Montana oil and mining journal. [volume] (Great Falls, Mont.) 1931-1953, 1944-05-20

IS
How often this cry, ringing down
country roads with It's promise of
riches 10 come, has put the John
sons, the Smiths, and the Joneses
into the business of being OIL farm
'ers overnight and set their neigh
bors TO specializing excitedly as to
whether or not there Is oil on their
land too.
The business of leasing land for
oil exploration is one which is but
little understood outside the in
dustry Under the laws Of the
United States, unlike those OF most
foreign countries, the SubsoiI min
erals belong to the owner of the
land: and ii lis the owners exclu-
sive right TO drill for and produce
such minerals or TO designate others
TO do so for him.
Few landowners, however, care
to take the risk of costly explora-
ton and drilling and are usually
happy to lease that privilege to an
oil operator In return for a cost
free share In whatever rewards may
accrue
This owners share Is his royalty
and Is customariiy one-eighth of
the gross return, cost free, with
seven-eights going to the lessee.
The latter bears all costs of explOr-
ing for the oil, drilling the wells,
and lifting the oil, as well as the
expense of necessary installations
such as pumps, tanks, pipelines,
ETC.
The royalty share is occasionally
fixed at a higher or lower level
than one-eighth due TO unusual cir
cumstanceg, but 80-odd years ex-
perlence has indicated that this
fraction Is usually a fair share
when all factors are balanced.
!; In fact IL has haen said, and per
1laps with accuracy, that If one
could choose. IL would be better TO
hold all the oil royalties IN the
United States than all the leases,
Not infrequently an operator will
be losing money due TO high pro
ducing costs on property while
the owner continues to enjoy, with
out worry, his royalty interest.
Long before the "oiI strike" news
has broken, a specialist known to
the industry as lease hound"
will have been at work, negotiating
with the owner for the necessary
lease and permits for the right to
prospect for oil
All of the larger operators and
most OF the smaller ones maintain
staffs of lease and land men. In
addition, there are hundreds of
lease brokers who operate indie
pendently. This phase of the oil
business has always been one of
its most exciting and important as
poets and one I'M which competition
has been the keenest since the first
oil Well caused leasing stampede
in 1885,
The lease man is frequently the
sole contact between the operator
and the landowner until develop
fnent begins and is generally dis
tinguished for his amiability, sound
Judgment of human nature, and
reputable character He may or may
not have legal training, but~in any
event ne must have practical legal
knowledge on leasing questions and
very large share OF common sense.
No tricks are tried by reputable
operators neither lease man nor
his principals could long act other
wise than with baaieally fair intent.
as most oil operators are sn the
business for life. A resentfuI lessor
Is no asset.
The conventional form OF oil
lease provides for some definite
term, such ag or 10 years. Sign
ing OF the lease 10 usually aoeornpa.
MED by payment 10 the owner OF
a bonus which varies with the
nearness To known or producing oil
ard from few cents to, In rare
cases, over $1,000 an acre. Terms
Of the lease usually call for the
operator to start drilling or produc
ing within one year. II such opera
items have not been undertaken
within year, a delayed rental
IN paid to the owner ON tina anni
versary of the signing OF the lease
Naturally, almost every landown
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