Contract w/ Oil/Gas Lawyer has Section I Question

I have taken everyone's advice and contacted an oil/gas attorney to negotiate a lease w/ the oil company because the lease offered was not what I felt was fair.
My question is the contract w/ the attorney that I received to represent me has some sections that concerns me. When I spoke w/ the attorney I was told I could chose one of two payment methods. 1: An hourly rate. 2: 40% of the signing bonus I received. I chose the 2nd because the signing bonus initially offered was so low.
My question: In the attorney contract it states that I would pay 40% of upfront signing bonus. Then it says the client will pay any out of pocket expenses of litigation incurred int the prosecution of the claim regardless of outcome. It goes on o list these costs such as expert witnesses, steno, consulting reports, travel and lodging expenses.
I know I cannot expect these things for free, but as I read each item I kept seeing $$$.
Are theses normal requests? I know someone will say, "You cannot get the work done for free." I thought they were included in the 40% payment. Has anyone used a lawyer to negotiate a lease and if so did you experience large expenses?
Thanks. - Denver

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Permalink Reply by Jack Straw on March 13, 2013 at 1:59pm

I lack knowledge that would address your direct questions.

But, one thought does come to mind .... you might wish to do a little "comparison shopping" before committing to an Attorney. You would not likely purchase an automobile without shopping around - it might prove valuable to likewise shop around for an Attorney that you most feel comfortable with.

When you purchase an auto, it is a decision you will live with for 5-10 years.

When you sign a lease, yours heirs may be dealing with it 60 years hence.

 

Good luck to you ... and please let us know how things turn out (so that those here might learn from your experiences).

 

All IMHO,

                  JS

Permalink Reply by Denver Gallentine on March 13, 2013 at 2:10pm
Thanks Jack. I will take your advice. I just got the contract today and was surprised at the section I noted.
On the car analogy, I remember too well as a young man in 1976 walking into a showroom and falling in love w/ a brand new Mustang loaded with everything possible. Yes I bought it.
Permalink Reply by Berk on March 13, 2013 at 2:26pm

Denver- I'm just a small landowner in Pa. still waiting for something to happen in my area. After reading your concerns and after I took a few minutes to get my eyeballs back in my eye sockets please allow me to show you some math. Lets assume you have 50 Ac's of land. And for easy math lets again assume this lawyer gets you a lease for $1,000 per Ac. Totaling 50,000 dollars now you must give him 40% of this which is $20,000. You now have $30,000. Now comes taxes, Federal, State and maybe Local (not sure). This should be around 40%. This is another $12,000. So now you have $18,000 dollars left. Out of this $18,000 you could get hit with the other costs you mentioned. You end up with 36% or less of the entire lease amount.      

Permalink Reply by JK on March 13, 2013 at 2:29pm

Denver,

Good for you in reaching out to find an attorney.

BUT!

I would Dump this guy!

Find another attorney.

It's discusting you have to even watch what your own attorney puts in a contract!

Pay them by the hour and keep a rein on them!  Make an agreement to pay when you receive your bonus.

Follow your gut on this..

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on March 13, 2013 at 2:33pm

40%?!?!  That's...bad.  Really, really bad.  Pay hourly unless that number comes down to 10%.  What litigation is going to come from signing a new lease?

Permalink Reply by JK on March 13, 2013 at 2:35pm

Denver, how big is your acreage and where are you?

Permalink Reply by Denver Gallentine on March 13, 2013 at 3:04pm
JK, much of the oil/gas mineral rights that this lease covers is owned by a large group of cousins. The total acreage is over 1400 acres (shared by about 40 people). Tis initial section is 150 acres, but I am trying to set a president for the other 1300 acres in Wetzel County. We have leases on 120+ acres in Marshall Co. WV and in Ohio and got really good leases 18% royalty and a good signing bonus on the land w/ new lease, but I did not have 40 other family members involved. This lease they initially offered $100 per acre signing bonus and 12 1/2% royalty. I refused to sign and the uped the signing bonus to $1000 per acre. If it was just my land negotiations would be so much easier. - Denver
Permalink Reply by JK on March 13, 2013 at 3:33pm

Denver I remember your story.

What a hassle to find all 40 relatives.

It can be done though.

I had to find one and kept digging and found him.

All is well.

Please keep us posted on your progress.

Permalink Reply by Dee on March 13, 2013 at 3:11pm

I would not sign a contract with those high fees. As a comparison we hired who we believe to be the best real estate attorney in Eastern Ohio to negotiate our lease with one of the majors. The fee was $5 per acre. Why so low? He feels he has made his millions and wants to assist people in not getting taken. We got vertical and horizontal pugh clauses, etc, etc. He advised us not to accept the lease per acre amount that was offered and told us where it would go to. Due to our particular situation, we accepted the lease. The $ per acre amounts did in fact go to where he said they would. I would suggest that you keep looking for an attorney. Best Wishes

Permalink Reply by JK on March 13, 2013 at 3:31pm

Dee,

Sounds like the attorney of our dreams!

What is his name and is he licensed in WV??

If he's not in WV then maybe he knows some good guys here.

That would be great..

Heck I would pay him just to talk to him..

Permalink Reply by Berk on March 13, 2013 at 3:32pm

Dee,

How about Pa.?

Permalink Reply by Denver Gallentine on March 13, 2013 at 3:56pm
Thanks to all who replied. You all reinforced what I thought. It is good to know my gut feeling is right. I will be glad to get this stuff settled. It seems I have been working on this for 20 years. I will let you know how things turn out.

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