Energy Company Wants to Buy Surface Rights

We've been asked by the energy company that leased our mineral rights to sell the surface property to them. We would retain the mineral rights, but the firm would be able to drill, install multiple gathering lines from other wells in the National Forest, build a compression station, treatment facilities, and tank farm. The firm would get full control of our ponds and spring. We have no structures on the land and no plans to build on it. In fact, we are absentee owners.

Has anyone else had such an offer? Can you share any details? We will likely entertain their offer, but are very surprised by this development.

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Permalink Reply by WayneandAnna on February 10, 2009 at 14:17
This is a good idea. Thank you.
Permalink Reply by WayneandAnna on February 11, 2009 at 4:18
We sent the following email to the energy company this morning:

Your proposal surprised us; we thought if you were interested in a compression facility on the property, you would offer us a long-term lease. We’ve turned down numerous serious offers to buy the property over the last 10 years. In fact we have a folder with notes from people who want a call if we ever decide to sell. It is a pretty piece of property, and we have an emotional connection through Anna’s family.

While we have given no thought to selling, the direct answer to your question is that we will seriously review any offer you make. Our goal is to generate an income stream from the property which is why it has been planted with commercial pine trees. If your offer included an assurance that you would drill on the property, that would satisfy our attempt to generate an income stream.

Thank you for your proposal.

Wayne and Anna
Permalink Reply by Cathaus on February 11, 2009 at 4:50
Now just sit tight and wait. You will be hearing from them one way or the other. Until then, I sent the adoption papers off this morning by registered mail. Please sign and return them asap. Mr. Cathaus and I look forward to calling you Mom and Dad!
Permalink Reply by ELLIS HUGH on February 11, 2009 at 4:58
I may be able to 'broker a deal' for some grand-children.
Permalink Reply by Cathaus on February 11, 2009 at 5:15
Grandchildren? I can help you out there Ellis. How many would you like?
Permalink Reply by ELLIS HUGH on February 11, 2009 at 5:25
No ma'am. Not trying to gain more children. Trying to provide some grand-children. lol
Permalink Reply by Cathaus on February 11, 2009 at 5:41
It's just as well. I don't share well with others!
Permalink Reply by WayneandAnna on February 11, 2009 at 12:36
Cathaus, we always wanted a daughter. This will be fun. I'm making a chores list right now. Of course you'll get a generous allowance and access to the cars. You don't have to cook, we love to cook a wide variety of foods.
Permalink Reply by Cathaus on February 11, 2009 at 13:48
I will be the bestest daughter in the whole wide world. Hey, even better than that now that I know I won't have to cook! I am happy to do chores as long as one of the cars I get to drive is a little souped-up red job! I do look gooooood in red.
Permalink Reply by WayneandAnna on February 12, 2009 at 8:34
Jim, we presented your idea to the energy company. The company replied, "The reality is that for production facilities, because the become nearly permanent fixtures (25-30 years possibly), it is not unusual for the pipeline folks to buy those sites (1-5 acres) rather than look at a long-term lease. A lease arrangement over that term is hard to price.You would need to have an automatic renewal provision with lease terms tied to the CPI or some other metric that allows the facility to continue operating. You [the energy company] can not be in a position of having to re-locate pipeline and compression facilities if lease terms become unworkable. Something for you to think about as plans progress. "

Jim, what's your thoughts?
Permalink Reply by Steve on February 11, 2009 at 12:21
Wayne and Anna,

I'm not in the O&G business, but am in commercial real estate (not sales). If you do not lease and end up selling the property, educate yourself about what is called a 1031 exchange. It essentially lets you avoid taxes on the gain from the sale of the property by rolling the investment over into another property. For example, you could purchase a warehouse, retail center, apartments, etc. and have a recurring income stream. It is a great way to maximize your income from the sale.

I think you can even purchase a house if you do not live in it for a certain period (6 months maybe?) and then convert it to a personal residence without a penalty.

Is your land surrounded by national parks land?

Good luck.
Permalink Reply by WayneandAnna on February 11, 2009 at 12:37
Thank you for the information. The land is surrounded on three sides by the National Forest. The energy firm has the mineral rights to the National Forest. I'll study "a 1031" exchange.

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