"Oil and Gas Interest" in WV: real or scam?

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runner9
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"Oil and Gas Interest" in WV: real or scam?

Post by runner9 »

My MIL was widowed 11 years ago. Today she got a 9x11 manila envelope in the mail with a single page on letterhead. It says that she has "inherited a small oil and gas interest" in Marion County, WV. It names her late husband and a few of his relatives and says he inherited it from them. It says it's from a specific person at EQT Production and they are going to drill for oil and pay royalties.

She calls every so often about something and I usually tell her it's a scam, etc. I don't know about this and need advice. The person and company both seem to exist online. I don't know anything, let alone enough, to know if this is real or a scam, and if the latter, how.

My MIL agreed to let me call the phone number tomorrow on her behalf and then go from there. Advice? Thanks!
alex_686
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Re: "Oil and Gas Interest" in WV: real or scam?

Post by alex_686 »

Be cautious - but sure. I have worked with oil and gas interests have been passed and split to the great-grandchildren. Fractional shares of less than .1% paying out single digit royalty checks every month. Almost impossible to sell your interest on.
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adamthesmythe
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Re: "Oil and Gas Interest" in WV: real or scam?

Post by adamthesmythe »

If it is a scam it hasn't started yet, since they haven't asked for money or signatures.

There is oil and gas in that part of the country, and many property owners do not own the mineral rights. So not on the face of it implausible.
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Re: "Oil and Gas Interest" in WV: real or scam?

Post by bottlecap »

Do a search online. It might be legit, except that her royalties might be calculated in the company's favor. It could warrant investigating just for that issue.

So long as she doesn’t provide information or send checks, there's not much else they can scam, right?

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Re: "Oil and Gas Interest" in WV: real or scam?

Post by Humility101 »

I have a friend that works in this industry, and this is not completely out of the ordinary. With that being said, heed the details, and have a lawyer review the content. Certainly don’t have her share any personal info or account info.

It is possible that she makes a fortune as my friend would literally make some farmers multi millionaires over night if they had a well on their land. Strange industry, but could be real...or could be a scam.
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Re: "Oil and Gas Interest" in WV: real or scam?

Post by Sandi_k »

My grandfather had land outside of Charleston, and when he died, the kids sold some of the land but kept the mineral rights. They were substantial.

So possibly not a scam.
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Re: "Oil and Gas Interest" in WV: real or scam?

Post by runner9 »

Thank you all. I will call tomorrow. Other than not giving a check or account number, anything else to specifically watch for? I’m guessing the contract isn’t negotiable or am I mistaken?

The letter suggested a couple hundred dollars a month subject to market changes.
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Re: "Oil and Gas Interest" in WV: real or scam?

Post by alex_686 »

runner9 wrote: Mon Apr 06, 2020 7:09 pm Thank you all. I will call tomorrow. Other than not giving a check or account number, anything else to specifically watch for? I’m guessing the contract isn’t negotiable or am I mistaken?

The letter suggested a couple hundred dollars a month subject to market changes.
Ask for a accounting for the past 12 months for the well. Ask about percentage and ownership structure. Ask you is running this. I suspect that everybody has a tiny fractional share. Getting all of the owners together will be like heading cats. Normally these things get set up and go on autopilot. There should be a trust or something looking after your interests. How robust they are is a different question.
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heartwood
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Re: "Oil and Gas Interest" in WV: real or scam?

Post by heartwood »

My wife inherited two of these from her parents 10+ yrs ago. One stopped paying after a while, apparently a limited term lease that expired. Her share of the other throws off maybe $200 in a good year. She's got something like 0.0019% ownership in 20 very old fields that don't pump much. She gets accounting with every distribution, twice a year. We've investigated selling since its almost not worth the effort of filing the K-1 that comes every year. The firm managing the leases and bookkeeping etc offered us a one time buyout of $250 or a little more than 1 good year's payout. Last year we got a RE tax bill on several wells, maybe $15 total from one County in Texas. First time that's happened.

