In the United States, minerals such as oil, natural gas, and coal-bed methane are commonly owned by private individuals, as opposed to the government. If a company would like to produce or develop these minerals, they must lease the interest from the owner; in this case, you.
AELS wants to lease your mineral interest on behalf of a third-party client who intends to develop it for market.
AELS serves a variety of oil and gas entities, but due to
the sensitive nature of the industry, we are not at liberty to disclose their
names or where they are operating. However, we take great care to work with
only the best, most respectable companies in the business.
Title search is the process of determining ownership in private property. For AELS, this generally refers to establishing ownership in a mineral interest, for the purpose of leasing said interest on behalf of our client.
As with any private property, leasing enables you to retain ownership while relinquishing some of your rights for a prescribed period of time. Conversely, selling involves relinquishing all right and title in perpetuity. While there are some companies that exist solely to acquire mineral interests, AELS engages in leasing exclusively.
While it is true that bonus payments for state and federally owned mineral interests are often higher than those for privately held interests, it is important to consider the fact that the other terms of state and federal leases differ as well - particularly duration and royalties. For example: federal leases are typically for ten year terms, while state leases are for five years. If an oil company takes a federal lease at $1000 per acre, the cost is essentially $100 per year, on average. If they take a three-year lease from a private owner at $600 per acre, the cost is essentially $200 per year, on average. Likewise, royalties for state and federal leases are often much lower than those for privately held interests.
Taking all terms into consideration, individual mineral owners often secure a much better deal!
A top lease is a means of delay leasing a mineral interest that is already leased by another company. Top leases typically go into effect on the expiration date of the prior lease (also known as the base lease), assuming that the lessee does not have or has not exercised an option to extend, and that a producing well has not been drilled.
Gross mineral acres refer to the total acreage in a tract of land, while net mineral acres refer to a lessor’s share of that acreage.
Royalty Interest refers to a lessor’s “share” in the production or proceeds from a well drilled on their mineral interest. Those with a royalty interest do not bear responsibility for any of the costs associated with production, but do own a portion of the resources or revenue produced.
When a lessor’s net mineral acreage is less than the gross mineral acres in a tract of land, royalties are paid only on that portion which they do own. In other words, the royalty is reduced in relation to the lessor’s share of ownership.
A spacing unit refers to the required distance between - and the acreage allotted to – individual drilling units, as required by a state’s regulatory agency. Spacing units vary in size depending on geographic, geologic and environmental factors, among other things.
It is incredibly difficult to predict when, where – or even if – a well will be drilled. Due to intense competition within the oil and gas industry, this proprietary information is typically not shared with AELS and/or lessors until drilling commences. Ultimately, a well will be drilled in the area that geologists have determined bears the best chance of producing in quantities that are profitable.
Hydraulic Fracturing – aka "fracking" – is the process of cracking or shattering sub-surface rock in order to stimulate oil and gas production in formations deep below the earth's surface. This process is utilized when the permeability and porosity of the rock are not sufficient to support the flow of oil and gas at a rate that makes production economically viable.
The process involves injecting a highly pressurized liquid composed of water, sand, ceramic or other materials into the wellbore in order to create conductive fractures in the rock. These fractures increase the area from which oil and gas can be recovered by creating a path connecting a larger area of the reservoir to the well.
In recent years, there have been questions about the effects of fracking on ground water and air quality, particularly in regards to the potential migration of gas and other substances to the surface. It is important to note that hydraulic fracturing is common and wide-spread, having been employed for over 60 years on over 1 million wells, and while accidents have occurred, they are exceedingly rare.
Once your signed and notarized lease is received by AELS, it will take 35 to 45 business days to receive your bonus payment, depending on the terms of your lease. During this time, AELS will undertake comprehensive title search to confirm ownership in the mineral interest to ensure that it has not been erroneously or previously leased. Because mineral title can be extremely complicated, we take great care to protect the interests of both our clients and lessors.
Absolutely. We encourage you to seek legal counsel regarding how to best protect yourself and your mineral interests, especially if any of the lease terms are unclear.
