.

Sorry that was so long! DH says I have "blabber fingers"!

ETA: Just thought of something else. If they have to move any of your livestock fencing, they will build you a new fence inside the old fence (however far over they need), and then take your old fence down. No moving livestock.

You CAN negotiate much of this with them. But also be aware that a few around here negotiated (well, argued) their way right out of the deal. Then the gas company only paid them minimal amounts and was awarded the lease/rights anyway via imminent domain. Working WITH them will get you further than fighting them. You won't win if it goes to court.

[Windy in Kansas]

Mineral rights or Oil and Gas rights? There is most definitely a difference.

Unless close to buildings, i.e. small acreage I wouldn't hesitate to lease for oil and gas. However the lease would state the distance from buildings, roadway access, and other restrictions such as not being able to put a house on the property for their caretaker. Old leases often allowed that.

Your lease, you're in control.

[Windy in Kansas]

Originally Posted by EasyDay

then you receive royalties on all gas pulled (well, once they're overhead is paid...it usually takes about 6 months to start collecting).

With a standard oil and gas lease in Kansas you get paid your royalty share of all of the production, not after they have recovered expenses. Typical mineral rights holder gets 1/8th of the total.

[AR Transplant]

Easyday, your post is probably one of the most scary I have read in a while.

Imminent domain is talked about alot around here and to me it's just another name for stealing.

We'll for sure sit tight, we have 7 acres and half is frontage. One good thing on our side is neighbors who love their privacy even more than I do. The neighbors who sold their mineral rights have sold their land and moved.

again thanks for the brutal explaination on this mysterous mineral right thing.

ar

[EasyDay]

Originally Posted by Windy in Kansas

Mineral rights or Oil and Gas rights? There is most definitely a difference.

Unless close to buildings, i.e. small acreage I wouldn't hesitate to lease for oil and gas. However the lease would state the distance from buildings, roadway access, and other restrictions such as not being able to put a house on the property for their caretaker. Old leases often allowed that.

Your lease, you're in control.

I disagree with your last statement in that they have certain requirements that are not negotiable.

They will put some small trailers there because the drilling crews work 24/7.
However, once it's up and operational on it's own, everything is taken away except the rig on the pad (and the lights and constant drone that goes with it).

[EasyDay]

Originally Posted by AR Transplant

Easyday, your post is probably one of the most scary I have read in a while.

Imminent domain is talked about alot around here and to me it's just another name for stealing.

We'll for sure sit tight, we have 7 acres and half is frontage. One good thing on our side is neighbors who love their privacy even more than I do. The neighbors who sold their mineral rights have sold their land and moved.

again thanks for the brutal explaination on this mysterous mineral right thing.

ar

It isn't as scary as you took it, I don't think. The imminent domain thing... the people that were taken to court refused to lease unless all of THEIR criteria were met. The argued back and forth until the gas company finally said, "we'll see you in court". They were called into court where the judge gave them a few options... the most attractive to them was taking less lease money. So, the company still got their lease... and the farmer will still get all associated upfront monies (road, pad, etc.) and royalties.

We've talked to a lot of the gas co. people around here. They ARE willing to work with you. They pay money that, by law, they don't really have to pay but they like to keep things peaceful. For instance, they didn't HAVE to pay us $3/ft for road frontage because the county had already given them our road as an easement. They paid us because they understand that it STINKS to have gravel trucks, etc., dusting us out day and most nights.

Not scary.... but be aware, and be smart about it, and even be friendly with them. You'd be amazed what options they can offer if you aren't a jerk about it. Still, talk to an attorney before signing anything.

And never SELL your rights. Only lease them (if you want to).

[Sabrina67]

There is an letter to the editor about mineral rights in M.E.N . You might check it out, it was from a lady who bought property and didn't buy the rights. Just a suggestion.

[stanb999]

Natural Gas leases are very complicated and absolutely require at least an experienced attorney. In our area we formed land owner groups to help with the leasing. It gives alot more leverage in the negioations. For instance the group that I'm a member of has over 1000 and 80,000 Acres of land.

We have pushed the lease monies to close to $3000.00 an acre/20% royalty/5-7 year leases. The landmen said as little as 9 months ago no one would ever get more than $250/12.5/10 year leases.

We also put formation and depth limits in the leases as well.


You are the land owner/ mineral owner. They went what you have. So you dictate the terms, Not them.

