If an oil and gas exploration company has determined your land contains valuable mineral reserves below the surface, you are going to be presented with an option to sell the land or lease your mineral rights.
You may not be in a position to part with your property for a number of reasons, so a lease arrangement is usually the best choice. A priority before you sign any lease agreement for the rights to your oil and gas reserves is to know what type of person you are dealing with.
Know Who You're Dealing With
Just because someone approaches you about a lease arrangement for oil and gas exploration that does not mean the individual represents the company that will be handling the job. In fact, oftentimes oil and gas companies hire out a staff of leasing agents to secure the rights before they even do exploratory tests on the land.
Ask for credentials. No trustworthy mineral-rights agent will be unwilling to divulge what company the represent or what the company's objective is. They may or may not be at liberty to discuss any timetable for the company they represent, but they should be willing to present you with sufficient information to let you know who will be responsible for paying you the earnings due.
Three Types of People You May Deal With
1. Individuals who work privately to secure mineral-rights leases. These people are called contract leasing agents or land brokers. This type of person will most commonly be an independent contractor working on behalf of the oil and gas company.
2. People who will present you with a proposal from their company to potentially drill on your land. Agents may also work for a large land brokerage company whose job is to secure multiple mineral-rights contracts and then sell those to the oil and gas companies.
You may be contacted directly by an employee of the oil and gas company. This situation is usually indicative that they already know for certain that your land has valuable oil or gas reserves that they wish to obtain. This person is called a land man and will present themselves immediately as an employee of the company.
3. Private entrepreneur or middleman. These are in some respects similar to land brokers, but often they are working for themselves. Through their own expertise or based on research data that they have paid for themselves, they will begin to secure the oil and gas rights to parcels of land that they believe hold valuable reserves below the surface. This person is a businessman with the primary objective being to make a profit. This person will purchase the mineral rights to your land and then flip them to an oil and gas company who will actually do the drilling. These types of arrangements are the most tenuous, and if presented with this type of proposal, you should be very aware that this person does not represent the oil and gas company and will have their own profitable interests as a priority.
No matter which type of person you are contacted by, find out exactly in what capacity they are working. There is a big difference in dealing with a person who represents an oil and gas company, one who represents a mineral-rights brokerage, and a person who is trying to purchase the rights to the oil and gas beneath your land for themselves. If you have any questions, you would do well to consult with legal counsel to protect your rights.
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