Sunday, November 24, 2013

To Sign or Not to Sign a Mineral Lease.

If you are a homeowner who received a letter from 
Mineral Resources with the request to lease your mineral rights for their next horizontal drilling and fracking project, you may want to read what attorney Matt Sura has to share on the subject. 

As a service to the community, Weld Air and Water hosted a presentation by Sura who on Saturday gave an overview of the dangers of fracking near homes and schools, and explained what options people have. Here some key points. You can download two fact sheets by clicking here.
Forced pooling is often threatened by landmen to persuade reluctant mineral owners to lease their minerals. But the threat of forced pooling should not be used to pressure a mineral owner to hastily sign a lease. Forced pooling is only used as a last resort for operators who have already acquired leases to the vast majority of acreage they are planning to develop. In 2010, the COGCC received 62 forced pooling applications. Operators want to avoid the additional time and expense of going through the COGCC process to force pool a mineral owner.  
..Once the drilling unit has been established, an affected mineral owner, who has not leased his minerals, has four different options: He can choose to sell his minerals, lease his minerals, consent to voluntarily pool his mineral interest with the others and participate (financially) in the drilling operation, or be a “non-consenting” owner and be “force pooled”
If the COGCC issues a force pooling order, there are four consequences for the non-consenting owner; 
1) oil and gas operations in that drilling unit are allowed to proceed, 
2) the mineral owner will get a 1/8 (12.5%) royalty payment, 
3) the other 7/8 of the mineral interest payments are withheld to pay-off the costs of the well (plus penalties), 
4) if the mineral owner owns 100% of the minerals under a parcel of land, the operator will not be able to locate the well or facilities on that parcel.

Note that, "Mineral owners who are forced pooled will still receive a 12.5% royalty interest", but the total amount will likely be less than if a lease was negotiated and signed voluntarily. That is because royalties will not be paid until costs have been recouped and by then the production of the well may have declined. But, if (like me and many others) you find the practice of drilling and fracking inside a city reprehensible, this option is the only moral one. Signing the lease is really condoning the practice.

Note also that as the mineral right owner (and you do want to lease) you (especially when joining with many of your neighbors) can request mitigations that will help reduce pollution, noise etc. which is not only beneficial for the people directly affected by the drilling process, but for our whole community! If you want to know more about how to negotiate your lease, please contact Weld Air and Water.

With enough interest, a follow-up meeting with Matt Sura will be planned, so also let your neighbors know about this opportunity! 

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