[EasyDay]

What I've been hearing more and more about around here is... if the gas company leases 51% of the section, the rules change. I do know that they can drill on your neighbor, then cut over (underground) and pull from under your land, as well, without you even knowing.

AR Transplant, I should mention that it isn't likely that they'd take someone to court (imminent domain) unless their surveys show a definite pocket that they'd want. They lease many acres that, once surveyed (geographically and seismically) aren't worth drilling on. So, they let the leases run out without exercising their additional options.

Too much to put in one thread! But, just one more thing. Many leasing companies around here that aren't drilling companies. I wouldn't lease to them because they turn around and lease it to actual drilling companies and make twice the money. Some leasing companies, though, are owned by drilling companies. Know who you're dealing with.

[Windy in Kansas]

Me: Your lease, you're in control.

Originally Posted by EasyDay

I disagree with your last statement in that they have certain requirements that are not negotiable.

In Kansas I simply have the option of not leasing. It truly sounds like Arkansas has some really screwed up laws. As an example you don't have a lease and yet you will get royalty from the neighbor's well should production be found. Everyone lumped into a section lease situation.

I currently have a lease that states my royalty cannot be pooled with others meaning I won't get a share of another well not on my land, nor will they get a share of mine--UNLESS I give permission allowing pooling. I believe that pooling is wrong so won't give permission which means that I will likely never get a well.

I had not renewed a lease with a reputable company because they wanted to put in a pooling clause. Instead the land went unleased but was eventually picked up by another oil company.

I've never heard of eminent domain rights being used for leases and can't understand the logic allowing them to be used.

Seems the good old US and the states definitely have some screwed up ideas and laws.

[mtman]

Originally Posted by AR Transplant

Easyday, your post is probably one of the most scary I have read in a while.

Imminent domain is talked about alot around here and to me it's just another name for stealing.

We'll for sure sit tight, we have 7 acres and half is frontage. One good thing on our side is neighbors who love their privacy even more than I do. The neighbors who sold their mineral rights have sold their land and moved.

again thanks for the brutal explaination on this mysterous mineral right thing.

ar

you are not sellimg them you are leesing them most of the time for 5 years then with an option

[EasyDay]

Originally Posted by stanb999

We have pushed the lease monies to close to $3000.00 an acre/20% royalty/5-7 year leases. The landmen said as little as 9 months ago no one would ever get more than $250/12.5/10 year leases.

12.5% is the minimum by Fed law... but that is of gross, not net. Your 20% rate is gross, is it not?

We also put formation and depth limits in the leases as well.

Stan, I'm curious why/how y'all stipulate formation and depth? I haven't heard that mentioned around here, so I don't think folks are doing it... or CAN do it. I would think that the depth would be dependent on the seismology results, no?

[texican]

If you still own your minerals, (of which oil and gas is included), you can stipulate a no occupancy exception.

I just got off the phone with a landman that wants to renegotiate a 60yr old lease, so that they can drill 5 more wells in the unit. I hold one of the last tracts to be renegotiated. I asked for a non occupancy (no drill pad) on certain sections of property, and he said he'd put it in the papers.

If you don't lease, and don't ask for a non occupancy clause, you're throwing away anywhere from hundreds of dollars, to hundreds of thousands, over the life of the lease. Don't lease, and they'll go around your plot of land, and you'll still have to deal with noise, dust, big trucks...and if they need to put a pipeline thru your place, they will, whether you're under lease or not.

Prices are as much as 10$/foot for roads and pipelines ROWs...around here. Some folks are getting 35K for a drill pad. I'd also ask for free gas, in order to lease. Probably won't get it, but it doesn't hurt to ask.

Several of my gas leases produces more per acre, than the land is worth, ....it only takes six months worth of production to produce enough income to match the current price of the surface estate. An oil or gas well is a license to print money. If the well isn't on your place, why care? You don't lease, and there still getting your gas, and don't have to pay you diddly!

If there not drilling in your area, it might be difficult to negotiate a lease.

[tamsam]

Don't think they will put only one well in. Here they put them in one after the other. If they are the same depth they have to be 1,000 feet apart, but if one is shallow and the other is deep they can be side by side. And yes the will tear up anything that gets in their way. Take plenty of pictures of what they do and talk to the state inspector as to what is legal in your state. Sam

[stanb999]

Originally Posted by EasyDay

Stan, I'm curious why/how y'all stipulate formation and depth? I haven't heard that mentioned around here, so I don't think folks are doing it... or CAN do it. I would think that the depth would be dependent on the seismology results, no?

