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About The Battalion. (College Station, Tex.) 1893-current | View Entire Issue (April 3, 1980)
Otliei dinners Jet-awa w Holida and 15JI Landowners learn lessons, make money from oil boom THE BATTALION Page THURSDAY, APRIL 3, 1980 The Anthropology Club Presents 2 M James Ivey ) “Recent Excavations at The Alamo” ) Tonlte at 8:00 P.M. 301 Bolton Hall followed by a short primate discussion by Dr. Gentry Steele in preparation ^ for Saturday field trip to San Antonio Zoo. > ) the crap ds, black d chuck* smoothly, 'hackgam. t time this 1 they’ll bt gamblint 'dorm ab \ the night, j hey’re not | 'wealth, j: ly of stir- [ 'ominons, biers. ; crowded es, Taylor vill be set | nge. emmen! t improve irdized ait ■Govern sf rank. ■ Cornnn Washinm rcacy gw mtary sysB ts would it' ■oluntary? not belli! to tellpeol \ in salton nld prefer: hat a hot f rid. | ;nt of thel: , a trade* rs, disagr .•itingafi label she® it retained:; By MICHELLE SCUDDER Special to The Battalion Although they may not be buying palatial estates or fleets of Mercedes, landowners in this area have been reaping the monetary benefits gen erated by the local oil boom. The benefits have come to area landowners in the form of lease pay ments for their property, and/or monthly royalty payments if they have a producing well. The tremendous growth of the oil industry in this area began three to Many landowners were una ware that all provisions of an oil, gas, and mineral lease are nego- taible, or they faded to under stand the legal significance of what they signed. Thus, many landowners have found them selves bound into agreements that are not in their best in terests. four years ago when oil companies rapidly increased property leasing and oil exploration and develop ment. Most area landowners have owned their property for many years and simply woke up ope morning to find their investment in high demand by the oil companies. Before any exploration could be gin, however, the landowner (the lessor) and the oil company (the les see) had to agree to certain terms regarding the rights, privileges, and obligations of the respective parties during the exploration and possible production stages. Many landowners are unaware that all provisions of an oil, gas and mineral lease are negotiable, or they failed to understand the legal signifi cance of what they signed. Thus, many landowners have found them selves bound into agreements that are not in their best interests. When landowners are contacted by “lease hounds’ they are usually presented with what the lease hounds call a standard oil, gas and mineral lease. Dr. Judon Fambrough is a licensed attorney and works with the Texas Real Estate and Research Cen ter, and the agricultural economics department at Texas A&M Universi ty. Fambrough has researched the legal problems local residents have encountered while negotiating leases. He said people simply don’t understand the legal ramifications of the leases they sign, and they just sign what the lease hounds tell them is a standard lease. Fambrough said there is no such thing as a standard or universal lease form used by the oil and gas industry, but instead each company has a pre-drafted agree ment that has proven suitable to it in the past. But, he said landowners should re member that all provisions of a lease are negotiable and they may want to insert some provisions in the lease for their personal benefit and protec tion. Fambrough presented his findings in a seminar for local residents and has documented his findings inhis recent publication, “Hints on Negotiating Oil and Gas Leases.” In his publication and during his seminar, Fambrough outlined the advantages to landowners of includ ing certain clauses in their lease, and the disadvantages of not including them. Fambrough said people have generally made the same four mis takes while negotiating their leases. He said the first of the mistakes is basing royalty payments on pro ceeds, which means that the royalty is based on the actual revenue de rived from the sale of the mineral, which may or may not be equal to its market value. Fambrough suggests basing royalty payments on market value, which will allow the royalty to follow the upward trend of oil and gas. Fambrough said another mistake is not putting a “pugh clause” in the lease which would prevent the lessee from consolidating the leased pre mise? with adjoining leased tracts so that all the landowners would have an interest in a common under ground reservoir. A third common mistake is failure to negotiate for sliding scales in royalties, which would base royalty payments on variables such as amount and time of production. Another mistake landowners make, he said, is not limiting the lease to exploration and drilling for oil and gas. Instead, most landown ers allow exploration and drilling of all minerals. Filinbrmigh suggests that the landowner lease just for oil and gas, with a clause to negotiate