landowner

Texas Mineral Rights w/o Royalty

As the result of an inheritance, I have acquired 8 acres of mineral rights in Texas.  Unfortunately, the royalties are not attached to the minerals.  If I lease the minerals, as I understand it, I will only receive the bonus.  My question is, do I have any responsibility to the royalty owners to negotiate a lease that provides them with a good return, or can I go max bonus and forget about the royalty?  Or am I totally off base?

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Permalink Reply by ELLIS HUGH on January 12, 2011 at 3:58

I am wondering what would happen if you choose not to lease at all but rather voluntarily participate in the well.  As an unleased mineral owner would you be able to participate in the well and 'cut-out' the royalty owner?

 

I am not familiar with Texas mineral law, maybe an expert will reply.

 

 


landownerPermalink Reply by king john on January 12, 2011 at 4:21

no expert here. it is my understanding in different interest type situations the person leasing the minerals does have an obligation by law to negotiate a good lease.

for example let's say there is an overriding interest. they would have no voice in the lease negotiations or the bonus money. they would however, be entitled to a fair lease agreement and payment.

that's what an old bear told me anyway...

kj


Oil & Gas ProPermalink Reply by The_Baron on January 12, 2011 at 4:24
What does the royalty deed say.

landownerPermalink Reply by True Texan on January 12, 2011 at 6:01
In Texas you either own the land or the mineral rights.  In some cases you would own both.  I don't understand what you are talking about by saying you acquired the mineral rights but you don't own the royalties.   When they take the oil or gas out of the ground then they pay you a % what the minerals are worth based on what your lease with the company says you are to get.   1/5, 1/4 ect.   You want both a bonus for leasing the land to them for three years and a % of what ever they take out of the ground.    What you are saying sounds like some one is trying to steal your minerals by purchasing them from you for next to nothing because you don't know what you are doing.  Be very careful with what you sign even if it's cashing a check because some times they will write stuff at the bottem of them saying you are signing over your interest. 

landownerPermalink Reply by MARG on January 12, 2011 at 7:50

That is very true--it is called conveyance.  MANY will send drafts, checks and paperwork; once someone signs this, it is considered that the minerals/royalty becomes rightfully theirs as by signing, etc. it is considered conveyed to the other person (s),  Most of us receive these offers continuously.  I have heard of people doing that and thinking they were getting a lease, etc.  ONE HAS TO BE VERY CAUTIOUS AND NEVER SIGN---WHEN IN DOUBT, DON'T.  IF ONE IS NOT KNOWLEDGEABLE, HE OR SHE NEEDS TO SEEK LEGAL ASSISTANCE.

 

We have MINERALS; when one get a well and begins production, it is then ROYALTY.

 


Oil & Gas ProPermalink Reply by The_Baron on January 12, 2011 at 8:50
You can own minerals, and sell your royalty. No one is stealing anything.

Oil & Gas ProPermalink Reply by Clint Croley on January 12, 2011 at 8:07

You have what they call a naked mineral interest.  If you would like, send me this conveyance, I'd like to look at it.   Croleyc@gmail.com

 

Clint


Oil & Gas ProPermalink Reply by Ben Elmore on January 12, 2011 at 9:41
Right to receive royalty is just one of the five "bundle of sticks" accompanying the mineral estate in Texas.  The other four are the right to lease (executive right); right to drill and develop; right to receive bonus; and right to receive delay rentals.  Each "stick" can be separately conveyed or reserved, though there is authority that the right to lease and right to develop cannot be severed.  If you own everything but the royalty, you are the sole person with authority to lease.  You have a duty of utmost good faith (akin to a fiduciary duty, but not that strict) to negotiate and obtain equal benefit for the royalty owner that you obtain for yourself.  In this situation, if you are going to obtain the market rate for bonus, you should obtain the market rate for royalty.  If you are going to obtain an above-market bonus, you should obtain an above-market royalty.  As an example.  Say the market rate for royalty percentage in the area is 25% and the average bonus is $1500/acre.  If you negotiate a lease with a 1/8th royalty and $5000/acre or higher bonus, you will likely be facing a lawsuit by the royalty owner.  You do not have an obligation to keep the royalty informed of your negotiations, but if you are doing a deal that even feels like you might be obtaining a benefit for yourself that will be to the detriment of the royalty owner, you might want to get their approval. 

landownerPermalink Reply by phaco on January 13, 2011 at 9:17

Thank you all for your insight.  I am curious about Ellis' position.  I guess I won't lease and we'll see if a WI opportunity presents itself.  I will discuss with a TX O&G attorney before entering into any agreement or finalizing any course of action.

 

Thanks again for the info.


Oil & Gas ProPermalink Reply by Ben Elmore on January 13, 2011 at 9:45
I can tell you that right now Texas does not recognize any duty to lease on the part of the executive rightholder.  The Supreme Court is considering this very issue right now and will be issuing an opinion sometime in the next year I expect.

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