Well let me tell ya,

First back as far as 1900, It was noticed that a flammable gas will flow from a deposit located deep in the local rock. The way they found it is kinda funny.
I may post the story for those interested. It involves a NYC doctor, an Indian, a hog house, and BOOM.

So, for years folks have used the gas lease money to pay a bill or the taxes when times were tuff. Then last summer the offers went for the standard 25 bucks an acre to 250-350 an acre. With landmen trying to sign all the large parcels. A few of the folks with the internet started checking things out with the question "Why did the price go up 10X +?". Well they got organized, Searched for the reasons, Found out the facts. When we had the info. Land owner groups were formed, Lawyers hired, etc.

What happened as a result of all this is basically we changed the whole process of leasing. Our group leader has been interviewed by the Wall street Journal 3 times. Because the way we did it. We cut out the middle men, we designed leases the make it their job to get the well drilled and bring the gas to market. Not just blind promises or lies. If they don't drill they loose, if they don't bring the gas to market they loose. If they do environmental damage they loose. This is quite different than the standard leases where they get the power to drill. But no responsibility too.

Now for the depth provisions. Well we as a group have check the geological records available publicly. In our area there happens to be 3 oil/gas producing formations. Being that the one they want now is very extensive we had the ability to leave the others out.

P.S. that is gross not net 20%

[homebody]

Originally Posted by EasyDay

AR transplant, we haven't leased ours yet, but we are literally surrounded by those who have.

Old Vet is right that the pad will be about an acre square. So, if you have the land available and/or need the money, go for it.

Just to use our existing road, which is a county road, they paid all landowners $3/ft based on road frontage.

Locally, they will pay you for: the road they must build on your property to get to the drilling location, any timber that they must remove, $3/ft to run a gas line across your property, about $15,000 per pad upfront, then you receive royalties on all gas pulled (well, once they're overhead is paid...it usually takes about 6 months to start collecting).

It's based on a section of land (640 acres). So, by NOT leasing, here's where we (DH and I) stand:

All land in our section is leased except ours. We got the $3/ft for road frontage. We put up with the traffic/noise/dust (YUCK!). They are getting ready to start drilling on our neighbor (over 1/2 mile away). Because he is in our section, we will also get royalties. The amount paid goes by how many acres you own within the section, and it's based on a daily rate. Areas around here are ranging anywhere from $1-$3 per acre, per day.

I'm okay with our decision, so far... but money isn't everything to DH and me. We'll settle for just royalties for now because we don't want to give up any pasture or our hay field.

Know that you can also sell them water if you have a sizable pond, or are willing to let them build a pond on you (they're usually about 5 acre ponds).

All income is taxable EXCEPT for the money they paid for road frontage. That is considered compensation for damage, so isn't taxed. We made them put a culvert in one area near our house because they were tearing up the road.

Sorry that was so long! DH says I have "blabber fingers"!

ETA: Just thought of something else. If they have to move any of your livestock fencing, they will build you a new fence inside the old fence (however far over they need), and then take your old fence down. No moving livestock.

You CAN negotiate much of this with them. But also be aware that a few around here negotiated (well, argued) their way right out of the deal. Then the gas company only paid them minimal amounts and was awarded the lease/rights anyway via imminent domain. Working WITH them will get you further than fighting them. You won't win if it goes to court.

Did not know that about the section. Is that true in all of AR? We have 66+ raw acres north of Hagarville that was leased for 5 years and one-fifth royalty. Surrounded on 3 sides by Ozark nat'l forest. Also in a valley surronded on 3 sides by mountains. We own !00% mineral rights on 20+acres, a couple of people come in on the rest. We don't plan on ever moving there so will stay unimproved/raw as long as we own it Free gas is in the lease. Don't know if they will ever drill in this area so am interested in the section share. Man that would be great. We pay taxes every year but don't live there so we'd have to have an out of state hunting license to hunt on our own land. I know that DH will never sell it as he sees the place as a refuge if needed. Is the section thing for all of AR? Or do I need to do some checking? Thanks.
Also is there a website I can look at that will tell me what is planned for each section? Thank you.