Perhaps a good investment in her parents day before it was split so many ways, but now its questionable. We usually get a distribution in March (and Oct) after accumulated distributions reach $100 or more. None so far this year. I'm guessing with the price of oil down so much we didn't hit the $100 trigger.

I recall she had to file some paperwork changing title but that was handled by the attorney handling her mother's estate.
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Re: "Oil and Gas Interest" in WV: real or scam?

Post by Mr. Rumples »

First, it says she inherited it. If its legitimate, is it worth her while to accept it? What liability goes with it? If she did inherit it, why wasn't it handled in probate before now?

I would contact corporate headquarters of the company and also the WV Attorney General's Office, the consumer protection division.

When my father died, I wrote the circuit court that there was one piece of property I did not want to inherit. It had so many owners with tiny shares and so much liability, the property was contaminated with lead and asbestos, it just wasn't worth the headache.
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Re: "Oil and Gas Interest" in WV: real or scam?

Post by notmyhand »

I have some experience in the industry and it happens more often than you think. Depending on how much you own, it may or may not be worth seeing an attorney on it. In WV if she refuses to develop the minerals, there is a law referred to as the co-tenancy law. If 75% of the owners (assuming there is a larger amount) want to develop the land, then she is forced to as well. So you may not just be able to ignore it. Not an attorney though! If she's not interested in dealing with it, see if the company will purchase the minerals instead or offer minerals to one of the dozens of mineral buying companies in the area. Keep in mind, oil and gas is at an all time low so she will not see good prices right now.
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Re: "Oil and Gas Interest" in WV: real or scam?

Post by cheese_breath »

runner9 wrote: Mon Apr 06, 2020 7:09 pm Thank you all. I will call tomorrow...
They might not talk to you unless she's right there to give her permission.
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Random Poster
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Re: "Oil and Gas Interest" in WV: real or scam?

Post by Random Poster »

Probably not a scam.

Likely the oil company got a title opinion that identified the MIL (or FIL) as an unleased interest owner and the Landman is doing curative work on the title opinion to get the mineral interest leased.

Happens all the time in the oil and gas business.

And the interest owners more often than not think that it is a scam, which just drags things out unnecessarily.

What is surprising is that anyone is drilling these days.
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Re: "Oil and Gas Interest" in WV: real or scam?

Post by Fallible »

runner9 wrote: Mon Apr 06, 2020 5:23 pm My MIL was widowed 11 years ago. Today she got a 9x11 manila envelope in the mail with a single page on letterhead. It says that she has "inherited a small oil and gas interest" in Marion County, WV. It names her late husband and a few of his relatives and says he inherited it from them. It says it's from a specific person at EQT Production and they are going to drill for oil and pay royalties.

She calls every so often about something and I usually tell her it's a scam, etc. I don't know about this and need advice. The person and company both seem to exist online. I don't know anything, let alone enough, to know if this is real or a scam, and if the latter, how.

My MIL agreed to let me call the phone number tomorrow on her behalf and then go from there. Advice? Thanks!
What exactly are they asking your MIL to do about this? If it were a scam, there would likely be a request for personal financial information or for money but you don't mention this. It appears, as others here have suggested, the company has updated its lease ownerships and finally gotten around to your MIL.

When you talk to the company tomorrow, you can ask them why she is being notified now and what they want her to do, her options, etc. If you can, let us know what the company says.
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
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Re: "Oil and Gas Interest" in WV: real or scam?

Post by nestorius »

Call the company's 800 number (look it up in Google) and ask for the person named in the letter. If he/she exists, the operator will likely put you through.
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Re: "Oil and Gas Interest" in WV: real or scam?

Post by Valuethinker »

alex_686 wrote: Mon Apr 06, 2020 5:36 pm Be cautious - but sure. I have worked with oil and gas interests have been passed and split to the great-grandchildren. Fractional shares of less than .1% paying out single digit royalty checks every month. Almost impossible to sell your interest on.
Sale - perhaps to another rights holder on the same property?
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Re: "Oil and Gas Interest" in WV: real or scam?

