By Hanaba Munn Welch
We all know about the landman’s role, or at least we think we do. It’s all digging through records at the county courthouse, right? Well, it’s a lot more than that. And it’s a lot of things that most people, even most oil and gas people, never suspected.
Oil is where you find it. Mineral owners can be anywhere. Finding all the mineral owners for any given prospect can be one of the toughest aspects of leasing, and it’s getting tougher all the time. Ask any field landman, and he or she will tell you that the business of tracking down mineral owners is now more complicated than ever, even with help from the all-knowing Internet. Uncle Jack, for example, may or may not be on Facebook. And if he’s somebody’s late Uncle Jack, the search generally turns into a hunt for multiple offspring—scattered cousins, as it were.
“Every year that we go on as time moves on, people die off,” said Ray McKim, Midland-based independent landman. “The role of the landman is to run titles. We have to run titles back to sovereignty. When somebody dies, it adds a new pound of paperwork to the title of that tract, be it probated or whatever. It doesn’t make any difference.”
McKim has advice for anyone who’s eventually going to die:
“When you die, it’s important that something be shown in the courthouse to let the landman know where they can get a muniment of title. It’s basically to help prove you are who you are—particularly if the probate is filed in a different county from where the minerals are located.”
Once minerals owners are found and the minerals are leased, the landman’s work isn’t done. If and when production begins, it means more title checking.
“That’s for the royalty payments,” McKim said.
Typical scenario:
“We need to find probates for all those people you leased up, Mr. McKim,” says the company landman, from whom he gets his assignments.
McKim goes back to work.
“Where’s Grandpa’s probate? Where’s Uncle Tom’s probate?” he asks the heirs.
“We don’t know,” the heirs say.
More work for the landman.
“At least tell me where the Hell your uncle died. Help me.”
If anything surprises McKim, it’s how often people don’t keep up with family members, siblings included. “What is really astonishing to me is we have all these dysfunctional families,” McKim said. “I’m flabbergasted how many people don’t know where the rest of the family lives.” When McKim asks one sibling for the address of another, he doesn’t always get an answer or even a place name. “I’ve got a cousin or two that I’d have to track down,” McKim said. “But those are cousins. It floors me that brothers and sisters don’t know where each other live.”
The Internet sometimes holds answers, but not everyone is as easy to find as, for example, McKim. Google the name “Ray McKim,” and his “LinkedIn” listing is at the very top of the page. He’s described with the blurb “Odessa/Midland, Texas Area—Environmental Consultant and Oil and Gas Landman.” But McKim has found that a lot of people his age and older—he’s over 60—aren’t so easily found on the Web. And looking for lost people is often part of his job. “Most of these people that are lost are in their 70s or 80s,” he said. “A lot of people don’t have much of an Internet footprint until they die. If I need to look for somebody that is 60 or older, they often don’t get included on the Internet.”
And once McKim finds people, if they’re alive, another part of his job kicks in. “People don’t know what they own,” he said.
Scenario:
Grandpa keeps a fourth of his minerals, but he sells three-fourths to three different people. Grandpa dies, survived by many descendants.
“Your mineral ownership can be devalued by the number of people you have to look up,” McKim said, not referring to the sharing that occurs between heirs but to the additional costs that are incurred when an operator has to pay a landman to find a large number of mineral owners. Sometimes the trouble makes the prospect not worth the effort. “You have 200 to 300 owners [of the minerals] of a small tract,” McKim said. “Those tracts are almost condemned because it’s too hard to put those owners together.”
McKim has advice for large families with significant mineral holdings: The family should empower one or two people to handle the leasing on behalf of the entire family.
“If it breaks out where everybody is doing their own [negotiations], it’s too time-consuming to put it all together,” he said. “These are the little things we put up with.”
In Louisiana, by the way, it’s a different ballgame. Thank Napoleon.
“One of the tenets of the Napoleonic Code [the basis for Louisiana law] is that the owner of a property who sells the minerals doesn’t sell them forever. If after ten years the minerals aren’t producing, they revert to the surface owner,” McKim said. If there is production, the ownership doesn’t revert to the original owner until production has ceased for ten years.
