Mineral leases valuable for landowners
North Louisiana activity, slowed by price drop, still hot item for region

By Tom Kelly
Editor and Publisher

Mineral rights is a hot topic for landowners in the Piney Woods region, since development of natural gas production in several shale rock formations in north Louisiana, Arkansas, and East Texas within the past year.

While leasing and drilling has slackened within the past three to six months because of a collapse of prices, activity continues and landowners within the prime shale areas continue to benefit.

One Bienville Parish landowner recently reported leasing a 60-acre tract for Haynesville Shale rights for $1.5 million, and anticipates royalties from production from drilling now in progress. The landowner in question, who is well known is Louisiana forestry circles, said he is less concerned with timber now that the land produces from underground minerals rather than trees on the surface.

These issues were considered in a presentation by tax attorney Paul Spillers of Monroe, at the recent AgExpo Forestry Forum in Monroe. Spillers, a board certified tax attorney with the firm of Theus, Grisham, Davis & Leigh, is also a forest landowner, and a frequent presenter at landowner seminars in the area.

In his talk, titled "Basic Mineral Law for Forest Landowners," Spillers said "minerals" include oil and gas, coal, gravel, the soil itself, sulfur, underground water, and "other substances occurring naturally in or as part of the soil, or geological formations on or underlying the land," according to Louisiana law. He emphasized that state law, not federal, governs minerals in Louisiana. The Louisiana Mineral Code, he said, is distinctly different from the mineral law of other states, and needs to be understood by landowners in order to maximize their returns on leases, production, and to protect against damages that can occur in drilling, producing, and transporting minerals from the land.

Under Louisiana law, the landowner only owns the surface, and not the minerals under the land, Spillers said. "Ownership of minerals begins only when you pump the oil and gas out of the ground and put it into a tank or pipeline. Ownership begins with possession. Prior to possession, the landowner has only a 'mineral servitude'", which is the right to explore for minerals and bring them to the surface. The landowner usually leases this right to companies in the exploration business.

Spillers affirmed that a producer may use horizontal drilling to gain possession of oil or gas underneath a landowner's property, without owning a lease to the surface. Unless the land is placed in a production unit, he may not share in royalties from production.

In buying and selling land, the owner may sell or may retain rights to minerals for specific periods, up to ten years.

Because the mineral law is specific to Louisiana, landowners are advised to learn their rights and responsibilities to protect themselves and their property. Professional counsel is advised to cover specifics of any lease, Spillers said.