Replies to This Discussion

Permalink Reply by Henry on October 25, 2013 at 0:57

Cindy, 

This is my thinking.  I COULD BE WAY WRONG HERE, so I urge others to jump in and correct me, if I am way off base.

This arrangement would pretty much take over your 6 acres for the next several decades.  It would make it almost impossible to sell the property.  So I would ask, at a minimum, for the full value of the land.  Then, on top of that, I would ask for a recurring payment to keep the surface lease in force -- say, something like every 10 years you should be paid X dollars.  And X should be at least large enough to cover 10 years of the property taxes.

I have some experience with a company being on land for 50 years -- my parents signed a surface lease 50 years ago, and what a mistake it was.  So if I were you, here's what I would ask for:

-- EXCO must maintain the site, keep it clean, keep the buildings up, fences up, etc.  You would be surprised how lousy the property could look, if they let the fences sag, buildings crumble, etc.

-- If you live next door to this, you might think about limiting truck traffic to daylight hours

-- You need to put in strong language about what terminates the lease (something like 180 days of no production, or some such thing), and what they are required to do to clean up the property when the lease expires.  If you don't do this, they might just walk away, leaving a mess that you have to pay to clean up

Now, having said all that.  Ask yourself:  Is this worth it to you?  If you need the money, go ahead.  But recognize that this could mean headaches for you and your heirs for the next 50 years.

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Permalink Reply by Joe Aldridge on October 25, 2013 at 2:46

Henry, 

Very good suggestions. The upfront should be for damages. The yearly lease amount should be at a commercial rate not agricultural. I would want an overriding royalty in addition to the yearly rental of say 1 to 2 1/2 % from the adjacent property's production. But what it comes down to is what you can negotiate with Exxon/Exco. They can be difficult.

Others on GHS might want to make other suggestions.

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Permalink Reply by 1kw6x71km1v37 on October 25, 2013 at 4:32

$3,000 per acre per year, or $30,000/acre LUMP SUM UP FRONT BEFORE CONSTRUCTION STARTS for an unlimited time is best I recall what one major landowner in LA gets. What you are talking about is a small chemical plant in place. That has commercial industrial plant value connotation, not residential  or agricultural value, as you will find out in your next ad valorem tax notice. The downside is the operator will now shop the neighbors, who will sell out cheaper out of ignorance or if, for instance, they need a new four wheeler and deer rifle this fall. Good luck.

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Permalink Reply by Two Dogs, Pirate on October 25, 2013 at 13:24

CS, the whole deal is governed by the language of the lease. How many tracts of land are valued at $30,000 per acre in the area?

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Permalink Reply by 1kw6x71km1v37 on October 28, 2013 at 16:15

Lately, several, and slightly in excess of $30,000/acre. And these are just residential tracts. That is not a lot of money in the O&G business where it concerns good wells. 

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Permalink Reply by Chris on March 28, 2014 at 3:13

I disagree. People think operators are made of money but many of these wells are drilled on slim margins and having to pay $180k in damages on a pad might make it not worth drilling the wells.

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Permalink Reply by Joe Aldridge on March 28, 2014 at 3:28

Chris,

The problem is they moved in illegally. They tried to take advantage of an estate and I have no sympathy. Some in the industry try to take advantage of situations.

They should have to pay damages, a commercial lease for the surface and an override on any wells that are drilled from the pad. They should have dealt with owners upfront and not after the fact.

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Permalink Reply by Keith Mauck (Site Publisher) on October 25, 2013 at 5:06

You had duplicate discussions. Here was a reply from Skip 

The surface rights are valuable and you are in a position to negotiate.  I suggest that you engage the services of an experienced local O&G attorney who is familiar with current values.  There is no standard answer as to value as each circumstance is unique and any comments you get here on GHS, without greater specific details, would be general estimates at best.

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Permalink Reply by Joe Aldridge on October 25, 2013 at 6:34

Skip,

I agree that the land and the deal is valuable and important. But I like to go in with an idea of what I want and what I consider is reasonable and necessary. I don't like just relying on an attorney to make decisions for me.

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Permalink Reply by Skip Peel - Mineral Consultant on October 25, 2013 at 8:01

Joe, O&G attorneys don't make decisions for clients.  They make suggestions based on experience that a client may choose to follow or not.  I've done research for attorneys representing clients in questions of surface value.  Without knowing the pertinent facts of potential surface use, an operator's possible options and a knowledge of what has been paid in the past in similar situations, the average landowner has no reference for what the value may be.  An experienced attorney will cover was is reasonable and necessary.

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Permalink Reply by Joe Aldridge on October 25, 2013 at 8:21

I guess my question is: Why is GHS here if a person should be going to an all knowing attorney for all of their advise and knowledge?

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Permalink Reply by Skip Peel - Mineral Consultant on October 25, 2013 at 9:07

In part it is to get advise on managing their minerals.  And for most mineral owners in a majority of circumstances that advise should include getting professional assistance from an experienced oil and gas attorney.  Not just any attorney.  Surface value is a good example of a circumstance where a knowledgeable attorney is quite often worth far more to the mineral owner than the cost of the professional assistance.

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