Gas drilling "offer"

[toverman]

Sorry, this is a longish one ...

We have continued to receive letters from a natural gas drilling company about signing a lease for them to suck out the gas from under our property. We are apparently one of 10 holdouts (at least as of middle of this month) who hasn't signed. The original per-acre rate was $300. It's now up to $3,500 per acre and a 25 percent royalty. I haven't calculated what that would mean for us, as our property is a fraction of an acre.

Anyway, one of our neighbors (also a holdout) said there are negotiations to add a $2,000 bonus to the per-acre rate.

Just one catch, and it's a big one. It even made the landman who knocked on our door shake his head. When we closed on the house nine years ago, amid the tons of paperwork we had to sign, was a form from the original lender (we've since refinanced) discussing mineral rights and the damage that could be caused on the surface, which would be nearly a mile away and not directly affect us. One paragraph in particular:

"Further, Borrower(s) agree that Borrower(s) will not consent to execute any documents to transfer, convey, assign, sell, or lease any mineral development rights on said Property to any person or entity during the term of this Loan."

I imagine it still applies to our loan, even though we refinanced with another company (which then sold our loan to Wells Fargo). If we'd known what advancements would be made in horizontal drilling, we wouldn't have signed. There was no indication anyone would ever approach us, because there is no feasible place for a well site anywhere near us, and city ordinance was 500 feet from any residence (it's now 600 feet). Ugh!

[andyz]

I would check your documents to see if it is there. Renewals often change more than the payment terms. My original VA loan said the satellite dish and curtains were sold with the home and had to be there when I sold it. After a couple of refis that is gone. So are the curtains and the huge dish that we never used. (I cut it up and recycled it.)

Is this clause there to protect the property and its value as a homestead? I'd hate to have my rights and uses restricted.

[tomdrink]

I would suggest contacting an oil/gass attorney. Perhaps you could band with some of the others to split the fees. But with that amount of money at stake, it might make sense to have a professional opinion!
Tom in TX

[epoh]

The oil company will actually verify your mineral rights for you. They pull the origional deed and everything else necessary to make certain.

Secondly, we managed to negotiate $10,000 per acre signing bonus, and 22% dividends pre-cost. I'd keep haggling. Make sure all the hold-outs are on the same page and are negotiating together though. If most of them sign, they won't need your permission.

[bondarnes]

Each time you re-finance the old loan is paid off and the contract is fulfilled. If that language is not in your new loan contract then it no longer applies.

[toverman]

We have the mineral rights, I'm just unsure whether our signatures on the document mean we are unable to lease them. At the least, we may have to notify our mortgage company.

By law, they cannot encroach on minerals we own. Most have already signed; they simply wouldn't be allowed to retrieve the minerals under our property. I've got no other use for those minerals. As far as getting a better offer, it's doubtful we'd get too much more in any case ... the market has tanked quickly. Some drilling ops have even been put on hold because the cost of leasing the drilling rigs costs too much compared to the gas.

[carrbowl]

and the cost of gas is only going to go lower

[epoh]

Originally Posted by toverman

By law, they cannot encroach on minerals we own. Most have already signed; they simply wouldn't be allowed to retrieve the minerals under our property.

Unfortunately that gas is not enclosed in some sort of container under your land. It's a vast reserve that covers thousands of square miles and isn't static. That means that even if you don't sign off, and they only drill on your neighbor's property, over time the gas under your land will leech over there and they will get it in the end, rights or no rights, lease or no lease. Just takes them longer.

[CaptainTom]

I've some friends who were in the same situation before the economy tanked.
The drilling company withdrew all the offers and my friends were left without any kind of contract.

[Cajungaltx]

My parents are actually sitting high on the hog because of one of these circumstances. They collect 5 figures a month because they have almost 200 acres in a large plot of 'oil & gas reserves' in Louisiana.

I'd talk to an attorney to CYA, and if so, I'd sign up for it in a heart beat.

[jgrindal]

$3,500/acre and 25% is pretty good for Ft. Worth Basin area.

I'd have a lawyer peruse it and go for it before the company lays their rigs down.

[d2creative]

I just refinanced and had to sign the same thing.
They said "it's a texas thing".
Basically you own your land but not what's under it.

[David Whatley]

Don is correct on the Refi, adn the offers have gone down a LOT, you better get what you can, while you can. A friend has 10 acres in Keller and 3 years ago got 10K an acre. RE-uped last month at 3K an acre. They wouldnt even talk to his neighbor, so the neighbor got 0.00

[kenw]

In Texas (and some other states) you can sell the mineral rights separately from the land. It doesn't always go away with a new loan.

[dbphotos]

Don is correct, if you have refinanced the home and it wasn't part of the new loan docs, then you are free to do what you want. If what you are referrring to is that you refinanced with company A and they sold it to company B, then all the documents you orignally signed are still in effect, it doesn't matter who you pay your monthly mortgage to.

I hope that helps.