I’m a new member and would like to get some advice about joining a landowner group. I am in Morrow County, Ohio, and we have been presented with a landowner group agreement with terms that I wonder about. The landowner group claims to be nonprofit and its officers consist of four men, two of which are attorneys. Below are the actual quotes from the contract:
Since there is quite a bit of collective knowledge on this board I would be interested to hear some opinions. My first inclination is to do nothing and wait.
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Sounds WAY too high, 4%. Waiting never hurt anybody, and can only benefit you.
Check out this link, this group only charges 1%:
http://www.daggerlaw.com/oil_and_gas_info.html
You definitely want an oil & gas lawyer to write your lease. VERY IMPORTANT!
James
I would NEVER join that association. If you decline the lease they bring you then you can not lease for 24 months. I think you might miss the " goldrush" that is coming within this year. I think you need to be able to sign a lease at ANY time you get the deal that you like. Kevin is right. You definitely need a lawyer.
You guys are definitely echoing all of the red flags I see too. Have you ever seen this "war chest" clause? I thought that you NEVER give away any percentage of your royalties! What are the chances that anyone is sued by the O&G company, anyway? More of a chance of the opposite happening. Also says it will be returned with interest at the end of your lease. Couldn't the lease contiue to roll over in the case of production?
Yes, which means you might not see that 1% of your royalties for years and years. I would also want to know who gets the 4% within the group. The officers? The lawyers they hire?
There also seems to be somewhat of a conflict of interest of the officers. They are wearing one hat as officers of a non-profit looking out for the best interests of the landowners, but they as officers agree to pay themselves wearing the lawyer/consultant hats a fee that sounds like a windfall to them depending upon how many acres they sign up. Percent on bonus is one thing, but percent of future royalties is overreaching.
Most of them that I have seen do, which is what I was referring to.
Four percent is on the high end, particularly given the amount of information that can be gleaned from sites such as this, especially the availability of lease forms. I can't see giving attorneys that kind of money. The real value is in the potential contacts with buyers that an association leader possesses. If that leader were one of the landowners... I would highly doubt his/her contacts, but you never know. Perhaps they plan to advertise on behalf of the association. That can be costly. As for the one percent set aside...that's a joke. One percent of what payments... the initial bonus payment or ongoing royalty payments, or both??? Return it to you at the termination of the leases... what if the leases get HBP's and are in effect for 30 years or more. You really think anybody is really going to come look you up to hand you back your money 30 years from now? I doubt it, law firms come and go in and out of existence.
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