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 I received a Paid Up Oil and Gas Lease on 12.5 acres that I own in Rusk County, Texas with mineral rights. I have been told to limit the lease to petroleum and natural gas and related hydrocarbons produced in association with oil and gas. Why should a lease be limited as so? The lease states the term "gas" as used herein includes helium, carbon dioxide and other commercial gases, as well as hydrocarbon gases. Also, what is the difference between a Paid Up Lease and one that is not titled Paid Up? Thank you.
Answer David, the lease is probably titled "OIL, GAS, AND MINERAL LEASE" or something similar. If you like you can cross out the word "mineral" and replace it with the words "associated hydrocarbons." This would limit the lease to only to oil and gas and related hydrocarbons. Always be sure to initial your changes and date them as well (without scribbling all over the lease...try to do it in the margin if possible.)
If you don't want to include "helium, carbon dioxide and other commercial gases," you can simply cross them out on your lease form as well, and put your initials by where you crossed out; again, preferably in the margin if there's room.
Alternatively, you could simply add the words "This lease applies only to oil, gas and other liquid or gaseous hydrocarbon minerals" and attach it in the form of a lease rider which would be attached to and made part of the lease itself. Anything you add in a lease rider will take precedence over conflicting terms in the lease. You may still however also want to delete or "strike" other references in the lease relating to "other minerals" and replace them with "associated hydrocarbons."
For ANYONE WITH MINERALS IN TEXAS, I would suggest you purchase "The Great Texas Lease Mark-Up Handbook" from NARO (The National Association of Royalty Owners) in Tulsa, OK. Tell them I sent you...they'll charge you double ha ha! Actually, DO tell them I sent you, and then pay the $12 or whatever it is for this 40-page Handbook. It's WELL worth it for those of you with minerals in Texas, and would also be helpful for other states as well. Their website is www.naro-us.org and their phone number can be found there, as well as the NARO "store" where you can order online if you wish.
Yes, I'm a member of NARO, and no, I don't get paid anything for hawking their books, I just really think they ARE very helpful guides for the mineral owner! This booklet will tell you what you need to cross out and/or change in those Texas lease forms that are sent to you. Very well written and easy-to-understand. "Look Before You Lease" is another good one (for all states) and it has been recently revised as well!
To answer your other question; a PAID UP LEASE just means the "delay rentals" have been paid in advance and so none will be due on each yearly anniversary during the primary term of the lease. In the past, a lessee had to pay a yearly rental fee (usually only $1 per acre) in order to continue to hold the lease each successive year of the primary term without drilling. It was called the "delay rental" actually; since if they chose to delay drilling until after the first year had gone by, then they had to pay a "rental" fee in order to keep the lease through the next year.
These days they usually just pay the delay rental up front (include it with the bonus) so that in effect they can "delay" drilling for the entire term of the lease if they wish without paying any rental, since the delay rentals normally due each year have been already been paid in advance.
In the past, companies tended to forget to pay the delay rental sometimes, and they lost their lease because of it...since delay rentals were required each year they delayed the drilling. Paid up leases solves that problem.
Hope this helps you out!
Frederick M. "Mick" Scott CMM
