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Texas Mineral Leases

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Mineral Interests and Mineral Leasing

Most people who come to me for help with negotiating a lease for their family's mineral interests are not just looking for help with negotiating a specific lease. They also want good, practical advice about how to be a good steward of the blessing that a parent or grandparent left for them to enjoy.

First, we must discuss the property to be leased. Does your family own the surface of the land as well as the minerals underneath it or do you just own the minerals? If you own the surface estate, you will want to make sure that you protect whatever is most important to you with the lease provisions. If you're living on the land or plan to one day, you may not want them to drill on your land. By "pooling" lands together, the company may be willing to lease your land, while promising not to use any of your surface for the drilling activities.

If you are willing to let them use the surface, you will still want to put in specifics to protect your use of the land. You can include provisions which protect your well water, restrict drilling activities to times other than hunting or farming season, and specify a place where you would allow drilling to occur - whatever is most important to you.

Next, we must find out whether the lease offer is sincere or just a lowball offer. Every county in Texas has a different range for the lease term, bonus, and royalty percentage and those vary from month to month. It is important to have current information. It is also important to determine how many net mineral acres are being leased. The more mineral acres you own, the more bargaining power you have. This is an important point to remember for future generations as well. A lease you sign today may be in effect for decades to come if production is achieved, so it is vital that you take your time and negotiate lease terms you can live with for a long time.

Since mineral interests are often passed from one generation to the next, mineral interests are often "fractionalized" significantly, depending on the number of children in each generation. If you're lucky enough to have a relatively intact mineral interest, you may want to consider creating an entity to hold the mineral interest for generations to come. That allows you to protect the bargaining power for your children and grandchildren down the road. If an interest has already been fractionalized, it may be possible by negotiating with siblings and/or cousins to reconsolidate the interests by placing them into an entity.

There are many provisions which can be included in a customized lease, but you won't get them unless you ask for them and negotiate to find a lease form that works for both you and the leasing company.

YCG Investments Office Building (Behind Independent Bank)
3207 Ranch Road 620 South, Suite 200 - Austin, TX 78738
phone (512) 263-5665  •  leslie@lesliedolliver.com