Influx of People Advocating to Sell Minerals

First, I want to apologize in advance. What I am about to say could be 100% wrong, but interesting none the less. I have been a member of this blog for several years. I have never seen an influx of new people like I have in the past few weeks. Maybe the settings have changed and we are now just getting new member notices. I don't remember, but there now seems to be more and more new posts and comment about how it is OK and probably "smart" to sell your mineral rights rather than lease. This is especially interesting considering how many letters I am now getting from people/companies wanting to buy my mineral right. I just thought it was curious. I feel it is never OK to sell your rights unless you are in dire need of money! More importantly, when someone tries to buy just "part" of your rights, upon signing an agreement to "just sell us half", you are immediately vulnerable to a partition suit (at least in WV). Unless you can out bid the big boy, you will lose. Big Time!

Comments?

Views: 5455

▶ Reply to This

Replies to This Discussion

Permalink Reply by Harry E. Rose on March 24, 2015 at 10:29am
Jim, You are a smart fellow, but do not ruin it forthe crooks.
Permalink Reply by David Perotto on March 24, 2015 at 11:04am

There are times where selling everything makes sense. As you have stated if time is on your side, hang on to your rights. Some people need the money now or are interested in flipping properties. Doesnt make them wrong, just different needs/expectations.

Whether you sell or lease, never negotiate without a good oil and gas attorney representing you. 

Permalink Reply by Jim White on March 24, 2015 at 12:05pm

The point of my comment is that I don't want people to be sucker. I stand by my comments.

Permalink Reply by Jim Litwinowicz on March 24, 2015 at 11:29am

Can you explain a 'partition suit'?

Permalink Reply by Jim White on March 24, 2015 at 12:14pm

Jim

If I own only 1% and you own 99% of the minerals under your land, I can petition the courts to divide up (partition) the 100% interest. If we can't agree on how much each of us gets, the court will appoint three appraisers who will make a determination as to the value. If either one of us doesn't agree with the appraisers opinion, the court will order that the interests are to be sold at public auction on the court house steps. If you can't outbid the other party, or if you can't bid enough to at least drive the price up, they will get the 100% and then pay you for your 99%. If the winning bid was $1000, you would get $999 and I would get all the mineral interests. I am pretty sure it works the same way in Ohio. Not sure about Pa. 

Permalink Reply by searcherone on March 24, 2015 at 1:17pm

Good explanation of a partition suit.   And, I too, was wanting how it works in PA.

And while it sounds really great to think about only selling a percent of your minerals, if one needs or wants to sell minerals I have stated before it is best to sell by the parcel.   If your property is in different parcels, sell one of the parcels.  That way you are not subject to a partition suit.   Or if your property is all one parcel there is nothing stopping you from having it divided into two parcels.   For example if you had 50 acres and wanted to sell 50% of your minerals.   Have the property split into two parcels of 25 acres each and sell 100 percent of the minerals on one of the parcels.  That would equal the same amount as selling 50% of the 50 acres.  Then you would not be subject to a partition suit.

This is my humble understanding of all of it.   Consult an experienced oil and gas attorney.

Permalink Reply by Jim White on March 24, 2015 at 1:29pm

That's very interesting. I'm not sure how you would divide it except by selling it to your son or wife etc. since you would have to sell in what is call fee simple completely separating the interests. Then you could sell the minerals under one and keep the other parcel. I have had several people tell me how much money we would make by just selling them 25% or 50%. In your case, you would be selling 100% of either yours or another persons interests. That would work. Good thinking!

Permalink Reply by Jeffrey Beunier on April 1, 2015 at 12:31pm

Why couldn't you contractually limit the buyer (and any successors in interest) of the portion of your minerals against filing or bringing a partition suit.  Seems like the risk can be eliminated via a clause in the PSA that addresses the circumstances where a partition suit is permitted to be filed.

Permalink Reply by Nancy Mosley on March 24, 2015 at 1:24pm

Partition suits are used by the gas companies to force somebody into a lease or a lease modification. As Jim said, if the company owns 1% and you own 99% of the mineral interest, or if they can find somebody with a 1% (or any interest) interest in your mineral tract, they can petition the court to partition it since all the owners (you and the other guy) can't agree on how to use the land (in this case, to lease it, or to modify it for pooling). If the judge agrees, all interests are sold at auction (or accept the appraised value), and guess who has the most money.

I think it was common in the olden days when somebody with a farm died without a will, and the children (heirs) could not agree on who got which acres of the farm. Judge would divide it up, or appoint a commission to divide it up fairly.

The gas companies are doing a lot more partition suits now, and are using them as threats to get people to sign.

Since West Virginia just voted down forced pooling, there will continue to be partition suits to force leasing (and pooling).

Permalink Reply by searcherone on March 24, 2015 at 2:03pm

Nancy,

"in the olden days" concept of dividing the farm by a partition suit still stands today with a will or without.   It is all about owning the property with other people or a company that can trigger a partition suit.

In the state of WV the deed abstractors do indeed trace those heirs on those mineral deeds searching all types of public records as well as obituaries and family histories looking for heirs.  I have said on here before that if you own property jointly and especially a mineral deed you need to know who your long lost cousins are and what they are doing with their percentage of the property you own together.   Their legal actions can and will affect you.

Permalink Reply by Nancy Mosley on March 24, 2015 at 2:34pm

Let's say there are 10 different mineral owners for a tract, maybe all descendants of Grandpa. The company wants to lease their land. 9 sign the lease given to them, glad to get any bonus money. The tenth has been reading this forum and knows there are things to get in a lease, wants a gross proceeds, etc. The company won't give a gross proceeds lease, and gets impatient with that last one, the "holdout". The company finds one of the 9 and buys his rights, or half of his rights. Then the company, being an owner, can file the partition suit, because not all 10 owners have agreed to a lease. The "holdout" is knowing that his minerals are valuable enough to have a good lease, and wants that good lease. The others are already leased. This is where the problem is. Those who are already leased are listed in the suit but are not being subject to having their part sold.

If there is already a lease, maybe 40 years old, with no provision for pooling, and the company wants to pool land to form a unit, and there is a tract with 10 different owners, all leased (from the old lease), but one wants to change the terms of the old lease (maybe make it 15% royalty from the old 1/8) and holds out for that, the scenario could happen again, if one of those 10 sells to the company, or cooperates with the company and brings suit. The holdout (wanting a better lease in exchange for the right to pool) can have his mineral interests sold by a partition suit.

I know that these things work that way, because a friend was involved in the first situation, and a different friend was threatened with partition, in the second situation.

No surface involved in these. Just mineral rights.

Permalink Reply by deutchen on March 24, 2015 at 2:47pm

nancy,

It sounds from what you say that there has to be some reason for disagreement between the 1% mineral owner & 99% owner about mineral rights  usage or leasing. If the oil & gas rights are already leased & the leasee has the right to renew for another 5 years everything is totally spelled out, I can't think of anything that could lead to a disagreement or am I wrong? 

RSS

© 2024   Created by Keith Mauck (Site Publisher).   Powered by

Badges  |  Report an Issue  |  Terms of Service