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What research should you do before signing a mineral lease?

Being contacted by someone who wants to lease your California mineral rights can be an exciting moment. However, before you enter into a discussion with that individual or company, there are several things you need to know.

According to MineralWeb.com, here are some things to research before entering into negotiations:

Who contacted you

Perhaps the person who called you is an employee of an oil company, but this is not necessarily the case. It could be an independent contractor working for the oil company, or it could be a leasing agent or broker from a land brokerage firm. The employee may have the goals of the company in mind, but the independent contractor will probably have incentives such as commission motivating him or her to get the best terms for the company. You could even be talking to someone who "flips" oil and gas leases, who will sign a lease with you, and then sell the lease to a company.

It is a good idea to do an internet search for the name of the individual who you spoke to and the name of any oil company or other entity that may be involved.

Who else was contacted

You may have other family members who have an interest in the mineral rights, and who may have received a call just like yours. Rather than each of you negotiating on your own, consider banding together on the lease so that the mineral interests you are offering are larger. This often gives more negotiating power. 

It may benefit you to form a business entity to place on the lease rather than your name, particularly if there are several family members negotiating a single lease. Signing as an entity rather than an individual may also help address any succession or financial planning issues with the income.

How other local wells are doing

You need to have an idea of the kind of production going on around your land. To get this information, find out the geologic formation's name and do an internet search for that. You may also find information from the local newspaper, and from the California Department of Conservation.

Although this article may give you an idea of some preparations you may take before entering negotiations for a mineral lease, it is general information and should not be interpreted as legal advice.

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