But Texas is different. McKim has a strong sense of Texas history and a good grip on the workings of state law, no doubt from tracing so many titles back to sovereignty. Also, his undergraduate degree from Texas Tech is in political science. “We came in owning our own lands,” he said, referring to 1845 when Texas joined the Union. “There are very little federal lands in Texas.”
Minerals, therefore, are generally owned by individuals or entities, the University of Texas and Texas A&M being notable among significant owners. (The original university land grant, minerals included, dates from 1839, when Texas was a republic.) Minerals “belong in big blocs to different type folks,” McKim said. “Therefore, minerals—non-producing minerals—are not taxed. Therefore, each generation can hold onto their minerals without them costing, without having to pay taxes or anything.” So, as mineral ownership flows from one generation to the next, the more work it takes from landmen to determine mineral ownership, especially in oil and gas booms when operators are especially keen to lease and produce minerals and when previously undeveloped properties come under scrutiny.
Morris Burns, Midland oil and gas consultant and former executive director of the Permian Basin Petroleum Association, confirms McKim’s take on the work of a landman—overwhelming when too many people have to be chased down, especially when the tract in question isn’t large. Burns cited an example of a 180-acre tract tied to a prospect for a horizontal well. “There were over 300 heirs because this land had been passed down from generation to generation,” Burns said. “Somebody died in 1950. It wound up being such a nightmare that the potential operator gave up on it.”
Snags develop in the leasing process for other reasons, particularly when a would-be lessor holds out for a greater per-acre bonus rather than taking the going rate.
“They’re leasing for $500 an acre,” Burns said. “Another person says, ‘I want $10,000 an acre for mine. I’m going to hold out.’ Well, you’re not going to get that.” Burns cited one case where a holdout who wanted $5,000 an acre derailed a project.
“That was way more than we were paying,” Burns said. “When they gave up on the project, he just lost.” Other lessors who had already accepted offers and had already cashed their bonus checks came out ahead, even though the operator pulled out without drilling. It happens.
Horizontal drilling has added one more dimension to the landman’s job.
It’s not that the task of finding mineral owners is more complicated than usual, but exploration can go off in various directions from a central drilling location, which can mean involving mineral owners in all directions for as much as two miles from the drill sites. “We can drill these laterals out as far as 10,000 feet,” Burns said. Technology takes the guessing out of the exact route of the bore, meaning production can be correctly assigned. “You know exactly where that drill bit is at any time,” Burns said.
Burns and McKim have identical advice for any mineral owners who have a chance to lease when a horizontal well is in the offing. “You better take that lease,” Burns said. “If you’re not a drill site owner, if they offer you a lease, you’d better take it if you want to share in that production,” McKim said.
Mineral owners may suspect a horizontal drilling project will tap into their minerals without their knowledge. The location of the rig doesn’t indicate where all the exploration is happening, but the Railroad Commission (the state agency that regulates oil and gas exploration in Texas) knows and informs mineral owners if their minerals are at issue. “The Railroad Commission will not give them permission to drill unless everyone has been contacted,” Burns said.
Enter the landman, who does his best to find everyone involved to be sure the project will materialize. Not that every mineral owner has to be found for an operator to drill—not vertically or horizontally. But operators prefer to find all owners sooner rather than later.
Scenario from McKim:
The landman finds three out of the ten owners of minerals involved in a particular tract. Finding the other seven isn’t required for drilling to proceed, but the operator doesn’t like dealing with the unknown seven. When production starts, their payments can’t be disbursed.
“It’s more trouble than it’s worth to put these people in suspense and for them not to be accounted for,” McKim said. It happens. “There have been some landmen that go around looking for lost people,” McKim said. “It adds up if you find them.” A nice part of the landman’s job is to tell someone he stands to make money by leasing his or her minerals—or even finding someone whose royalty has been piling up.
Not everyone gets it. Landmen easily get mistaken for telemarketers or scammers.
“I’d call up people,” Burns said. “You own minerals willed to you by your granddaddy, and I’m going to send you some money.” The response: “This is a sham.”
