Replies to This Discussion

Permalink Reply by David on March 17, 2010 at 6:18

The only way to have this answered is to speak with an oil and gas attorney.

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Permalink Reply by John on March 17, 2010 at 10:27

Yes, check for any parts of the will that pertain to any Legacy-type remarks. That say something like "upon his death, the children inherit the mineral rights in Trust, to be administered in a reasonable manner by their step-mother, until she dies, or they turn 18 (whichever occurs first)... that said, it may be complicated if he has no will, or does not mention the minerals specifically. And if his will was not complex (or worse, there is no current will), the assets usually go to the spouse, unless clearly mentioned they should not.

I empathize – My family is doing protective measures through my mother's will – mainly for my adult sister's protection – who's new husband (based on his mysterious origins, and his opulent spending of my sister's assets) could, in a bad scenario, likely liquidate the mineral property upon our inheriting a perpetuating, and generational-type mineral property asset that could be passed on to the next 2-3 generations.

Good Luck.

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Permalink Reply by Mac Davis on March 17, 2010 at 9:47

How many acres?

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Permalink Reply by Love Horizontals on March 17, 2010 at 12:15

Appears that the step mother was only left a life estate in the minerals. The grandchildren who actually inhereited the minerals are called remaindermen. Need to check with a competent estate attorney as to whether a life estate tenant has the authority to bind the remaindermen to a lease. For example a life estate tenant cannot sellthe house, land, etc. in which they have a life estate......only use them. There are also some requirements of a life estate tenant to maintain property, not cause damage, etc. during their use. Need to read the will and see what restrictions if any were placed on the life estate. For example, some life estates in a house allow the life estate tenant to execute a mortage and borrow money against the house. Others restrict the life estate tenant.

The issue with minerals is that even though it is "called" a mineral lease, what really occurs is a SALE of the minerals as they are produced.......ie DEPLETION of the property/minerals. Since the grandchildren are the actual owners of the minerals, that is likely why the company wants them to sign the lease as well now. Again, check with a qualified estate attorney who also understands that a O&G lease is a effectively agreement to SELL some of the minerals each month and deplete the asset. A life estate tenant may not be entitled to any of the "sales proceeds" just a signing bonus. The grandchildren need to decide IF they want to lease now or not, and if they do. have a board certified O&G attorney draft a lease for them to submit to the oil company. (We have never signed an Oil Co's lease......the oil company signs our lease)

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Permalink Reply by P.G. on March 17, 2010 at 12:23

Does anyone actually own minerals before they are reduced to possession?
Or do they just own the right to gather them?

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Permalink Reply by Love Horizontals on March 17, 2010 at 13:28

Minerals can be owned "in place" with right to fully explore/develop/produce. An Ex: Reserves held in ground.

A lease to an oil co would be an example of where the right to explore/develop/produce is conveyed to the oil company in exchange for the oil company providing the cost of exploration and production with the oil company (lessee) receiving a working interest and the owner (lessor) retaining a royalty interest in the production.

The best money spent to make money in leasing minerals is with a qualified board certified O&G attorney if you are unsure about what you own, what your rights are, and to write a lease for you at terms protecting your minerals - requiring the oil co to fully develop/fully explore within a timely manner. So many mineral owners sign oil co leases and end up with the oil co holding their property with ONLY 1 well - they wait for years for the oil company to ever drill another one.

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Permalink Reply by Shaleeee on March 17, 2010 at 13:41

Love Horizontals - What does your last sentence mean? I thought that one well would hold the lease - can a person get a release from the lease after so long (end of original contract) and lease again even with a producing well? I do not understand but it sounds like something I need to know!!!!

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Permalink Reply by Love Horizontals on March 17, 2010 at 14:23

Yes, an oil company's lease allows them to drill one well and hold the acreage in the unit without continuing to drill b/c the lease THEY write does not contain a drilling committment or require them to "fully explore, fully develop". As a result, most mineral owners end up very disappointed when the oil co drills the first well, but doesnt drill any more for years.

The key is to negotiate and write your own lease the oil company has to sign rather than vice versa. Then you can have provisions that require them to keep drilling or give up the acreage so the mineral owner can lease to someone who will keep drilling.

Think about it this way...when you go to lease an apartment, does the apt owner let you write your own lease at your terms or do you have to sign the apt owners lease terms. The oil co like the tenant who gets to write his own lease in the apt project.....they write the terms such that it is hard to ever evict.

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Permalink Reply by Shaleeee on March 17, 2010 at 14:30

Thank you so much for that info - appreciate it.

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Permalink Reply by Love Horizontals on March 17, 2010 at 14:37

Shaleeee-Need to look at the terms you negotiated in your first lease. If it was an oil co's lease and they have drilled a well, then you are probably stuck. The oil co has "captured" youracreage and gets to book the reserves on their financials and boost their stock price. They get a financial benefit without actually producing anything. This frees them to go drill "1well" somewhere else and capture more acreage and so on. Eventually they may drill another well, when and if they choose to.

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Permalink Reply by adubu on March 18, 2010 at 5:10

Love Horizontals--thanks for info but you last couple post with shaleeee is off the topic on this post --please return to subject--Thanks

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Permalink Reply by adubu on March 19, 2010 at 13:41

Love Horizontals---what happen if the Leesee can not get the heirs to sign ratification????? Is lease not valid? Can that still drill without heirs signing? What pro and con to leesee operator if they sign or not? Thanks for reply if you know

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