Many of us will be forced to deal with a Landman wanting to lease or buy our minerals at some point in our lives.
Any situation like this immediately causes stress and panic:
• What am I signing away?
• What am I getting?
• Why does this man or woman want MY land?
• What do they know that I don’t?
• What are they planning to do?
• Am I getting a good deal and doing the right thing?
• Is my neighbor getting a better deal than I am?????
These are all important questions requiring answers. The first step in making the best decision regarding the future of your mineral ownership and development is always to slow down. There is no reason to hurry such an important decision. The Landman needs something from you, not the other way around. You set the timetable. There are obvious other considerations that might alter this a bit such as drilling schedules, etc., but those often have the upside of increasing your bargaining power. Once you have “clear eyes and full hearts” you can begin the process of making the right decision. Here are a few useful tips to guide your way:
1. Be friendly. This process doesn’t have to be combative. Make sure to open a good dialogue with the Landman. Ordinarily, the Landman has a number of leases or minerals to obtain rather than just yours. Be polite and forceful at the same time. This is a business decision, pure and simple. Never personal. (for future reference, the 1972 film, “The Godfather” provides a lot of guidance in general). Establishing a good working relationship with the Landman is essential to making the right decision. A combative relationship can certainly work against you.
2. Be prepared. There is a ton of free information that you can use to get informed. Make sure you have a good legal description of your land. Make sure you know the number of acres you own, the state and county in which the land is located (if not your primary residence), as well as the survey and abstract containing your land. Both the Texas General Land Office (www.glo.texas.gov) and Texas Railroad Commission (www.rrc.state.tx.us) provide excellent materials and guidance. Make sure you know as much as you can about what is going on with your land. Is your land currently under lease? Is your land producing? How much, if any, of the minerals do you own? What kind of mineral ownership do I have? Learn the language. You can certainly ask the Landman any and all of these questions. An attorney with Landman experience is an excellent tool here. Make sure you know all you can.
3. Greed is Good. A very popular quote from “Wall Street” is good advice when dealing with a Landman. Everything is negotiable. You don’t know if you don’t ask. Many people are afraid to ask for any number of reasons. Don’t be afraid, be certain. Most Landmen are given ranges of allowable royalties, bonuses, and prices. Make sure to find out what those are and pursue them. I temper Gordon Gekko’s sage advice with one caveat. Stay within reason. In the natural gas boom in the mid-2000s, many of the communities in the Barnett Shale banded together to increase their bargaining power. Many across North Texas saw dollars in their eyes and $25,000.00 per net mineral acre bonuses in their dreams and stuck to their guns. When boom went bust around 2008-2009, these communities were left united only in having empty pockets. Make sure you strike the balance between acceptable and foolish amounts of greed.
4. Be Advised. Make sure to consult an Oil and Gas attorney when negotiating with a Landman. The price for lease negotiation SHOULD be miniscule when compared to the bonuses, royalties, and payments that a potential lease or sale of minerals will bring. Pay a little to get a lot. Sacrificing a little up front is far more attractive than potentially suffering for years. You can get all the panic questions answered and hopefully enjoy “mailbox money” for years to come!