Ratification of lease by future heirs---who has knowledge to answer?
Minerals owner sign lease of minerals left to her by husbands' Will that on her death the minerals are transferred to two grandchildren. The mineral owner is step-mother and grandchildren biological to her husband who died. The grandchildren have received papers and ask to sign ratification of lease. They have been given copy of lease plus bonus money per acre to sign ratification. This is in Shelby County Texas. Question--why does operator need the lease ratified by future heirs? What happen if not ratified and step-mother dies before lease expires or production occurs and step-mother is receiving royalty payments?
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Replies to This Discussion
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Permalink Reply by David on
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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 -
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 Love Horizontals on
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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
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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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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
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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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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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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
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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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