Gas Leases

Make copies, keep files and think about your future were three mantras recited Sunday in yet another local mineral rights meeting.

The Red River Desk and Derrick Club brought representatives of the National Association of Royalty Owners and related business leaders to the Magnolia Ballroom at Sam’s Town Hotel. About 200 attended, some in jeans and T-shirts and others in Sunday hats and dresses.

Meeting topics included negotiating leases and planning for estate taxes.
Lease bonuses just the start

Tina Bonner, president of the National Association of Royalty Owners, reminded northwest Louisiana residents that leasing mineral rights is just the beginning of a possibly yearslong process.

And it could be just the start of a financial boost.

“There is no such thing as a standard oil and gas lease form,” Bonner said. “If that’s all you’ve been negotiating, you’re going to hurt yourself in the long run.”

Lease bonuses mean a padded bank account now, but Bonner encouraged mineral owners to take a closer look at royalty rates — also known as retained fraction — and the number of years the lease lasts, or the primary term.

Royalty rate offers should not be below 3/16, Bonner said.

Shorter is better, she said. Why give the option of a two-year extension if nothing is drilled when you could renegotiate for a better deal?
Watch the wording

Jeanne Davis, of Legacy Royalties in Tyler, Texas, advised the group not to give in to emotional appeals when it comes to legal documents.

“Beware of tricky language in deeds,” she said.

Some phrases she said to watch for:

# Lump sum cash payment.

# Pay you in full for your royalties now.

# In these uncertain times.

Some companies may even send what appears to be a lease through the mail asking for signatures, Davis said. It actually could be a deed that gives up mineral rights.

Ask a lawyer for help on those, she said.
Keep your own records

“Keep copies of everything,” Bonner said. “Files are good.”

And that should help in preparing to pass down property and prosperity to younger generations.

Mike Gorham, of Principal Financial Group, talked with the group about estate taxes — imposed on those who inherit certain properties.

It may seem early in the shale game, but stakeholders should start now with drawing up wills, trusts or family-business partnerships, Gorham said.

Gorham quoted a recent study that says some $41 trillion will be transferred from older to younger generations over the next 40 years.

“One of the reasons you may want to do some simple estate tax planning is that what you’ve worked for all your life is gong to go where you want it to go,” Gorham said.
Participating organizations

Red River Desk and Derrick Club is the local chapter of a national association of office workers in the oil and gas businesses. The association puts on educational programs about the industry and gives money to charities.

The National Association of Royalty Owners, based in Tulsa, Okla., advocates mineral owner rights in oil and gas production.

[Via The Shreveport Times]