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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Permalink Reply by T16N R14W S09 on August 30, 2008 at 1:40
Pat,

If you think I'm being "robbed and won't know it for years", read my previous posts on this thread and expound further on your idea. I want you to explain what I'm missing.
Permalink Reply by Snake Stewart on August 30, 2008 at 1:50
Not to put words in anyones mouth but I believe that Pat is refering to the group as a whole moreso then the individual. Your approach doesn't look bad from a small parcel mineral owner standpoint. Looks horrendous for someone that owns more. If you think of your group as being one large landowner instead of 30 or 40 smaller owners I believe you will see the point that is being made.If these types of deals are left out there to seem justified then that would be a disservice to this board of posters and readers. If you choose to take a passive approach, that is certainly your choice to make. Just as signing for $500 per acre was a choice that many took. Sounded like a fantastic idea at the time as well, only to look ever so different down the road.If 4% doesn't look bad to you then go ahead and get the rest of your group to send swamo 4% as well. It wouldn't be that much because you guy's don't own much property. We could use the money for signs and stuff. Heck , if everyone would just send us 4% then we could probably forgo our signing bonuses altogether. We have certainly done a service to your community and have your best interests at heart don't we ? HA! HA! Sound familiar ? Just a thought. Sounds stupid the way I put it doesn't it . Just trying to show the economic impact on the total area with this approach. Huge to put it mildly . Get some sleep , you been up all night .
Permalink Reply by T16N R14W S09 on August 30, 2008 at 2:13
Thanks again, Snake.

You make your point and mine. If I did own a large piece of land, I would be less likely to agree to the % of a lease bonus. Most likely, the 4% fee paid will be less than the hourly rate for an attorney to review my lease. If I was actively negotiating myself, I would still have a qualified attorney look over the lease in it's finality, even IF I had the knowledge to negotiate the perfect lease.

Pat just seems to think that all landholders are the same, and we're not. I'm paying a one time fee for a one time service. I understand the negotiator stands to make a killing, it's just not cost effective for me to pay an attorney and/or a negotiator individually (unless, or course the lease bonus reaches the 30K/acre range).

There have been much discussion to the "% vs. flat rate fee" issue. I am in the camp of believing that a negotiator is more motivated to negotiate a higher lease bonus if he stands to make a few dollars more from me (and that's all it will be, a few dollars in my situation). If I had the leverage of multiple acres, I would do this myself. But, unfortunately, I don't.
Permalink Reply by Pat on August 30, 2008 at 7:45
You DO have the leverage of multiple acres. You get that by joining a group.

Then, instead of the group paying 4% from everyone which comes out to ridiculous money, you pay a flat fee/hour rate as a whole for quality advice for the group and your small portion of that cost is pennies.

I think all landholders are the same in that they shouldn't be taken advantage of.
Permalink Reply by T16N R14W S09 on August 30, 2008 at 2:50
I very well could send SWAMO 4% of my lease bonus (whatever that may end up being). You could buy maybe a couple of signs, that's about all.
Permalink Reply by Thomas T. Thomas on August 29, 2008 at 7:56
Won't know you have been robbed for years huh? I wonder if the people who were "robbed" by these companies a few years ago feel robbed with their vertical and/or horizontal pugh clauses. Those two clauses went from after thoughts to millions of dollars with this gold rush.
As some of y'all have already said, it is not all about bonus and royalty. Personal welfare, protection of one's land, and clauses with future financial ramifications are all vital. All that said, don't trust just any ole lawyer or upstart negotiation firm. Go with people and institutions that have been in the business for years before this Haynesville happening.

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