Post by Greenleaves »

Some of what the OP tells us seems right, and some does not. How could anyone predict your money per month before the well is even drilled?
Leases are very state dependent. The mineral rights will have been recorded in the county of the lease. As has been stated a "landman" is probably trying to put together a lease, happens every day. At some point your SS# will be needed ,most likely a W9 for the Division Order. You would receive a
1099 Misc for Royalties and you also file Schedule E for oil depletion and production tax.
Typically "Bonus" is paid upon the lease signing as an amount per acre. This is paid before drilling and with each lease extension. They can drill a dry hole and have no royality, so "Bonus" is all you receive. Hard to learn what others are being paid. There are Royalty Owner websites/forum
just like Bogleheads.

An attorney is a good idea before you sign, though they are a unique type of oil & gas practice.I always have the landman or the company he represents pay all my attorney fees. Everything in the lease can be negotiated,depends on your % of the mineral rights.
Mineral Rights are like a bundle of sticks and can be broken into many pieces.
Try contacting her family members, someone should remember something Uncle ? owned. Does someone have signature authority over the lease for the others?
Some refer to the lease as a "Producers 88", and if you are presented that to sign it needs careful review, can be totally rewritten and usually has a side agreement attached. You may be a small fish and be "force pooled" if your sate allows that. Limits can be set for how deep the well is drilled,and "favored nations clauses" can be asked for. Make sure to spell out conditions that terminate the lease, time,or no production.
A well for oil or gas can run for decades, and sometimes function long after as a saltwater disposal well continuing to bring in payments.
Find out who is the surface owner over your mineral rights.
Good luck with this, an interesting project. Try Mineralrightsforum.com
Last edited by Greenleaves on Tue Apr 07, 2020 3:34 pm, edited 1 time in total.
Oilcans
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Re: "Oil and Gas Interest" in WV: real or scam?

Post by Oilcans »

runner9,

I have 20 years of dealing with oil and gas companies and landmen as I have interests in the Bakken in ND.

It sounds to me as if it is not a scam. If it is real it can get somewhat complicated dealing with their agreements, Division Orders, etc.

My first advice is to go slow. Most of the landmen will try to get you to make a quick decision which is not in your best interest. So don't get excited and sign. I've seen this happen and usually it is a big mistake which you may regret years down the road.

Next thing is to educate yourself about the industry. I would recommend calling the WV Oil and Gas Conservation Commission to start. Their # is 304-414-1239. Ask them questions.

Another good site is to check out is: www.mineralrightsforum.com/ Go to Marion County in the West Virgina tab. Ask your questions here. There are people there who may have some of your same questions and usually there are two or three experts who will point you in the right direction.

At this time I would not recommend an attorney. Most attorneys do not have experience dealing with Oil and Gas companies so why pay $350 an hour or more for someone not familiar. Once you become educated you can ask someone on mineral rights forum who they would recommend.

After you have done these things, then call EQT and speak to someone in the Land Department. Just remember they are not your friend. They are looking out for the company.

Incidentally I've signed many agreements with O & G companies. But never one of theirs as they are one sided in their favor. I have drawn up my own and had an attorney review before sending it back to the company.

Good luck.
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Re: "Oil and Gas Interest" in WV: real or scam?

Post by basspond »

I have a relative that had mineral rights in a field that development was held up because one small piece of property had 40 mineral right owners that had to be contacted. I would talk with other mineral right/land owners to see if they received similar letters. Try this link to search for the lease:

https://apps.dep.wv.gov/oog/permitSearc ... 2f421b69TR
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Re: "Oil and Gas Interest" in WV: real or scam?

Post by absolute zero »

nestorius wrote: Tue Apr 07, 2020 12:24 am Call the company's 800 number (look it up in Google) and ask for the person named in the letter. If he/she exists, the operator will likely put you through.
This was my same thought.
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Re: "Oil and Gas Interest" in WV: real or scam?

