5% commission to negotiate your leases

Comment

Comment by Jerry Shade on January 26, 2012 at 12:11am

There is a point to be made here - as I think 5% is high in most situations. But I am an attorney, and my family has land in the Utica, and I am in the early stages of organizing a landowners group to combat the 7 1/2% commission being asked for in my county. To suggest that a family lawyer with no experience in O&G leases can successfully seek competitive bids and negotiate a modern horizontal fracking lease in a few hours is ridiculous. 

If your talking about a client bringing you an existing lease offer in a well developed play, maybe. Or if you sit and wait for somebody else to negotiate a quality lease in your area, you can spend a few hours monitoring the internet, and 5 minutes advising your client to jump on the bandwagon. But even then, it assumes your also going to let the O&G company determine good title to the mineral rights instead of doing it for your client. It also assumes nothing in the way of advice on all the other issues surrounding new found wealth. It would almost have to assume your not going to bother explaining the terms of the lease to the client so that they can make an informed decision versus just blindly following your advice. Its very difficult to believe a lawyer would even make such a blanket statement on such a potentially complex topic.  

Comment by Michael Mclaughlin on October 25, 2010 at 9:28pm

If anyone is interested I would be glad to provide a copy of a lessor favored oil and gas lease from the southern oil and gas states. Email me at bigmac51@mac.com if you would like a copy.

Comment by Michael Mclaughlin on October 21, 2010 at 11:51am

I failed to add in my post that negotiating an oil and gas lease for a client would take an attorney, at most, 3 or 4 hours. At any reasonable hourly rate , your oil and lease negotiation would cost less than $1,200.00. If you are talking about a significant acreage and a significant bonus, that is a minor expense.

Comment by Tom Kiss on October 21, 2010 at 11:34am

outback you have all your info incorrect. In 2009 Fortuna a.k.a .Talisman paid $ 5500.00 for a lease with the Friendsville Group. Chesapeake paid 5750.00 to the Wyoming County landowners group. And Chesapeake did not do any leasing in 2010 for that amount, nore did they honor their promise to sign all of Wyoming co. It was just a scam to control Wyoming County. And many landowners were left waiting. I don't know where you got your info. All newspapers in the area covered the signings check their archives.

Comment by Outback on October 13, 2010 at 3:08pm

The "Friendsville Group" was formed to negotiate lease bonus payments and royalty rates, among other things, for it's members. The cost to join was $50. It didn't matter if you owned 1 acre or a 1,000. They negotiated primarily with Talisman and Chesapeake. In September 2009 they struck a deal with Chesapeake.
They paid a lease bonus payment of $5,750. for a 5 year lease. They also offered a 20% royalty (not recoupable against royalties). Fire halls, American Legion halls etc were rented and hundreds of landowners in Bradford, Susquehanna And Wyoming Counties leased tens of thousands acres.
On top of that, Chesapeake offered the same deal to non-Friendsville Group landowners and as late as this summer 2010, were continuing with that same offer. That's a fact, check it out.
My point is that, while this same offer may not be available statewide, I agree with Mr. Mclaughlin that these negotiating fees of 5% and more is "highway robbery".

Comment by Victoria Smith on October 13, 2010 at 10:48am

Outback says: "a 50 buck fee .......$50 period . Tens of thousands of acres were signed for $5,750 bonus for 5 years and 20% royalty. $50. "

This sounds incredulous. First are you saying $5,750/acre for 5 years?. The gas company must be ensured of a tremendous return in the Friendsville area to so easily concede to this bonus, not all O&G owners have such productive properties. Also, is the bonus recoupable against royalties, because if it is then it's not such a bad upfront investment for the lessee. But also, I would never even expect someone to negotiate all the terms of my lease, my specific environmental concerns & receving copies of test reports, spud fees, deadlines/ kill fees, shut-in fees, pooling restrictions, etc for a mere $50. Are you saying the Friendsville Group did all this for $50 per lease regardless of the amount of negotiation that went into the lease?

Comment by Ed Shaffer on October 13, 2010 at 10:19am

I recently discussed similar fees with someone that works in a trust department at a major bank. He stated that they receive 6% of everything to manage the minerals inside the lease. I believe he included the bonus's negotiated on new leases. Does this sound reasonable? Are there other factors covered by the 6% for services provided by the trust department? Or is this a total ripoff?

Comment by Outback on October 13, 2010 at 10:15am

I agree. Here in Bradford County the "Friendsville Group" paid a 50 buck fee .......$50 period . Tens of thousands of acres were signed for $5,750 bonus for 5 years and 20% royalty. $50.

Comment by Victoria Smith on October 13, 2010 at 9:56am

It sounds like this 5% may have been extrapolated/rationalized from the standard PA 5% (or 6%?) realtor fee. I think 5% sounds reasonable as a one-time fee (with caveats mentioned below), but do not let the % tie in to ongoing revenue streams. Also, there needs to be parameters tied to the negotiation results so that the agent is not negotiating away your O&G interests for a pittance of what you expect to receive. If the agent and you can come to an agreement in a little minute as to the lease terms you expect to acquire in the negotiation, and these terms are put in writing, 5% sounds reasonable. But, if you have to get into a negotiation with the agent about what the terms of the agency are going to be, you might as well have hired a lawyer.