Expert: Frederick M. - 6/30/2009

Question
Straight forward, I know nothing about mineral rights, leases, etc.  I am one of 75 heirs to mineral rights to 50 acres of property in West Virginia.  They are offering $10/acre per year for delay rental for a period of five years.  12% royalty.  That's it!  Pooling at their discretion.  I know mypart is small but should I negotiate for something highter?  I asked who the other heirs were and the response was there were many.  Duh!

Answer
Debra, if possible, I'd get together with the other heirs and negotiate as a group; perhaps choosing someone to represent you from among the heirs, or even hiring an attorney or landman to represent the group of heirs. The oil company would probably give you a better deal as a group than they would individually as it would save them a lot of time.

Parts of West Virginia (I don't know where these are) are worth more than $10 per acre to lease for five years, but other parts are not these days. The "delay rental" you mentioned is probably $1 per acre, not $10. The lease bonus is probably the $10 per acre. The lease will expire after five years unless they drill, or have an extension option written into the lease.  

You could check in the local courthouse land records room in the county where the minerals are located and see if any other companies are also leasing in the area where these minerals are. You could potentially get a better deal from one of them by contacting them yourselves.

At the very least, I'd counter with SOMETHING just to see if they'll go up any. Ask for $25 per acre and 1/6 royalty (which is 16 and 2/3%.) Can't hurt, right?

Also tell them you'd like them to add a "depth clause" to any lease you're asked to sign. They'll know what a depth clause is and it's in your favor to have one in your lease.

The "pooling" provision in the lease is fairly common and is generally nothing to worry about.

Hope this helps.
Frederick M. "Mick" Scott CMM