Post by Katietsu »

If this is a small share and what EQT does on the surface is of no consequence to MIL, an attorney for just MIL is probably not worthwhile. An attorney for a block of landowners could be worthwhile. And I think many land men are better at taking advantage of the vulnerable than any whole life or annuity salesman. Gotta always have your guard up.
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Re: "Oil and Gas Interest" in WV: real or scam?

Post by Greenleaves »

Several posters have advised against attorneys yet warn about the evil "Landman "wanting you to sign his lease. I have participated in many leases over decades. I have never had a "landman" or the company he represented not agree to pay all our attorney fees. On the other hand the lease is our own that they are familiar with, and probably know or have heard of our O&G Attny. and we really do not involve attny till near the end of negotiation. Funds are paid and dispersed by him. Bottom line do not fear a oil & gas attorney you pick and paid for by others. They also seem to move right along when they know they are paying.

If you also own the surface we use a separate lease for access roads,gates,heaters,treater,storage tanks, wellsite,and cropland loss, with detailed restoration of the land. Lots of moving parts to this business to go it alone first time.
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Re: "Oil and Gas Interest" in WV: real or scam?

Post by EmBee »

Random Poster wrote: Mon Apr 06, 2020 8:50 pm Probably not a scam.

Likely the oil company got a title opinion that identified the MIL (or FIL) as an unleased interest owner and the Landman is doing curative work on the title opinion to get the mineral interest leased.

Happens all the time in the oil and gas business.

And the interest owners more often than not think that it is a scam, which just drags things out unnecessarily.

What is surprising is that anyone is drilling these days.
Can confirm. I’ve had to do this often as Landman in Appalachia. Happy to provide additional info if OP needs more information. (NOT EQT employee)
Random Poster
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Re: "Oil and Gas Interest" in WV: real or scam?

Post by Random Poster »

Greenleaves wrote: Tue Apr 07, 2020 2:19 pm Some of what the OP tells us seems right, and some does not. How could anyone predict your money per month before the well is even drilled?
Leases are very state dependent. The mineral rights will have been recorded in the county of the lease. As has been stated a "landman" is probably trying to put together a lease, happens every day. At some point your SS# will be needed ,most likely a W9 for the Division Order. You would receive a
1099 Misc for Royalties and you also file Schedule E for oil depletion and production tax.
Typically "Bonus" is paid upon the lease signing as an amount per acre. This is paid before drilling and with each lease extension. They can drill a dry hole and have no royality, so "Bonus" is all you receive. Hard to learn what others are being paid. There are Royalty Owner websites/forum
just like Bogleheads.

An attorney is a good idea before you sign, though they are a unique type of oil & gas practice.I always have the landman or the company he represents pay all my attorney fees. Everything in the lease can be negotiated,depends on your % of the mineral rights.
Mineral Rights are like a bundle of sticks and can be broken into many pieces.
Try contacting her family members, someone should remember something Uncle ? owned. Does someone have signature authority over the lease for the others?
Some refer to the lease as a "Producers 88", and if you are presented that to sign it needs careful review, can be totally rewritten and usually has a side agreement attached. You may be a small fish and be "force pooled" if your sate allows that. Limits can be set for how deep the well is drilled,and "favored nations clauses" can be asked for. Make sure to spell out conditions that terminate the lease, time,or no production.
A well for oil or gas can run for decades, and sometimes function long after as a saltwater disposal well continuing to bring in payments.
Find out who is the surface owner over your mineral rights.
Good luck with this, an interesting project. Try Mineralrightsforum.com
Greenleaves wrote: Tue Apr 07, 2020 3:57 pm Several posters have advised against attorneys yet warn about the evil "Landman "wanting you to sign his lease. I have participated in many leases over decades. I have never had a "landman" or the company he represented not agree to pay all our attorney fees. On the other hand the lease is our own that they are familiar with, and probably know or have heard of our O&G Attny. and we really do not involve attny till near the end of negotiation. Funds are paid and dispersed by him. Bottom line do not fear a oil & gas attorney you pick and paid for by others. They also seem to move right along when they know they are paying.

