Survey Results Tidbit: Leasing-do-over on royalty deductions

In our State of the Mineral Owner survey, we asked Mineral Owners, "In retrospect, if you could have done one thing differently during your leasing process, what would it have been?" The survey participants had 6 answers to select from

  • Higher Royalty
  • Higher Bonus
  • Better restrictions on deductions from my royalty
  • Different leasing company
  • Other (fill in the blank)

So how did the participants answer? See below:

  • 22.8%  - Higher royalty
  • 5.6%    - Better protection for my land
  • 21.9%  - Higher bonus
  • 24.4%  - Better restrictions on deductions from my royalty
  •  9.8%   - Different leasing company
  • 21.5%  - Other (fill in the blank) 

So there you are. On this question, royalty deductions make an infamous appearance as the selection for nearly 25% of survey participants.

There were also some common themes for those who selected "Other." They tended to drop into 4 categories:

1) Nothing/Satisfied

2) Acquired legal representation or professional guidance

3) Did not go through the traditional leasing process due to inherited mineral rights or force pooled

4) An addition of a pugh clause to the contract

And my personal favorite, "Joined GoHaynesvilleShale.com."

 

Stay tuned in as we continue to share this interesting data.

 

 

 

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Replies to This Discussion

Permalink Reply by William Simmons on October 27, 2013 at 2:16
In the end I guess it really doesn't matter who you lease to because they are constantly buying ,selling , or trading with each other. Great site thanks for your hard work!
Permalink Reply by Skip Peel - Mineral Consultant on October 27, 2013 at 4:33

Sometimes you don't have a choice of lease offers to accept.  Then it becomes a matter of whether you can get satisfactory terms under the prevailing circumstances.  Those terms should anticipate the possibility of a lease being assigned, in whole or in part, to other parties as that is a very common occurrence.  All parties who obtain development rights by assignment are bound by the terms of the lease.  Take the time to get the best terms possible for your specific situation by seeking qualified professional assistance.

1kw6x71km1v37Permalink Reply by 1kw6x71km1v37 on October 27, 2013 at 14:17

There are some companies a sane person would not voluntarily do business with. The law as written can put you in business with these shysters. While they may be bound by law to honor a lease somebody else acquired, it may fall on the landowner to enforce the lease if an unscrupulous party becomes the named operator. But ultimately, in Louisiana at least, the law as written is simply an evil necessity of the O&G business, bound to cause problems.

Permalink Reply by Skip Peel - Mineral Consultant on October 27, 2013 at 14:53

In LA one always has the option to go non-consent.  I would prefer to be leased.  For all the possible exposure to unscrupulous parties and evil necessities, it is the better option for most mineral owners IMO.

Permalink Reply by Henry on October 27, 2013 at 23:54

Yes, they buy and sell.  My parents signed a lease 50 years ago, and it is on something like the 6th operator now.

A funny story....  I signed a lease with BHP a while back.  Although he was polite about it, the BHP landman let it be known that he thought I was way overly meticulous on the wording of certain parts of the addendum.  Then, I said, "Look, you never know who may own this lease one day.  Chesapeake may end up buying it from you."  He then immediately understood where I was coming from, and began to work with me to get the exact language I wanted.

Permalink Reply by Skip Peel - Mineral Consultant on October 28, 2013 at 2:16

You've learned well, Henry.  A lot of energy companies active in the areas we regularly discuss must perform their day to day business in a climate of suspicion and anger because one company pushes the bounds of ethical behavior.

Permalink Reply by Keith Mauck (Site Publisher) on October 28, 2013 at 2:58

LOL

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