AboutFrederick M. Scott CMM RPL Expertise I can answer questions about oil and gas leasing, and give suggestions on negotiating a good oil and gas lease and how to best deal with oil companies or their representatives. I can answer questions about buying and selling oil and gas royalty or mineral rights. I can help with questions concerning forced-pooling, correlative rights, deeds and conveyances, and "post-production" costs. I am most experienced with Oklahoma properties and laws, but am able to answer questions concerning other oil and gas producing states in many cases.
Experience I am a Certified Professional Mineral Manager (CMM) (certified by the National Association of Royalty Owners in Tulsa, OK) and have managed my own oil and gas properties in Oklahoma for over 10 years. I have dealt with many landmen, attorneys, and other oil and gas professionals in the course of doing so. I am also a member of several professional associations and have written articles of interest to royalty owners which have appeared in several industry publications. I have prepared deeds, title work, and done curative for my own minerals; and have acquired a good deal of knowledge on the subject of oil and gas law and landwork in general in the process. I am the owner of Timbercreek Mineral Company, LLC; which was formed as a vehicle to manage family mineral interests, and as a way to facilitate the buying and selling of oil and gas interests for other people.
Organizations NARO, NADOA, AAPL
Publications National Association of Royalty Owners "Action Report" (ROAR); NADOA Magazine, Landman Magazine, and several royalty owner association groups newsletters.
Question Inherited mineral rights on 46 acres (1/5 interest in 230 acres)in the "Wheelock" prospect in North Dakota. The rights are currently under lease which was a 4 yr lease and a option year which was exercised ending July 2010. The Oil Company has just made an offer to lease for 3 yrs starting July 2010 with an option for 2 additional yrs. Both have a 1/6 royalty provision. The offer would pay 25% now and 75% in July 2010. The offer is basically double in $ amount, yet original lease was 4 vs 3 years and option years 1 versus 2.
My question are:
1. Is it common practice to receive an offer a year prior to expiration of the exercised option year?
2. Where can competitive quotes, if any, be acquired?
3. What is "forced" participation (or similar term) mean and does it only apply only to the 230 acres of the family owned mineral rights?
Thank you.
Answer Jeffrey, in areas where there is lots of competition for leases, it is not uncommon for companies to offer to "top lease" a current lease.
To find "competitive quotes" you could call some of the other companies leasing in the area and ask if they'd better your current offer. The courthouse in the county where the minerals are located would be a good place to find the names of some other potential lessees. All leases are eventually filed in the courthouse land records room. The name of the lessor and lessee is always stated on the lease.
"Forced Pooling" is a method used by oil companies to drill a well in cases where they either can't locate, or can't come to an agreement with, a potential lessor (mineral owner.) If they intend to drill a well, they will eventually apply to the State for a "forced pooling" order, which in effect "pools" all unleased mineral owners into the drilling unit, at terms dictated by the State.
If some of your family leases their share, but you don't, you will be force pooled potentially; but they won't because they have already been leased. The forced pooling order (should it be approved) would apply to the entire drilling unit, not just the minerals your family owns. Every other unleased mineral owner would also be pooled into the unit. A gas well unit is often 640 acres, though they can vary.
The National Association of Royalty Owners publishes a booklet called "How to Survive Forced Pooling in Oklahoma." While it is geared towards Oklahoma mineral owners, it would be beneficial for North Dakota as well, since the process is similar in both states. NARO's Website is www.naro-us.org, and you can order the booklet (and many others) from their online "store."
I would shop around a little before accepting this offer. It may not be a bad one, but I'd suggest contacting some other companies nonetheless. See what they say. The fact that they're wanting to lease you before your current lease is even finished leads me to think there is a demand for your minerals. Perhaps you might also choose to simply wait until your current lease expires. Perhaps offers will be even higher then?
You might check out this website: https://www.dmr.nd.gov/oilgas/ It has to do with North Dakota oil and gas. Perhaps you'll find some helpful information there.
Hope this helps you out!
Frederick M. "Mick" Scott CMM