for any other minerals. Fambrough estimates that 80 to 90 people attended the seminar and out of those, only about five had not already signed leases. So, landowners are discovering by hindsight what they could have done to represent and protect their in terests better. Jim Parrack, a Bryan resident who signed a three-year lease on 100 acres in Fayette County six months ago, says he is refusing to sign a lease for an additional 48 acres he owns seven miles from College Station until he gets the terms he wants in his lease. Parrack said he learned what he should look for in a lease from Fam- brough’s seminar and from other people’s mistakes. Parrack said that one year ago the land development company offered him $35 per acre in advance royalties payment, and $1 per acre per year rental fee. He said that now their offer is up to $75 acre in advance royalties, and $10 an acre per year rental. Parrack said some terms he is holding out for are a three-year lease instead of a five-year, one-sixth royalty payments instead of one- eighth, and the most beneficial pric ing payments. Parrack said that after “We’re very lucky — we have extra spending money and we’ve paid paid for our land. We have no indication at all about how long the well will produce. We couldn t depend on it for a living because it could play out tomor row. ” — Bryan resident Sam Urso. he gets the terms he wants he will sign a lease, and the lease hounds are still calling him with offers. Other area residents who signed leases several years ago have found themselves in a holding pattern if the oil company has not drilled on their property yet. Bryan resident Bar bara Childers said she signed a 10- year lease on her property near Tunis seven years ago, and the com pany has not yet drilled on their property. “We hope that there might be oil there, but don’t count our oil barrels before they come in,’’Childers said. “I know they’re out there working in our area because they’ve found oil all around us, but we don’t know when they will drill on our property, but I represenl lessors nization n impro" id mandati esult in i . Achievi eft to ed« health o cians nw) 1 quate nut rse con# 1 shown b io little abt if physich i telling f icissueist that the« inflatioiu 1 tdl businf: ,n would from the' artmenU istration® i mission» ling chan? egislati* 14 KT. SOLID GOLD BEAD 24T Now you can build a necklace of everlasting beauty and increasing value — inexpensively — one gold bead at a time: No. 25 One 4mm 14K bead on 15" It. drawn 14K chain Reg. Sale " 8mm. 17.25 13.75 No. 29 Three 7mm & four 3mm 14K beads on 18" chain 7mm. 9.30 7.40 6mm. 6.40 5.10 5mm. No. 26 One 4mm 14K bead on 4.50 3.60 15" gold filled chain 4mm. 2.75 3.10 3mm. 1.50 .09 No. 1 One 7mm 14K bead on 18" 14K gold rope chain No. 41 One 7mm 14K bead on 18" It. drawn 14K gold chain f <iJ 4 Start yours now at No. 14 One 7mm 14K bead on 18" gold tilled curb chain ^V V S’ rm YOUR jeo^Y STORE 415 University Drive 84:6-5816 Northgate do wonder,” she said. Childers said the oil company paid them $15 per acre advance payment and $1 an acre per year during the 10 years. “Our payment is not the bad part of the lease we’re involved in be cause that’s what the going price is at the time, but the bad part is that it’s a 10-year lease.” Childers said the oil company contacted them first about leasing their property and they did not contact a lawyer before signing their lease. While some landowners are an xiously waiting for an oil well, other landowners took their turn waiting and found out that the wait was well worth it. Bonnie Langham, a Bryan resi dent, signed a five-year lease on property near Giddings three years ago. The oil company began drilling on the property in June, 1979, but it did not contact the Langhams about royalty payments for eight months. Langham said they bought a new car and spent extra money at Christmas anticipating their royalty payments, but they did not come. She said she knew the delay was because they had signed a lease with a clause in it that said payments would be made “from time to time.” “Fools that we were, we signed that rascal (the lease) right up be cause we were so thrilled about get ting paid $27 per acre when we had been getting $1 an acre all the years before, ” she said. Langham said they didn’t know that it would make the slightest difference that they didn’t specify their payment terms, and they didn’t seek legal advice. * * * * SELL YOUR BOOKS FOR MORE! University Book Stores MM NORTHGATE Mu 409 UNIVERSITY DR. CULPEPPER PLAZA . $ NEXT TO 3C-BBQ ' i JABRJCSI GOOD FRIDAY CELEBRATION for 1 DAY ONLY! Yards and yards of fabric, all patterns and notions.. 50% OFF Open Mon.-Sat. 10-6 CULPEPPER PLAZA College Station jtiheaic I 1 All When you want Quality in a haircut 209 E. University 846-4771 Weekend Sale Save $ 150 MCS Series® 35 watt receiver and two 3-way speakers Only $ 449 If purchased separately 599.85. 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