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My wife and I received a letter in the mail yesterday from a Mr. Lemoin Unger, Petroleum Landman with Courage Oil & Gas, LLC regarding an oil & gas lease offer request for land we own in Franklin County, Illinois.  The land is located in Sec. 36 Twp 5S Rng 4E.  The terms offered are for a 5 year primary term with an option to extend for an additional 3 years.  They are offering $300 per net mineral acre for a paid-up Oil & Gas lease with a 17.5% royalty or $250 per net mineral acre for a paid-up lease with an 18.8% royalty on all future production. The offer is conditioned upon acceptance by April 2, 2013 and is subject to title.

I have several questions:

1.) We did not think that we owned any mineral rights to our land. We know that the coal rights were sold in the 1920s and our legal description excepts all coal, oil, gas, and other mineral rights. Why would they send us this offer?

2.) What is a net mineral acre?

3.) What is a paid-up oil & gas lease?

4.) What does it mean that the offer is subject to title?

5.) Is this a reasonable offer? I am assuming one should counter it.

6.) What is a reasonable counter offer?

Thank you for taking the time to answer my questions.

1. They probably haven't done a thorough title search yet. Once they do they'll figure it out.

2. Net mineral acres are those acres you own within a larger gross acreage tract. For instance if you own 10 acres under the NW/4 of 36-5S-4E you own 10 net acres under 160 gross acres.

3. Paid up just means they're paying the lease rental (usually $1/acre) in advance, along with the lease bonus. If they weren't paid up front then the rental payments would be due each year they didn't drill during your primary term of three years.

4. Subject to title means they won't pay you your bonus until they've thoroughly checked your title. As you noted, they'll probably figure out you don't own anything during that process.

5. I'm not familiar with lease offers in this area. Best bet would be to check with neighboring mineral owners if you can find them.

6. I would counter with anything less than double the original offer, and I would also tell them I would not agree to the 3-year extension unless it paid double the original bonus agreed to. Frankly I'd prefer they just leave that off.

If you want to go ahead and lease to them even though you're pretty sure you don't own anything, you can tell them that you'll lease, but you don't think you own any minerals there and so will not warrant your interest and will not give back the bonus if they find you don't own anything there. That will probably keep them from leasing you, but if you don't own it anyway why bother.

Hope this helps you out.
Frederick M. "Mick" Scott CMM, RPL
The Mineral Hub  


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Frederick M. Scott


Oil and gas leasing, lease negotiations, how to best deal with the oil and gas companies or their representatives, buying/selling mineral rights, 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.


I am a Certified Professional Mineral Manager (CMM) certified by the National Association of Royalty Owners (NARO) in Tulsa, OK. I am also a Registered Professional Landman (RPL) with the American Association of Professional Landmen (AAPL). I have managed my family's oil and gas properties in Oklahoma for over 10 years and have dealt with many landmen, title analysts, attorneys and other oil and gas professionals in the process. I have written several articles which have appeared in various oil and gas industry magazines and newsletters. I have negotiated and drafted leases, prepared deeds, affidavits, and other legal instruments relating to my own minerals, as well as performed title, legal research, and curative work for same. I have acquired a good deal of knowledge on the subjects of oil and gas law, mineral appraisal, and landwork over the past ten years, and also worked as a professional landman and lease buyer for a time. I've seen the business from "both sides" and therefore feel confident I can help out most of the folks who ask questions in this forum.

National Association of Royalty Owners (NARO); American Association of Professional Landmen (AAPL)

National Association of Royalty Owners "Action Report" (ROAR); NADOA Magazine, The Mineral Hub, Landman Magazine, and several royalty owner association group's newsletters.

Certified Mineral Manager (CMM), Registered Professional Landman (RPL)

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