FAQS
1. What does it REALLY cost to belong?
The BMRO will operate at no cost to owners. While donations to
cover costs of mailings, website maintenance, meetings, etc. are appreciated,
none are required. It is anticipated that the attorney’s fee will be paid or
reimbursed by the gas company.
2. Why should I wait to sign a lease negotiated by you?
You are free to sign any lease you want at any time. We
believe you will ultimately do better by waiting to sign on
terms that apply to a larger, more attractive group.
3. What are the economic terms we are likely to get?
We cannot guarantee any particular terms, although it is our
belief that many current offers out there are below the true
market value. Further details will be provided as discussions
continue.
4. How long is this negotiation process going to take?
Most coalition lease agreement negotiations have taken 3-6
months to complete once the coalition is formed. The BMRO
was formed around July 1. We are very hopeful that our
negotiations can be completed more quickly than the “typical”
deal, but we won’t try to speculate about timing at this
point.
5. How do I know if I own mineral rights?
Standard form real estate purchase agreements generally do not
exclude mineral rights, so chances are that you own your rights. Reviewing
your purchase agreement and title policy will
generally note if mineral rights are excluded. Coalition lease agreements do not
require owners to warrant title, so it is really up to the gas company to tell
you that you don’t own mineral rights. We expect our lease to prevent members
from having to give back monies they may have received in cases where mineral
right are subsequently determined to belong to someone else.
6. What happens if I have a mortgage or decide to refinance or sell my house?
Mortgage documents typically prohibit mineral leasing, but
mortgage companies have been willing to subordinate their interest to the lease
upon request. We expect our lease to require the gas company to pay for any
subordination fees.
7. Do we know of any drill sites gas companies have identified?
Drill site locations are among the most closely guarded
secrets in the oil and gas business. We have been told by representatives of
several companies that they will have sites capable of reaching our entire
footprint. Also, we will be attempting to identify sites on our own, and
possibly bring in other areas with identified or likely sites. Ultimately,
all drilling sites must obtain permits from governmental entities before
commencement of operations.
8. What is the surface impact of oil and gas operations?
The coalition lease will provide for no surface use, although
sites the companies obtain for drilling will have such provisions. Generally,
horizontal drilling technology allows companies to establish a central “pad”
location which will drain up to 640 acres (1 square mile). Drilling and
operations activity is regulated by federal, state and local regulations, and
our lease agreement will provide as many specific restrictions above and beyond
those as we are able to negotiate. Water, air and noise covenants will be
particularly important, and it is important to remember that this lease could be
in force well beyond many of our lifetimes, as much as 80 years by some
estimates.
9. How long does it take for the drilling phase?
Although drilling and completion efforts can take 3-6 months
for a single well, the central pad locations may be used for
multiple wells and therefore “active” for several years. In addition,
re-fracturing of existing wells may occur every
couple of years. Again, items such as noise, traffic, etc. must be fully
addressed in the lease to protect all owners, and particularly those in close
proximity to pad locations.
10. What are my royalty payments likely to be?
We don’t want to speculate too heavily on monthly royalty
payment amounts until we get closer to striking a deal. Other coalitions have
estimated that royalty payments over time will be at least as great as up-front
bonus payments, but that depends on many factors, including drilling success,
future natural gas prices, etc.
11. What happens if I don’t sign a lease?
In our opinion it is highly unlikely that individual unleased
tracts will delay or prevent a company from drilling if they decide to do so,
and they may form a drilling unit which excludes both the area and the oil and
gas from those tracts. If a company so
elects, it can seek to obtain an order establishing a drilling
unit which includes all tracts within a particular area, and in that event
unleased owners may receive payments based on
terms approved by the Texas Railroad Commission, often without any bonus
payments. You cannot prevent drilling by not
signing a lease!
12. What are the tax implications of oil and gas leases?
It will be best to consult tax professionals to confirm
details,
but in general royalty income is taxable, subject to a
deduction for depletion. The value of mineral interests will
also be used in determining the assessed valuation of
properties for property tax purposes.
13. How do I know my acreage?
We have an excellent link right here, but before you get to
the signing, you should review the plat record that came with your papers when
you closed on your home. That will show you the dimensions of your property.
Remember that we will negotiate inclusion of the public right of way(s) that
border your property. Add that number to your calculations. The energy company
will figure your property size, but since this is a legally binding lease you'll
be signing, it is always in your best interest to know the size of your property
before the signings take place.
Another important detail is whether or not your mortgage
company will require a subordination agreement before you
receive royalty payments from our energy partner. While we
negotiate any fee payments for this agreement, it is in your
best interest to contact your mortgage company now and ask
them what they will require. We would recommend obtaining the
forms they'll want, but not executing them until we get to the
signings.
