Replies to This Discussion

Permalink Reply by Robert Duke on November 13, 2010 at 10:57

Okay, sorry to run on, but I realized that IF their lease does explicitly specify a 10 yr term for retention of mineral rights from date of purchase, then the original sellers may have shot themselves in the foot, in that exact stipulations of this sort apparently override the statutes (so the new land owners could acquire the mineral rights in 2 yrs, regardless of the status of development of minerals, it would seem). I would be (more than) a little annoyed at my lawyer on that one, presuming I had a lawyer draw up the legal docs for the sale.

• ▶ Reply

Permalink Reply by Two Dogs, Pirate on November 13, 2010 at 11:00

Robert, the person with the mineral rights is the only one who can grant the lease. So Billy Bob sells to Gene reserving minerals for ten years. Eight years into the deal Billy Bob grants an oil and gas lease to Podunk Drilling. Podunk drills and hits oil. Billy Bob gets to spent his mailbox money for two years, then Gene gets to spend it from that point on.

• ▶ Reply

Permalink Reply by Robert Duke on November 13, 2010 at 11:13

The law, it seems to me, stipulates a 10 year nonproductive period before mineral rights would be transferred; I do understand that you deal with this sort of thing; hence my concern, because I went through a lawyer in doing my sale, knowing that once there was production I would retain the rights, per statute, until such time as there is no production for 10 years. As it happens I will be conferring with my attorney next week on other land matters, and will bring this up, but in the meantime, if anyone else has a firm opinion or knowledge, I am of course interested.

• ▶ Reply

Permalink Reply by Two Dogs, Pirate on November 13, 2010 at 11:27

Robert, most mineral reservations don't have a time period built into the clause. Some buyers may not feel comfortable giving up minerals for as long as the well produces. One landowner I once leased bought over 1200 acres from a lawyer, that upon death will need to be screwed into the ground. The lawyer wanted to reserve 1/2 of the minerals, the buyer came back at him with which half, North, South, East or West.

• ▶ Reply

Permalink Reply by Robert Duke on November 13, 2010 at 11:49

Hi Two Dogs,
But that is sort of my whole point. If you read the bloody statute (I actually just did), if you do a blanket minerals reservation, UNLESS there is something in the deed whereby you give up rights based on some time limit, then there is this whole concept of "10 years of nonproduction" that appears to hold sway, and there are a whole bunch of conditions for how this "10 year prescription" can be interrupted - and have to start over; please go spend a little time looking at the statute (though it is basically nicely summarized by the simpler statement on the LA HS website); I quite agree that something can be put into the deed of sale to circumvent this stuff in the buyer's interest, but if not, and you do a simple reservation of the minerals as the seller, then the minerals are yours as long as there is not a 10 year window of non-production (the first window starting at time of sale, presuming that there is not an interrupting condition - like ongoing drilling or prodution). So maybe things happen differently because folks don't know to lawyer-up when challenged on this, or because a buyer insists on favorable language in the deed, and the seller agrees. Otherwise, I would think the incentive to sell HS land at anything short of astronomical prices is pretty low... There is additional language suggested in the statute on how to handle surface rights issues, so as to protect both seller and buyer - language that is incorporated verbatim into the deed of sale on the land I owned.

• ▶ Reply

Permalink Reply by Two Dogs, Pirate on November 13, 2010 at 13:04

Robert, I am a Louisiana Landman and have read the statutes many times. If I buy a bad lease I have to pay the money back out of my pocket. I have to know what I am doing or I would have been blacked balled from the biz many years ago.

Permalink Reply by Linda Whatley on November 13, 2010 at 11:59

Robert Duke,

What Two Dogs has told you is true. It's all in the wording on the cash sale deed - if the deed states the seller is reseving the minerals rights, then yes, the 10 year prescriptive period will be tolled if there is production. However, if the deed states the seller is reserving the mineral rights "for ten years," then at the end of the 10 year period the minerals will belong to the new owner, even if there is current production.

