If you are considering whether or not to sell some of your mineral royalties in California, chances are you are going to want to find a buyer who will respect the value of your assets. At Erhlich Pledger Law, LLP, we have considerable experience helping people to make strategic decisions when they are working with oil and gas transactions.
As with anything, there are more appropriate times than others to consider selling your royalties to someone else. Deciding when to begin soliciting your royalties is a matter of how much you wish to get for them, the condition of the market, the appeal of the royalties you are selling and how willing you are to spend time finding an ideal buyer.
According to ILOS Resources, if you are approached about selling your royalties and the discussion is contingent on your willingness to deposit a bank draft, take a step back and reassess. Before you agree to anything, make sure you understand the value of your royalties, as well as how much you are willing to negotiate. Once these decisions have been made, a bank draft can be created. Otherwise, you will compromise your option to negotiate at all. You may also consider getting a few quotes about how much your royalties are worth so you can begin to create boundaries for your selling experience.
When you are equipped with strategic methods for selling your royalties, you may be more confident as you prepare to sell your assets. For more information about transactions involving gas and oil, visit our web page.
The California gas and oil businesses are complex. If you own land or mineral rights, you probably work with those who hold interests or leases in the minerals, mining rights or royalties. Normally, contracts with these individuals and companies could provide consistent value to you as an owner. However, things do not always go as smoothly as intended.
Generally speaking, you can prevent many mineral disputes by establishing sound and fair contracts at the outset of a business partnership. Here is some information about establishing lasting royalty agreements, including some typical industry conventions on pricing.
You would want to negotiate leases that included royalty rights if you owned mineral rights to a piece of property. This allows you to receive payment based on the productivity of your assets as well as their inherent or prospective value. Most royalty rights holders negotiate for somewhere between 1/8 and 1/4, but your own terms should depend on your unique situation.
Of course, the simple percentage of royalty payments is not the only issue at stake. The form of the royalties, such as in-kind or cash, also could determine the value you would be able to secure from the types of payments. In terms of disputes, due dates and interest rates for royalty payments could also come into play. The best strategy in most cases is to go through all of the possibilities and write terms of the contract to deal with them specifically.
If you are receiving royalties, you may suspect that the gas companies are not paying you your due. As discussed on NPR, there are class-action suits in progress against predatory organizations. However, this is just information. Please do not view it as legal advice.
Oil and gas disputes take place for a myriad of reasons, and our law office has provided many examples of why these disputes arise throughout our website. When an oil and gas dispute comes up, it can result in many different consequences, regardless of the reason(s) behind the dispute. Not only can a business' reputation be on the line, but stressful legal challenges may lie ahead. Moreover, the financial impact of such a dispute can be enormous, and we will examine some financial concerns associated with these disputes in this blog post.
For starters, an oil and gas dispute may result in significant legal fees and even penalties, if the outcome is unfavorable. Moreover, an oil and gas company may be hit hard when they are no longer able to move forward with a project that they were counting on. The aftermath of a bitter dispute may also generate long-term financial concerns, some of which may even threaten the future of an oil and gas company altogether. In some instances, the financial fallout of an oil and gas dispute has prompted business owners to shut down permanently.
It is very important to be prepared for a dispute when one surfaces. Sometimes, these disagreements can be addressed without going to court, while others may involve litigation that is unavoidable. Oil and gas owners should be aware of their legal options and carefully pursue successful dispute resolution, as challenging as this can be in some instances. We have written about many related topics on our blog.
In some parts of the country, blue collar workers have been hit hard by financial challenges and job losses. Some people in this position have benefited from oil and gas leases, which have helped combat these economic challenges. However, some of those who lease oil and gas rights change their minds or disagree with the way in which a project is being executed. This may be due to confusion about the terms of a lease or a property owner's refusal to abide by the terms of a lease. In some cases, this can lead to a heated dispute, which may be very hard for an oil and gas company to deal with.
If you are in the middle of a dispute over an oil and gas lease, it is crucial to do everything in your power to find a successful resolution. You may be able to resolve the disagreement outside of the courtroom, but there are times when legal action cannot be avoided. In these instances, it is imperative to carefully pore over the details of the agreement and have a firm understanding of your rights and the lease. Depending on the outcome of the dispute, this roadblock could have a major impact on future operations and the overall health of your business.
We realize how challenging oil and gas disputes can be, whether they involve a lease or any other facet of a project. If you would like to read more about legal issues that impact oil and gas producers, browse our blog.
California residents know that the state in which they live is rich with many natural resources. Among these resources are oil and gas. While necessary for most people's everyday lives to run as they do, the collection and use of oil and natural gas can be a source of contention among politicians, business people and citizens. In California, this has led to a halting of leasing federal land to oil and gas companies for several years with the last lease sale on record taking place in 2013. This, however, may be set to change in the near future.
The current presidential administration has recently made two announcements providing information on its intention to open up more than 1.7 million acres of private and public land throughout the state for oil and gas exploration. As reported by The Los Angeles Times, the latest announcement concerns more than 725,000 acres in the central portion of the state staring in the San Joaquin Valley and running west to the coast. The region spans 11 counties with the bulk of the land falling in San Benito, Monterey and Fresno Counties.
It is anticipated that as many as 37 new oil and gas wells may be created on this land over the span of two decades. Slightly more than 42,000 of the acres would not be allowed to have surface level equipment but more than 683,000 acres would be opened up for oil and gas drilling.
Some residents and politicians in the state are pushing back on this plan but, for now, this is the intended direction per the administration.
