Other Minerals

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Other Minerals

 Do not overlook the royalty clause on other minerals covered by the lease.  The typical  industry lease contains the following type of other mineral royalty clause:

 (c) To pay lessor on all other minerals mined and marketed or utilized by lessee from said land, one-tenth either in kind or value at the well or mine at lessee’s election, except that on sulphur mined and marketed the royalty shall be one dollar ($1.00) per long ton.

 

 Frequently, negotiators overlook the royalty on other minerals.  Often, the royalty will be increased by an addendum that refers only to the fraction  “one-eighth,” wherever that fraction appears in the lease.  Such an addendum would leave the sulfur royalty at $1.00 per long ton.  The U.S. Government currently reports sulfur prices at the level of $200/ton f.o.b. mine or plant. [http://minerals.usgs.gov/minerals/pubs/commodity/sulfur/]   Under current market conditions, if the sulfur royalty was equal to the royalty on oil and gas, the lessor would benefit much greater than if the sulfur royalty was $1.00 long ton.

Copyright 2011 by Edward G, Hawkins. All rights reserved.