Paying % of Bonus or Royalty should be illegal

With the public knowledge of the Shale now, NOBODY would lease their property to any Oil and Gas company for the few dollars an acre they were getting last year. You have more information and know better now. In fact there are people so mad about "being taken" only a few years or even months before everybody knew about the Shale they have class action lawsuits against the O & G companies trying to void the lease. Good luck.

Use the same knowledge to understand that if you pay an attorney or anybody else a % of your bonus and especially a % of your royalty to negotiate a lease for you it is the same as turning down an offer for thousands an acre and instead saying you want the hundreds an acre they used to offer. Now that you know how valuable your minerals are you wouldn't take hundreds.

Where are the class action law suits against the CPA's and attorneys that took advantage of everybody early on and got them to sign a lease for a % of their money while also getting the O & G companies to pay them a percentage of that money too. The only other business I can think of that gets paid by both sides like that is a sports bookie.

If you are lucky enough to have a royalty check for 10 or 20 or 30 years, do you really think that somebody that played both sides of the deal at the beginning deserves part of your check?

There just is no way that the guy negotiating can have you AND the Oil and Gas companies best interest in mind at THE SAME TIME when he is negotiating. You want a higher lease bonus and royalty and the Oil and Gas company wants a lower lease bonus and royalty. So who do you think he would be working harder to please? I know who my guess would be.

It just isn't smart people. You have more information and knowledge about all this now. It just isn't good business for you to pay a percentage and I don't know how anybody that charges you 4%-5% can possibly still have a good reputation. Especially the ones that have you sign paperwork that says you have to pay them even if you find a better deal with someone else. How do they get away with this stuff?


I'll step off the soap box now. I just hate to see people throwing away money. One day it will make a big difference to you when it all becomes clear.

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Replies to This Discussion

Permalink Reply by Blanchard Shale on August 28, 2008 at 12:48
That is what Castellano is doing I think. I think dual agencies are very dangerous, for ALL involved. A good name is worth more than any amount of money.
Permalink Reply by RAY on August 28, 2008 at 15:28
all,
should an individual living in a subdivision [lot] really be concerned about the enviromental contents of his O & G lease?
Permalink Reply by Bobi Carr ("parker") on August 28, 2008 at 15:50
ABSOLUTELY!!!
Permalink Reply by Snake Stewart on August 28, 2008 at 16:32
Not unless that shopping center or park aren't all that close to your place.These are but a couple of the prospective sites that the O&G's will use to get at your gas. They can't pay you for it then just let it sit there. In Fort Worth they bought an older mall or large shopping center and tore it down and drilled. They will be all over you if you don't protect yourselves.Urban areas can be the worst affected due to the problems with finding sites.
Permalink Reply by Pat on August 28, 2008 at 17:12
Yes, unless you plan on moving out of there, you should be very concerned/informed about it.
Permalink Reply by T16N R14W S09 on August 28, 2008 at 20:09
Let's make this clear, for at least me in my particular situation. I am willing to pay a % for someone to negotiate the best lease for me. I live on a urban lot a little over 1/3 of an acre. The amount of money I stand to make on the lease, while appreciated, is simply not going to be a "life changer". I have joined an association that has grown to over 2900 property owners in my area. I am paying a percentage of the lease bonus ONLY and NO percentage of the royalties.

I live in a congested area of the city with the nearest available area to drill about 1/2 mile (unless the O&G co. wants to purchase my neighborhood and tear it down to drill). While I am interested in certain environmental issues and certain lease clauses (Pugh, for example). I am not overly worried about surface rights for my lease. I mean, what are they going to do? Run a pipeline through my back yard (which I still pay somebody to cut)? Or build an access road through my dining road?

I said all that to say this...I am as "informed and knowledgeable", thanks to this website, as I can be presently. I will make a decision on how to approach the signing of my lease (if ever offered) based on this information and knowledge and give my input to our homeowners association. Obviously, this is not the preferred method for you, but don't discredit my preferred method. While the negotiator stands to make beaucoup bucks cummulatively, my 4% is insignificant.
Permalink Reply by Pat on August 30, 2008 at 8:08
First, how do you know there are 2900 owners signed up? Somebody told you that? Can they prove it to you? How will they prove it to you?

Do you have it in writing that the group you joined isn't also being paid by the Oil and Gas companies that they are negotiating with on your behalf?

How do you know this group will get you the best deal possible? Also, if through your own research and time you find a better deal on your own or with another group do you still have to pay the 4% to this group you signed with? Usually you do. Kind of unfair isn't it.

You say your 4% is insignificant. How do you know that? Have you run any numbers?

I understand wanting to have somebody else do the leg work for you. I'm just trying to help you understand that this "easy" way is more costly to you than it has to be.
Permalink Reply by T16N R14W S09 on August 30, 2008 at 14:48
I arrived at my decision because I ran the numbers in the begining. Until lease bonuses reach the 30K range, it will cost me more to negotiate the lease and have an attorney look over the final lease. The end result will be the same lease (whether negotiated by me or my group), or I won't sign it. I do have the right for special considerations (all the bells and whistles I want) in the lease negotiated by the group.
Permalink Reply by Kassi on August 28, 2008 at 23:12
There are times the percentage is less than an hourly or flat fee. It depends on the situation. Percentage charges are fine as long as they are not excessive and there is more done than negotiating the standard lease. There should never be a percentage of royalties paid to anyone in my oppinion though. Paying someone for many years for a one time service is not ok.
Permalink Reply by T16N R14W S09 on August 28, 2008 at 23:18
I agree completely. Depending on the final lease bonus, my 4% will probably be less than an attorney's hourly rate. Now, if lease bonuses rise above, say 30K/acre (I'm not optimistic it will), then my 4% payment may reach the hourly rate. I'll just take my chances.

Am I missing some of the environmental issues that you have championed? Given my small lot and location?
Permalink Reply by Bobi Carr ("parker") on August 29, 2008 at 2:45
The environmental issues will ultimately effect everyone in the area.

To a certain extent the Oil and Gas companies are concerned also. But mostly from a cost basis and from a PR basis.

Do you really want a rig 200 feet from your house (even if there are noise abetments in place).

The city officials really need to address some of these concerns. They could easily do so within the MPC codes.

These things more than likely will not be addressed from the City officials until someone "makes" them address them. Government usually is reactive instead of proactive.
Permalink Reply by Pat on August 29, 2008 at 7:24
An hourly rate or flat rate for the project FOR THE ENTIRE GROUP, instead of 4% etc for each person in the entire group. If your group was paying an hourly rate or flat rate your cost would be pennies at best. You are being robbed and won't know it for years.

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