Saturday, April 19, 2008

"State can force mineral rights owners to allow drilling"

"Mineral rights owners in Mora County could be forced to allow drilling on their land, even if they don't voluntarily agree to lease the rights.

That's just one of the provisions of the state's oil and gas statutes that residents find confusing.

Mark Fesmire, director of the Oil Conservation Division of the state's Energy, Minerals and Natural Resources Department, which regulates oil, gas and geothermal activity in New Mexico, shed light on the leasing lingo and various possible drilling scenarios.

When a company approaches an owner to lease the minerals, it agrees to pay an annual fee for a specified number of years, he said. In Mora County, KHL Inc. is reportedly offering residents with mineral rights a 10-year lease at $1 an acre per year.

Fesmire said a company also pays an annual rental fee to the mineral rights owner if it isn't going to drill for a couple of years.

In addition, the company pays a royalty on any oil and gas extracted, usually one-eighth of the revenues from what is produced, Fesmire said. Mineral rights owners can negotiate for higher royalties.

But here's the kicker for people who don't want to lease their mineral rights, such as Rose Josefa in Ojo Feliz. She might have no choice but to allow mineral extraction from under her land — although she could make some money from it."