Lawsuits Over Mineral Rights on the Rise

Lawsuits over the nature of mineral leasing and the high stakes game of who owns and who leased first is a multi-million dollar issue in South Texas. Everyone sells land and leases minerals happily until acreage prices skyrocket. That’s when the lawyers come out. That’s when people realize they might have missed something very big. The gravy train of $10,000+ per acre lease bonuses and long lived royalties might have passed right by. Often times, real estate trades for fractions of the dollar before oil or gas is discovered.

In a 1-2 year time period in Northern Louisiana, acreage prices in the Haynesville Shale increased from less than $3,000 an acre (that was good) to sell land and mineral rights to simply leasing minerals for as much as $20,000 per acre. Prices have come down, but the boom is much like what we’experiencing in the Eagle Ford.

The dollars involved also increase the likelihood of fraud. There will no doubt be bad apples, but companies do their due diligence on title and many of these issues are resolved before leasing. If you are leasing, always do research to make sure you’re working with a reputable party.

A tangle of lawsuits has been filed over the disputed ownership of valuable mineral-rights leases in the booming Eagle Ford Shale in South Texas, including allegations that the Fort Worth office of JPMorgan Chase & Co. wrongfully leased lands in Karnes and DeWitt counties.

In the DeWitt case, Orca Assets of Corpus Christi says it paid $3.2 million for a lease that the bank, acting for Fort Worth-based Red Crest Trust, had already sold to a rival drilling company.

Orca is on the other side of litigation in Karnes County, where it is a co-defendant with Chase and the trust.

Not too long ago, very few would care about those assets. But hydraulic fracturing technology has made Eagle Ford a hot drilling area. The San Antonio Express-News reported that mineral leases that fetched just a couple of hundred dollars less than a decade ago are now commanding $10,000 and more.

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Kenneth E. DuBose

Kenneth E. DuBose

Kenneth DuBose is the past President of Cheyenne Minerals Inc., an independent oil and gas operator. He began his energy industry career with ARCO Oil & Gas. Mr. DuBose then directed development of natural gas storage projects with Tejas Power Corp. He was a founding member of U.S. Minerals, (acquired by Torch Energy in 1999) a provider of internet based education for America’s mineral owners. Mr. DuBose holds a BS in Petroleum Engineering from Mississippi State University. He has served on various industry steering committees, non-profit boards, and is an active member of the Society of Petroleum Engineers, the National Association of Royalty Owners, the American Association of Professional Landmen, as well as being a Registered Investment Advisor. He writes on topics of oil and gas investing, wealth management and personal finance, having appeared in the Wall Street Journal, Kiplinger’s, Kiplinger’s Personal Finance, Houston Business Journal, Financial Advisor and various radio and TV outlets.

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