I know someone who was receiving a monthly royalty check on his residential property. He didn't understand the law, so when he sold his property he thought his minerals would automatically revert to the new owner after ten years even though there was a producing well on the property. So, at closing, when asked if he wanted to reserve the mineral rights, he told the attorney that they would go to the purchaser after ten years. So, that is exactly how the attorney worded the cash sale deed, and ten years from the date of sale, the new owner started receiving the monthly royalty checks. Needless to say, this person was sick when he found out what he had done. ..... Moral is "be careful of the wording" on all legal documents.

• ▶ Reply

Permalink Reply by Two Dogs, Pirate on November 13, 2010 at 12:48

Linda we have been working on a deal where the person sold the mineral rights but reserved the executive rights. We have found the mineral rights owner but can't find the executive rights owner and have been looking for him for months. You run up on all kinds of crazy stuff in this biz.

• ▶ Reply

Permalink Reply by Linda Whatley on November 13, 2010 at 18:15

Two Dogs,

What does reserving the executive rights mean?

Permalink Reply by Robert Duke on November 13, 2010 at 13:39

Hi Linda,
Thanks for the input. Based on this, I think Two Dogs and I are both right. What I have been saying is that all the statutory stuff applies as long as you have a clause "reserving minerals" and the wording of the deed does nothing to further limit the seller's rights under statute (like saying that there is a 10 year limit from date of sell on the minerals reservation). I had a Natchitoches lawyer, highly reputable in managing estates, manage a bunch of inheritance issues for me that got complicated; we even ended up making (clarifying) some LA law as to what happens when part of an estate includes land out-of-state (darn near went to the LA Supreme Court, but the district court decision was strong enough it was unnecessary). So anyway, back to the case in hand, I believe (ie., agree) that if the seller of the land bought by the original poster here allowed a "10 yrs from date of sale" specification in that deed, then that seller is out of luck; in the case of my deed of sale, the language was careful to allow both full retention of mineral rights as well as full retention of surface rights to support the extant mineral lease (with Encana, who probably does a reasonable job of checking title ;-)) I would never have sold the land if I had thought this was in any way in question; the major reason I did sell it had to do with complications of settling the estate as much as anything. Does that make sense? The case I personally care about more is of course mine, and in that case, there is no language limiting the seller's rights to less than what statute allows (the mineral code very clearly says you can give away rights if you so choose, but it would have to be through the deed or presumably some other legal instrument). I don't really know what is up with Gene, because I don't have the Cash Sale Deed, or whatever, to examine.
Two Dogs, not trying to inpune your standing as a land man at all. I have always been amazed at how easy it is for two folks to sort of miss each other's points in an email-like forum. I am a computers and sciences guy, so I live in a pretty rigorously defined world on the software end at least; still, I think I am perfectly capable of talking around a point with folks not understanding where I am coming from, and this legal stuff is yet another world :-} I am presuming mostly where we have been missing understanding each other is that you have been assuming there is language in the Deed about "10 yrs from date of sale", and I am assuming that there ISN'T language to this effect.
Thanks again - Robert

• ▶ Reply

Permalink Reply by Two Dogs, Pirate on November 13, 2010 at 13:45

Robert as you said you don't know until you read the deed and one person can read a deed one way and someone else can read it another way.

Permalink Reply by obed w odom on November 13, 2010 at 14:09

Robert,

I think you are absolutely right that the 10-year period means a 10-year period of non-production. If production occurs anytime within the first 10-year period then that resets the clock and your mineral rights are then held for 10 years after production stops. Of course, if a seller expressly states that he wants to reserve his rights for only 10 years, maybe that would be binding, but I can't imagine why anyone would want to do that, unless he had an attorney who was not worth his salt and didn't explain the situation properly.

• ‹ Previous
• 1
• 2
• 3
• 4
• Next ›
• Page