If you also own the surface we use a separate lease for access roads,gates,heaters,treater,storage tanks, wellsite,and cropland loss, with detailed restoration of the land. Lots of moving parts to this business to go it alone first time.
All of this is pretty decent advice, but---as noted in your posts---everything is State dependent and depends on the quantum of interest at issue.

I am an oil and gas lawyer (but not the OP's lawyer, and not Greenleaves' either) and I'm not licensed in West Virginia.

I mention this only to say that I have quite a bit of experience with these sorts of things (lease negotiations, surface use agreements, etc) and my (now-ex) employer (an E&P company) would simply refuse to negotiate documents if the mineral interest at issue was small. Most other companies are the same way.

What constitutes "small" depends on each prospect, but if, when represented as an 8-digit decimal calculation, your mineral interest has three or more zeros after the decimal point before the first non-zero number appears, then nothing substantive will likely be negotiated in your favor. Rather, you'd just get carried, or force pooled, or whatever the state allows. And there is no chance that you'd get your attorney fees paid for by the oil company.

So if the OP's MIL's mineral interest is, say, 1/512*, I wouldn't get your hopes up in terms of hitting the jackpot and being able to turn the screws on the landman or the oil company. If it is a 1/4th or greater, well, then, negotiate away and good luck.

I'm not going to get into surface rights and access issues, other than to say that those are state and location dependent as well.

* I realize that 1/512 is .00195313 when expressed as an 8 digit decimal calculation and that it has only two zeros after the decimal before the first non-zero number appears. I'm just using it as an example.
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Re: "Oil and Gas Interest" in WV: real or scam?

Post by Fallible »

runner9 wrote: Mon Apr 06, 2020 7:09 pm Thank you all. I will call tomorrow. Other than not giving a check or account number, anything else to specifically watch for? I’m guessing the contract isn’t negotiable or am I mistaken?

The letter suggested a couple hundred dollars a month subject to market changes.
Is this an offer to purchase your MIL's interest? Or is it a lease offer?
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
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Re: "Oil and Gas Interest" in WV: real or scam?

Post by Lalamimi »

I am a retired Texas landman, and it most likely is legit. Call and ask for Land Manager or the area landman (with offices closed, he/she should at least have their office phone forwarded or checking voice mail). The company has had title run, and has chained the deceased MI owner to the husband. They have hired field landmen who search records, obituaries, etc. Sounds like they are putting their unit together. I have not worked WVA, but the company most likely needs a certain percentage of mineral owners leased to form the unit (pooling tracts of land into one big unit). The interest might be small, but she can say she is an owner in an oil (or gas) well. We loved getting calls from missing heirs, it kept the money from having to be held in suspense for years and then being escheated to the state. I doubt she needs an attorney, but they will offer a bonus per acre and 25% royalty is now the norm. (this gets split by what her actual interest ends up being).
If the company already has a lease with the deceased parties, then there is no negotiation. But if they are wanting her to sign a lease, then yes, there is room. Term (1 yr, 3 yr), bonus (again this is proportionate to the interest, so if they say $500 acre, she only gets a portion , unless she says no I want $500. Limit size of unit. We were forming some very large Production allocation areas in S Texas, but units are usually 320 or 640 , no clue in WVA. Larger bonus if not allowing for annual rental payment until the well is drilled. Again it really depends on what her actual interest is, and in how many acres.
Good luck!
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Re: "Oil and Gas Interest" in WV: real or scam?

Post by runner9 »

Thank you all. I left a message for the landman on Tuesday and haven't heard back. I will call again on Monday and leave another message. Thank you for all the responses, far more insight than I expected!
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Re: "Oil and Gas Interest" in WV: real or scam?

Post by runner9 »

Finally got a hold of the landman. She couldn't have been nicer in answering all my questions.

