Does a Mineral Owner Need a Lawyer?

Does a Mineral Owner Need a Lawyer?

Mineral owners often contemplate whether or not they need a lawyer. So why should you read an article written by a lawyer about whether you need a lawyer? Because there are lawyers out there who actually put their clients’ interests first, even if it means discouraging someone from hiring a lawyer too soon or paying too much for legal services.

This article gives tips to mineral owners that help you decide:

  1. Whether or not you need an attorney

  2. When during the process you should hire a lawyer

  3. What you can do to keep your legal fees as low as possible.

Abe Lincoln famously said that an attorney’s time and advice is his stock in trade. The question is how much that stock is worth and when the trade should be made.

Do I need an Attorney to Negotiate an Oil and Gas Lease?

Usually, yes; and as for when, that depends on how experienced you are in negotiating leases. Oil and gas leasing is simply one small element within the much larger framework of finding and producing hydrocarbons. Learn more in the article Oil & Gas Basics for the Mineral Owner 19.

Another article outlining the major areas of negotiation in oil and gas leases will be coming soon. If you have enough experience or confidence to negotiate yourself, before hiring an attorney to review the actual lease after the deal points are negotiated, you can save yourself a substantial amount of legal fees. If you try to negotiate without sufficient experience - this falls under the “fool for a client” rule. Even if you are an experienced lease negotiator, an attorney can still add value by:

  1. knowing the local market, what other leases are going for, and who is active in the area

  2. knowing common negotiation points, points the company leasing your property might give on, and those which it will not

  3. knowing whether you are dealing with a reputable party who has the money to close the lease.

How Do Mineral Owners Pay Attorneys?

Attorneys’ fees usually fall into one of the following types:

  • Hourly

  • Contingent

  • Contingent hourly

  • Flat fee, or

  • A combination of the above.

The traditional hourly arrangement means you have to pay the fees even if the deal does not go through. If you lack the funds to pay an attorney up front, see if the attorney will agree to a contingent hourly fee to be paid out of the bonus when the lease is signed. The attorney may want an increased rate or flat fee kicker to make up for the risk of the deal not going through. Some attorneys will also quote flat fees up front. You do not want to sign a contingent fee contract with an attorney to negotiate a lease, as the potential payoff to the attorney on a contingency is possibly far greater than the work required. Be aware – in smaller towns or hot areas, you may have a hard time finding attorneys who will take a lease negotiation on anything but an hourly basis.

Should an Attorney Review My Oil & Gas Lease?

Even if you are experienced in lease negotiations, you definitely should have an attorney review the lease before signing it. Just because the company agreed to a deal point does not mean the lease reads that way, or does not contain other provisions that dilute what you think you have negotiated. Oil and gas leases have become more and more complex over the years, if they are fairly drafted. Beware the short lease form presented by a company. It is probably the most advantageous to the company.

Finally, if you have a number of mineral interests, you may want to invest in having an attorney draft a “family lease form” to present during negotiations. A fairly drafted, and reasonably acceptable, lease form can save you much time and attorneys’ fees in later negotiations, by getting the company to use your lease form as the starting point. The time an attorney spends redlining a lease is usually greater than the time spent on direct negotiations. Consider having a family lease form ready for interested parties.

Do I Need an Attorney to find out What I Own?

Probably not, if you are computer savvy and willing to put in the time to do the research. However, an experienced attorney, or more likely his legal assistant, will likely locate the information faster and you save the time spent with the learning curve. Also, if you have been contacted about leasing, and there are no title issues that need to be cleared up, the company will eventually get a title opinion which shows you what you own.

There are many articles and posts on this forum that describe how to navigate the various online resources for finding mineral interests. Even if you are not that tech savvy, there is homework you can do that will save your attorney time and lower your legal bill. Some tips to think about:

  • Have you looked through all your and your family’s personal papers for the financial statements, deeds, wills, estate inventories, divorce decrees, and old oil and gas leases that will help you identify the property?

  • Have you looked for old property tax statements that might describe the property?

  • Have you researched online with the Appraisal District to see if you can find tax accounts or legal descriptions for the property?

  • Have you done a family flowchart showing names of relatives and the dates and counties of marriage, divorce and death, to help the attorney locate the divorce decrees, estate and other deed information?

  • If the county is within driving distance, have you gone to the deed records office at the courthouse and tried to do some research yourself? Most courthouse personnel are quite helpful, unless it happens to be in a county where the courthouse is swarming with people researching titles because of an oil boom.

  • Have you looked for old royalty checks and producer statements that may describe the property or lease?

  • Have you talked to relatives involved in the mineral interests to see what they know or have?

Once you agree to lease, ask for and keep a copy of the title opinion that will be generated. These can be invaluable in showing what you own, and will save time when it comes to leasing your next property. Of course, if you are having an attorney review the lease, the attorney should review the title opinion to see if it is accurate. The tips listed above can save your attorney much time, and you much expense.

When is a Lawyer Needed in Mineral Owner & Oil Company Disputes?

Most surface damages are negotiated as part of the lease, although some are negotiated when the company gets ready to drill. If you are experienced at negotiating surface damages where a lease is already in place, this can be done without an attorney. An attorney who knows what surface damages are going for in a particular area will be helpful in getting a better deal.

The term “surface damages” does not mean an oil spill or other catastrophe. It means the damages that are paid for taking surface out of production, building roads to service the well, and other losses to the surface owner as a result of the drilling and maintenance of the well.

If you are dealing with damaged property due to some extraordinary type of damages, or if you believe that the company is not paying according to the lease terms and the law, this presents an entirely different situation. Normally, an attorney will be needed, unless you have a great deal of experience in investigating and negotiating these types of claims on your own.

To reduce your legal bills, here is some homework you can do before contacting your attorney:

  1. Find or get an additional copy of the signed lease and past producer statements

  2. Check the state agency website production records to see if they match what are on your producer statements

  3. Take good photos and video of the situation, and consider hiring a skilled photographer or videographer, if necessary

  4. Document your contacts with the company by starting a diary listing phone calls, dates of contact, and what was discussed

  5. If you are corresponding with a company by email, save the emails, print them out, and take them to the attorney

  6. Make a timeline of events, and list of witnesses, including contact information, for your attorney to interview.

What Else Can I Do To Lower My Legal Fees?

Every good attorney relationship should feel like a well-run partnership. Communication should be frank, open, and consistent. However, the more work you do means less work that your partner -- your attorney -- has to bill you for. Here are a few additional tips on how to lower your legal bills:

  • Ask for correspondence and documents to be sent by email, to avoid incurring fax, copy, and postage charges;

  • Learn more about the oil and gas activity in the local area of your concern - for example, use websites like this one on the Eagle Ford Shale play of South Texas 3;

  • Do as much homework as you can, using some of the other tips outlined in this article;

  • Prepare before every telephone conference or meeting with your attorney, know what you want to talk about, and do not waste your or the attorney’s time;

  • Read the correspondence and documents your attorney sends you, so he does not have to recap them again over the phone, except to explain things you do not understand; and,

  • Resist the temptation to pepper the attorney with questions by email, as many attorneys bill for reading and responding to emails.

As the saying goes in legal circles, the best paralegal is usually the client.

Research Can Save the Mineral Owner Money

While this article leans heavily on the side of self-help as the best way to reduce legal costs, it does not mean attorneys will not do the work for you. They are, after all, in a service profession.

Remember Abe’s wisdom – all an attorney has to sell is his time and advice. The more you do to reduce the amount of time your attorney has to spend, benefits you and gives you the experience to handle more of this on your own in the future.

This article was originally published in the Mineral Rights Forum, August 2012.