Help!! Company wants to lease my Mineral Rights?

[Got5onIt]

***EDITED: I'm an idiot, the letter was asking to LEASE the mineral rights***


I received a letter yesterday stating several homes in my neighborhood are being offered $600 + 20% of all "profits" for the mineral rights the home sits on. Apparently, this company wants to tap a natural gas source in my area. The letter also states this has already been done in another part of my subdivision & I have until August 29th to accept the offer. I live in a regular, cookie cutter, suburban area in Denton, TX, so it's not like they're tapping into 10 acres of my land.
I'm not sure what would happen if I did not take the offer.

Anyone experience a similar situation? If so, your insight is greatly appreciated!!

 

[Silver2003Cobra]

well, have a good lawyer go over it.. and then do it, if you can make a chit load of jingle on it,why not?

 

[2003 Silver]

You're lucky! Here in PA (at least my area) you don't own the mineral rights below your property...I guess the government does?? It states it cleary in the deed.

Negotiate with them.....ya never just accept a low ball offer.

 

[s_x_i]

DO NOT SELL THESE RIGHTS!

Offer them a lease. I could explain, but it's too complicated over the forums. Tell them you are willing to lease only, and you want 1/4 of production.

I work in Oil and Gas legal - P.M. me if you want to go over it.

 

[astrodudepsu]

^^
thats true. In PA you do not own your mineral rights. A company can just come in and basically undermine your home. there have been many instances of houses collapsing because of bad mining operations below your home. Since they own the mineral rights they don't have to pay for it either. I would think long and hard about selling them, at the very least talk to some of your neighbors that have already sold the rights to see how the company is treating them.

 

[2003 Silver]

^^
thats true. In PA you do not own your mineral rights. A company can just come in and basically undermine your home. there have been many instances of houses collapsing because of bad mining operations below your home. Since they own the mineral rights they don't have to pay for it either. I would think long and hard about selling them, at the very least talk to some of your neighbors that have already sold the rights to see how the company is treating them.

Yep...the first mine shaft at my new house starts 100 ft. down....I think there are a few more farther down. The entire region was mined and most of the shafts locally have been flooded since the 50's.

 

[harry gilbert]

Good advice to have your lawyer go over the contract. I did some computer programming for a company that managed mineral rights royalties, and let me tell you, the property owners were royally screwed. Yes, they got a percentage of the "profits", but "profits" were defined as what was left over after all sorts of miscellaneous expenses were applied. Including every single chemical, garment, tool, and other expense that was remotely part of the gas/oil extraction. Usually, the "profits" were zero. The property owners had no recourse, and no way to verify the expenses.

Also, I belong to a hunt club (14,000 acres in Upper Michigan) that sold mineral rights to an oil / gas company. In direct violation of the agreement, the company came in and bulldozed down large tracts of trees, put in multiple gravel roads, and generally tore up the place. They cut the chains and locks on gates instead of using keys, and left the gates wide open to trespassers. We tried all sorts of legal approaches to resolve the violations, but were blocked at every turn by a bevy of lawyers on the oil company payroll. Basically, once in the door, they did whatever they wanted without regard for the contract.

 

[olefafl]

How many homes share the 20%?

You made it sound like YOU got 20%, is that right?

 

[s_x_i]

Whilst going to a Lawyer is a good idea, make sure you use a dedicated Oil and Gas Attorney. Most regular lawyers are clueless about the specifics of Oil and Gas law.

 

[s_x_i]

How many homes share the 20%?

You made it sound like YOU got 20%, is that right?

You share 20% of your interest. So...

If your interest was 50% of the mineral ownership in the tract...(say the developer owned the other half)

And the Tract was .25 of an acre in a 640 acre unit... (about the size of a home lot)

You'd own .125 Net mineral acres.

You'd get 20% of whatever production came out of the 640 acres, reduced proportionally to your 0.125 of 1/640th of total production.

Not a lot of Money either ways, BUT i still would never advocate the sale of any mineral rights ever. You're always better off leasing.

 

[SID297]

20% is a good deal. We usually only offer 1/8. In WV if the well sits on your property you get 1/8 of what comes off of it.

 

[s_x_i]

In Texas the norm is more and more leaning towards 1/5. If they want it, you can get 1/4 without too much trouble. I'm seeing a lot of leases for 22.5% come through!

 

[harry gilbert]

20% is a good deal. We usually only offer 1/8. In WV if the well sits on your property you get 1/8 of what comes off of it.

Sid: What's your experience in how the "profit" is calculated? 20% of a small number is a .... smaller number.

 

[FordSVTFan]

^^
thats true. In PA you do not own your mineral rights. A company can just come in and basically undermine your home. there have been many instances of houses collapsing because of bad mining operations below your home. Since they own the mineral rights they don't have to pay for it either. I would think long and hard about selling them, at the very least talk to some of your neighbors that have already sold the rights to see how the company is treating them.

That is not true. If you own your property as "fee simple" in Pennsylvania, just like any other state, you own the surface and everything below the surface, including minerals. The state has no interest in it.

You can sell the mineral rights, so you only own the remaining surface rights and when you sell it is subject to the separation of property rights into surface and mineral rights.

But, if you own your property "Fee Simple" as most properties in Pa. are, you own the air above and the dirt below.

 

[FordSVTFan]

You're lucky! Here in PA (at least my area) you don't own the mineral rights below your property...I guess the government does?? It states it cleary in the deed.

Negotiate with them.....ya never just accept a low ball offer.

It may be clearly stated in your deed, because you bought only the surface rights. But the vast majority of properties in Pa. are "fee simple."

 

[2003 Silver]

It may be clearly stated in your deed, because you bought only the surface rights. But the vast majority of properties in Pa. are "fee simple."

Well most of the properties around me most have sold those rights way back when. This will be my 3rd house in town and all my friends neighbors and the like all have the same verbage.

 

[Got5onIt]

Thaks guys for the advice. I'm not looking to make a zillion bucks here, just concerned that the drilling company may want to park a rig next to my house and run it 24/7.

 

[FordSVTFan]

Well most of the properties around me most have sold those rights way back when. This will be my 3rd house in town and all my friends neighbors and the like all have the same verbage.

It is most likely that the rights were sold a long time ago, before the development of the area started. You purchased only surface rights, while someone else retained the mineral rights. But, the vast majority of Pa. is fee simple, not as astrodudepsu represented.

 

[SID297]

Sid: What's your experience in how the "profit" is calculated? 20% of a small number is a .... smaller number.

For years the payment was calculated as the net after processing, scrubbing, ect. However, this spring there was a recent court decision that forced many producers to repay leasors on the gross because the lease never contained any language describing the processing. In other words, the payment will be based upon the operative language of the lease.

As far as how much can be made; I have seen several leases in which the wells on the property produce over $10,000 per month, and at least one that produces $16,000 per month. I'd be happy with 1/8 of that.