Replies to This Discussion

Permalink Reply by The_Baron on November 11, 2010 at 10:14

Technically you would have no minerals to lease. They could come back to you and try to get there money back, especially if the lease has a waranaty clause.

YOu could sign a lease, strike the waranty clause, insert a no-waranty clause.... Doesn't mean you couldn't get sued later. More than likely they would sign you up, do more detailed title work before paying you and discover that you don't own minerals.

Personally, I would do the right thing and let the landman know. A lease won't interupt prescription, they would have to actually drill a well. (See my blog on mineral servitudes)

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Permalink Reply by Robert Duke on November 11, 2010 at 10:52

So my understanding is that if I sell my land, but reserve the mineral rights, and there is production within 10 yrs of sell, the mineral rights are mine in perpetuity, or until there is some future 10 year continuous time period with no production? That at least has been my understanding, the land was sold a couple of years ago with minerals reserved, we leased the minerals and we have a (apparently not great) well producing as of a couple of months ago, but not yet in sonris with production data. This is LA land.

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Permalink Reply by Gene on November 11, 2010 at 11:01

Thanks. I was just curious as to how this person I know got money out of the deal if she didn't own mineral rights. I'm going to talk to her more about it. I am not planning to lie to the guy, just looking for info. Thanks!

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Permalink Reply by The_Baron on November 11, 2010 at 11:22

Any landman worth his salt should pick up the mineral reservation. They may be in a hurry and havn't run your title yet. Personally I think its a little foolish to make an offer without at least pulling the aquisition deed...

Keep in mind my advice is with no real knowledge of your situation, there may be circumstances orlanguage in your deed I am unaware of.

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Permalink Reply by The_Baron on November 11, 2010 at 11:19

Basically, read my blog for more detail into mineral servitudes in LA

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Permalink Reply by Mac Davis on November 12, 2010 at 17:12

I'll agree, be honest.

In theory, if you take the lease money and don't own the minerals, you could be on the hook for a lot more money than they paid you. You could be liable for whatever money they would have made if the lease was valid. It could be an expensive legal battle, even if you win. If you're small potatoes, it may be unlikely they'd come after you, but there is a risk.

You can reduce this risk somewhat, if not completely, by changing the language of the lease to eliminate the warranty clauses or even specify no warranty.

It's possible that some landman might pay you for a lease that he knows is invalid, then resell the lease for more money, and then vanish. You might be on the hook to the person who bought the lease. i.e. even if the person offering you lease money knows about you not owning the mineral rights yet, he could still be running a scam and leaving you on the hook.

Sometimes they will pay you with a "draft" instead of a check. The draft is not valid immediately, and can be canceled by the company before it becomes valid. That way, they can check out the mineral rights before you actually get paid, but you're still on the hook if they decide they want the lease.

How many acres are you talking about?

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Permalink Reply by Two Dogs, Pirate on November 13, 2010 at 5:50

If I read this correct "Previous owner reserved mineral rights for 10 years" then that is the length of time they can hold the mineral rights. Mineral rights revert to you at the end of ten years, well or no well.

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Permalink Reply by Robert Duke on November 13, 2010 at 6:14

Hmmm, that is not how I read info on a LA state website, which says:
"Owning land does not automatically mean you own the mineral rights to property. A search of your deed or property title at your parish clerk of court’s office can tell you whether you own your mineral rights. If your current deed does not specifically discuss minerals, you may need to contact a professional in title research. In Louisiana, mineral rights can only be reserved (held by the seller of surface property) for ten years, either from the date of sale or from the date of the last exploration activity or production of minerals from the land. If there is no mineral development on the property in that time period, the mineral rights then automatically transfer to the buyer."
This is at: http://dnr.louisiana.gov/haynesvilleshale/

Note that it specifically says there has to be 10 years with no mineral development for mineral rights to transfer to the buyer. Would someone who actually deals with mineral rights comment on these issues, please!

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Permalink Reply by Two Dogs, Pirate on November 13, 2010 at 10:01

You are correct about a search of the courthouse records could determine that the vendor did not own the mineral rights to begin with but if the grantor did own the mineral rights and the deed into grantee reads that minerals are reserved for 10 years then that is what they meant. I am not an attorney, I am a Landman and would have to read the document before I could make a call as to what it said. Gene has a landman knocking on his door, so something is up. The prescription period for a deed that reads 10 years is 10 years. Production has nothing to do with it. Most mineral reservations don't put a time line for when the mineral will run and if I read Louisiana Law correctly 10 years is the maximum that would be allowed. I have seen deeds that read the mineral would be reserved forever but that don't float in Louisiana.

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Permalink Reply by Robert Duke on November 13, 2010 at 10:17

Okay, so I was thinking that it is possible an attorney writing a deed could stipulate 10 yrs specifically, and much things up for the seller. BUT if a time is not stipulated, but you specifically reserve the mineral rights, the law sure seems to say that the "time-out" of 10 yrs only applies if you have not had any exploration, development, or production of minerals for 10 yrs! This is a very significant additional point for anyone who has sold their land, when dealing with a resource with potential value for say 50 yrs. We had already-leased land that we sold; had a good attorney write up a page of stuff on the deed about mineral rights as well as surface rights supporting the current lease. Kindly reexamine the quote from the LA website above, to whit: "In Louisiana, mineral rights can only be reserved (held by the seller of surface property) for ten years, either from the date of sale or from the date of the last exploration activity or production of minerals from the land. If there is no mineral development on the property in that time period, the mineral rights then automatically transfer to the buyer." What part of the "or" clause here do you not see?

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Permalink Reply by Two Dogs, Pirate on November 13, 2010 at 10:33

Robert I deal with this every day here in Louisiana. Some one sells something and someone buys something. With land and minerals it is governed by whats legal under state law. If I try to reserve minerals for 100 years then I have just added one too many zeros to the figure under Louisiana law. I can reserve minerals for 10 years or 5 years or 1 year or just reserve all minerals or 1/2 minerals or 1/8 minerals. It is all about the deal that was made between buyer and seller. What part of "Or" do you not see.

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Permalink Reply by Robert Duke on November 13, 2010 at 10:44

One further point - The mineral code for LA may be found at:
http://law.justia.com/louisiana/codes/2006/21/21.html.
Now, I am not a lawyer, but I certainly use one when I need one :-). This thing is pretty dense (no surprise there), but there are all sorts of things that will interupt the statutory 10 year prescription period - having drilling in progress, having production (though there is a stipulation that the production has to basically be sufficient as to be "prudent" or some such - I think the implication is you can't be running an operation at a dead loss), EVEN having a shut-in well, as long as it has been tested and thus certified "productive". Sounds to me like a well, for all intents and purposes, needs to be either plugged and abandoned or at least disconnected from the pipeline and deemed unproductive, and THEN you can start counting up your 10 yr period again. One could blow a whole afternoon plowing through this stuff of course, and still feel a need to call your lawyer... So as I read the situation for the original poster, the only way they could get a legitimate lease and be the legitimate owner of the mineral rights is if no well is started (ie., spudded) for the next two years. It would seem pretty messy to me if it were done differently; think about it. You have a lease with a O&G producer. As long as they have a producing well, they are not going to be wanting to have to back off and negotiate a new lease with new mineral owners while they are working on HBP or have achieved HBP on the lease. Any GHS member lawyers out there willing to comment on this? (thanks in advance)

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