Replies to This Discussion

Permalink Reply by Dion Warr, CPL on October 15, 2013 at 5:56

Steve:

In replying to you and somewhat dovetailing with what Skip has written, many mineral agents and attorneys have designed their own customized lease addendums which they more or less insist on being added onto virtually every lease for lessors that they represent, much as my O&G clients place a primary importance on designing a "standard offer" using a standard lease form and/or other add-on provisions via a lease addendum.

 

It is true that within the last few years with advancing software designs and other technologies, it is easier to create a "customized" lease form that does not require a base pre-printed form (e.g., Bath, Producers forms) with a "standard" lease addendum in order to advance a lease offer to lessors at the field level (look at Totaland or iLandman for examples).  However, I still have contact with many professional landowner representatives that want the standard Bath form with preset lease schedules which modify specific paragraphs in the standard form.  For one thing, the "standard form" represents a standard set of provisions to be modified and tailored to the specific situation; for another, it keeps the representative from having to analyze every word of every paragraph and every reference to ascertain to what the lessor and lessee have (or will attempt to) agree.  Put another way by way of a specific example, many N LA attorneys "know" what is in a Bath 14-BR1-2A-PX PAID UP - they look to the lease schedule to direct as to "when we talk about shut-in payments in Article 5, we now agree to the following...".  It's a comfortable framework to use and modify as necessary.

 

Without naming names, there is a particular area in which I have worked repeatedly where a group of landowners is represented by an attorney who I know for a fact will always send me a five or six-page Schedule "A", which he tweaks on a regular basis as a matter of course and evolving case law, and further tweaks given a particular set of circumstances.  There is not much negotiation above discussions of the merits or travails in advocating on behalf of my particular client and a mutual agreement to retool or revisit certain provisions (with the occasional striking of a provision or two), but most everything that he asks for is GOING to be in there, or it's not a "go".  In areas where I will deal with this particular attorney time and again, our negotiated form becomes the standard form - there is just not much reason to waste everyone's time by starting from some base form that would fly no further than if you folded it into a paper airplane and tossed it across the room.

 

Even in areas where few landowners enjoy professional representation, I would always advocate to a client that we hammer out additional provisions that we anticipate would become "standard", given the nature of the operations to be conducted and the prospect area, and stated objectives.  I don't always get my wish either; some clients just want to communicate an "entry level" offer to the owners, and then let the process evolve from there.  Even if a discussion occurs prior to a "rollout" of offers, clients generally want to (realistically) minimize their investment in lease acquisition, minimize the time required to acquire leases, and desire to have a maximum amount of flexibility in developing their prospects (be it land use, subsurface use, etc.) and in maintaining their leases.  This necessitates the broadly used, "standard offer".

 

When I advise and/or negotiate on behalf of landowners / mineral owners, conversely, the terms become very specific.  Their lands are their own, and the quantity and quality of the individual tract(s) is/are sharply defined.  Use surface here, but NOT here; yes, you can drill from A to get to B; no, you can't run the pipeline just wherever you want, etc.  The exception would be for large landowners and/or corporate or institutional landowners, where the philosophy is largely the same as most lessees: they wish to manage their lands in terms of defined principles and policies designed to maximize their use(s) for maximum returns from their investment.

 

As a result, "fair" becomes necessarily subjective: the owner that owns five sections has no problem with surface operations on a forty, the owner who owns 80 acres that lives and plays on one forty and works the other as a livelihood would have a serious problem with the same surface operations.  To the O&G client, one upland forty is as good as the other, unless one forty is sitting over the prime BHL and the other is a significant distance away, and many have a hard time understanding - "why are these lessors being so obstinate?" or "why can't you get the leases [I] need?"

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Permalink Reply by Skip Peel - Mineral Consultant on October 15, 2013 at 8:45

No hurt feelings here as I have been advising mineral owners to seek professional assistance  on GHS for five years.  My concern is that generic industry bashing often leads to mineral owners making poor decisions when they negotiate on their own without professional help.  I've seen that occur a number of times with GHS members.

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Permalink Reply by adubu on October 18, 2013 at 1:45

To all on this thread --- this discussion is what makes GHS a great site IMO --- read with open mind and after several years on site learning the back ground of each individual person posting ( with time you know who commits you trust or disregard) replies it continues the education for the novice mineral owner to help manage their minerals especially if they are lucky to get leased and become Royalty Owner with that wonderful thing called "mailbox income " having your leased reviewed by honest knowledgable oil & gas Attorney is best money you can spend before signing a business contact that could stay in place for generations into the future for your heirs

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