The term "mineral right" implies that one's claim to ownership extends only to the minerals found from beneath the ground of a property in California. This distinction is made due to the fact that a separate ownership category exists defining surface rights. In many agreements, the owner of a property retains the surface rights and simply sells or leases the rights to the minerals found therein to different extraction companies. Yet there are scenarios where the two terms can be blurred, thus allowing mineral rights owners to have certain surface rights, as well.
The most obvious of these would be express rights detailed in either a sale or lease contract. Surface rights conceded by property owners typically include structure permits and extraction methodologies, as they may care less about the method through which the mineral rights owners conducts its work as they do in being compensated for the use of the land. Yet California law does indeed open the door to interpretation when it comes to additional surface rights. In defining "mineral rights," Section 883.110 of the California Civil Code states that such rights include any "express or implied appurtenant surface rights."
What might qualify as implied surface rights? The most closely applicable answer may be in extending the definition of an implied easement to such a scenario. Typically, three elements must be present for an implied easement to exist:
It must be reasonably necessary for the enjoyment of the property
The land must have been divided by the owner so that either it retains a certain part or makes subdivided areas available to different owners or lessees
The implied easement's claim must have existed prior to the acquisition of the property
In cases involving oil and gas extraction, identifying implied surface rights can be critical to claiming production authority.
California is a land ripe with many natural resources which result in some of its land being leased out for the sole purpose of harvesting these resources. Some land may be leased from private individuals or corporations while other land may involve leases with the federal government. When the federal government is involved, it may end up paying the state of California royalties.
The amount of money paid by the federal government to the state for leases involving the extraction of natural gas and oil has been the subject of legal action and political policy over the past couple of years. As reported by Courthouse News Service, effective January 2017, the federal government was supposed to increase the amount of money it paid to states for these royalties per an order dated July 2016.
The order was enacted by one administration and not popular with the subsequent administration leading to efforts to block it from being instituted. A federal judge even ruled that the federal government illegally prevented the order from being executed. Twelve days after that decision, the federal government issued a repeal of the rule entirely. New Mexico joined forces with California to instigate legal action in the matter and have the rule remain in effect.
A judge recently ruled in the matter and blocked the repeal of the original rule. Some reasons for this decision included a lack of other options being considered or offered and a lack of opportunities for public comment from being provided by the federal government.
If someone has approached you with a lease offer for the minerals or the oil on your California land, it is not unreasonable to think the person who is talking with you represents a company that excavates minerals or other natural resources. Sometimes this is the case. However, there is the chance the party you are conversing with is actually farther removed from an actual drilling operation or has no ability to drill at all.
As Mineralwise explains, the party that approaches you for mineral rights could be one of three types. As previously stated, sometimes you are contacted by a person who actually works for an excavating outfit such as an oil and gas company. For instance, a landman that is directly employed by the oil company itself might talk to you about granting the oil company a lease.
However, not all landmen are employed by an oil company. Some landmen are actually independent operators. These parties actually have no ability to drill on your land. Instead, they do their business by seeking out oil or mineral leases, and once acquired, will resell those leases to a company that can do the actual drilling. This is known as “flipping” a lease.
In lieu of a company employee or an independent party, sometimes you talk to someone who is more in the middle, a person who is an independent contractor that works on behalf of a drilling company or someone who works as part of a brokerage firm that has been hired by a drilling outfit. These individuals will be looking to secure the most favorable terms possible for their client, since they will likely benefit from the deal as well.
Depending on the party that contacts you, you may be speaking directly to the party that can start drilling on your land or someone who may pass a lease along to a drilling company at a later date. If you are confused, hiring a professional mineral rights attorney can help you negotiate a deal that is more favorable to you and prevent another party from taking advantage of you.
This article is written only to provide general information on the topic of mineral rights. It is not intended as legal counsel of any kind.
The current presidential administration is making changes to a 1972 law that gave coastal states like California the right to stall or stop offshore drilling in federal waters. Governors of states up and down both coastlines contested a recent proposal to open all coastlines to offshore gas and oil drilling according to the Los Angeles Times.
The Coastal Zone Management Act gives coastline states a voice when it comes to industry development or federal projects that extend up to three miles off the coast of the state. The changes proposed by the administration will not change the current law but may affect how states are able to enforce it. The changes are seen as positive by the oil industry in removing barriers to the development of natural gas and oil resources.
The law was originally passed in response to the Santa Barbara oil spill of 1969 and allows states to request modifications when there is activity in federal waters. The state’s say is not final, but many have used the act to defeat projects that were seen as a threat to public health and the environment. California alone has stopped 36 oil leases in the early 2000s. Another block occurred in 2007 as state officials opposed a project designed to create a natural gas port just offshore from Los Angeles and Ventura counties.
The goal of both government and the oil industry is to find a compromise that allows for increased access to oil and gas resources without harming the environment. Many see this move as a positive step toward lowering oil prices.
Whether you are the owner of land in California or the representative of a company interested in accessing the resources that may lay below the surface of a particular piece of property, it is important for you to understand how agreements between these parties may work. When entering into any contract involving the rights to a mineral, whether rock, oil or something else, great care should be taken to identify the fine details in order to prevent future disputes.
As explained by Geology.com, a mineral rights contract may be structured in a number of ways. One option is to establish a lease that grants access to the land for a limited period of time. The intention here is that a company can use this time to explore and test the viability of any resource presence and production opportunity during this time. At the end of the lease period, they may pursue a purchase or walk away and all rights then return to the land owner.
Another option is an outright purchase. This, however, does not mean that production would commence immediately. It may take decades before this happens. It is therefore essential that the contract stipulate how a mineral rights owner may access the land and the resources beneath the surface.
If you would like to learn more about details that are important in contracts between land owners and those interested in accesssing potential resources from the land, please feel free to visit the mineral and surface rights page of our California oil and gas law website.