Area in question is just under 100 acres, my MIL owns 1/10 of one acre. Have been working in area a few years, just getting to this section. Almost 200 people own mineral rights in this area, she has agreements with about 3/4 of them.

Will pay about $100 a year until the well is drilled in 2021 or 2020. Then 15% as royalties if she agrees.

If she doesn't agree there's no payment until drilled, then 12.5% as royalties.

Will mail contract, would need address, phone number, would prefer a 1099 be filled out with SS# but not required, will withhold taxes without it. Processes a 1099 for taxes, no K1. Can do notary via video chat, etc under the current situation.

No liabilities as it's not ownership of land, just oil/minerals under the land.

This is what she told me. My first thoughts are it's a go anyway as she's nearly at 75% and not much of an interest anyway at 1/10 of an acre so probably nothing to negotiate, just double check?

I really appreciate all of the responses. Please let me know if I'm missing anything I should get an answer too.

Thanks!
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Re: "Oil and Gas Interest" in WV: real or scam?

Post by Boglegrappler »

This thread is an example of many on the forum that tend fill up with conjecture about questions of fact.

EQT is the successor to the old Equitable Natural Gas, and their website says they are the largest natural gas producer in the US. They've been around since the 1800's.

EQT production appears to be their production arm that actually manages the drilling of wells and extraction of the gas.
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Re: "Oil and Gas Interest" in WV: real or scam?

Post by mrsbetsy »

My family got the same deal through EQT.

A couple of years ago, we were all contacted. I owned about 1/167th of the property. We were told that we all had to sign in agreement so they could continue drilling (fracking) on the property. In return, we'd get $50.

I now live in CA and have zero ties to that side of the family and my heirs wouldn't give a rip about it, so I asked them what would happen if I didn't sign. It required a notarized signature and mailing forms back and it sounded like a pain in the butt and not worth the 50 bucks. He said he'd call me back.

A week later, he said that they would pay buy me out for $500. I said, SOLD! I signed some paperwork and got a check minus taxes.

If my siblings become rich oil barons, I'm going to be pissed, but for now...not worth the headache!

This contract went back to the 1800s? I don't remember the details but since my dad is long passed, the property just went to me and my two siblings.

They took the $50.
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Re: "Oil and Gas Interest" in WV: real or scam?

Post by Random Poster »

runner9 wrote: Wed Apr 15, 2020 1:23 pm Finally got a hold of the landman. She couldn't have been nicer in answering all my questions.

Area in question is just under 100 acres, my MIL owns 1/10 of one acre. Have been working in area a few years, just getting to this section. Almost 200 people own mineral rights in this area, she has agreements with about 3/4 of them.

Will pay about $100 a year until the well is drilled in 2021 or 2020. Then 15% as royalties if she agrees.

If she doesn't agree there's no payment until drilled, then 12.5% as royalties.

Will mail contract, would need address, phone number, would prefer a 1099 be filled out with SS# but not required, will withhold taxes without it. Processes a 1099 for taxes, no K1. Can do notary via video chat, etc under the current situation.

No liabilities as it's not ownership of land, just oil/minerals under the land.

This is what she told me. My first thoughts are it's a go anyway as she's nearly at 75% and not much of an interest anyway at 1/10 of an acre so probably nothing to negotiate, just double check?

I really appreciate all of the responses. Please let me know if I'm missing anything I should get an answer too.

Thanks!
With the quantum of interest at issue, I don’t see how there is anything to really negotiate.

The $100 a year sounds like delay rentals. You might prefer a paid-up lease with all of the expected rentals paid up-front (and, ideally, a bit more money as well) as a lease bonus. More money up front instead of waiting each year for the money to show up (and if it doesn’t, then the lease is terminated). Given the current economic environment, the lessee is going to prefer the delay rental approach, I’d imagine.

Similarly, with such a relatively small interest, be aware that the MIL may only get one royalty check a year. Not sure what WV’s law is on the subject, but it may be that no royalty check is due until at least $100 has accumulated or a year has elapsed since the last payment.
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