Back when mineral owners were generally the farmers and ranchers who worked the land and lived on it, a landman was a welcome sight on the front porch. People generally knew how the system worked and understood the role of a landman. If they didn’t, they listened and learned and ultimately agreed to lease their minerals, glad for the windfall and a chance to supplement their hard-earned agricultural incomes.
Now, working by telephone, the landman often must explain himself to a generation far removed from the land and sometimes to someone who’s sharing 1/300 of the minerals with distant kin. The person may not even know he owns minerals, much less what mineral ownership entails. It’s no wonder the best landmen are also teachers—people who can make an intricate subject understandable even to novices.
Burns has a degree in education, meaning the teaching part of his job should come easy. But first he had to be a pupil. Even with years in various aspects of the oil and gas business, he had to learn the landman’s trade. “I went in to take a class in being a landman,” he said. “An attorney was teaching it.” The attorney recognized Burns.
“You get up here and teach this class,” the attorney said. Burns demurred. “This is my area of least expertise in the oil and gas business,” he said. Now that Burns spends much of his time as a landman, he’d still be the first to tell you he doesn’t know all the answers. Like other landmen, he’s always learning.
McKim, a certified professional landman, started in the business working under an experienced landman. Despite his college degree in political science and his minor in business, he was drawn to the oil industry and was working as a pumper when he told his father, the late Raymond Lee McKim Jr., (“semi-famous,” in McKim’s words, as the first Republican district judge in the state of Texas) that he wanted to be a landman. Thanks to some of his father’s Midland connections, he was able to find work with an East Texas landman who agreed to mentor him.
Continuing education helps landmen sharpen their skills, and McKim has distinguished himself in that arena, putting together an award-winning seminar for his colleagues.
“I got the kind of topics, and I hoped they got the kind of speakers who would make it interesting,” he said, referring to others who helped him coordinate the event. “I wanted to keep the landmen from going to sleep. I got the credit. I was the chairman.” The American Association of Professional Landmen gave the presentation its 2013 Educational Award.
Among other landmen who worked with McKim on the seminar material was Kimberly Smith, one of many landmen who isn’t a man. Many women, in fact, now work in the field. Probably none maintains a higher profile than Smith, who has a radio show called “Ask a Permian Landgirl,” aired on the station KWEL in Midland.
Even in an oil town people have questions, and Smith tries to provide the answers and generally give her audiences a better understanding of minerals and the work of a landman. She identifies with mineral owners as well as the companies that seek to lease the minerals.
“The goal is to find a place where you can work together,” Smith said. “That’s my message to mineral owners.… You don’t want any party running over the other party. You want both parties to find what’s good for them.”
Smith is a natural communicator who believes in using all of today’s information technology to connect with people—her colleagues, her employers, prospective clients, whomever. It’s no wonder she likes being on the radio. “Everybody should have their own radio show,” she said. The show features guests who talk on various topics. Listeners can call in. “It was supposed to be like ‘Car Talk’ for women,” she said, referring to the popular National Public Radio show—a blend of humor and automotive advice to callers-in. “Ask a Perminan Landgirl” has turned out to be a forum not only on minerals but other related aspects of the oil and gas business. Smith is proud of her creation.
“I didn’t know there was a show like this,” one person told her.
“I know, because I created it,” Smith said.
Dispelling misinformation has been one of her goals. “I’ve heard you get $2,000 an acre here” is the sort of statement she heard often enough in her work to prompt her to correct such misconceptions.
Smith uses her positive energy not only on the radio but also when she works one-on-one with people in her landwoman role. “It has to be an instantaneous connection on the phone,” she said. “We lease all across the nation.” The mineral owners she talks to come in all varieties. “You have to be able to connect,” she said. “People don’t know a thing about you.”
She learns about more than minerals when she meets people by phone. Getting to know the strangers she calls is one way she works to establish a relationship built on mutual trust, whether she’s talking to an East Coast socialite or someone living in a trailer with no running water. “You have to like people,” she said. “People don’t know a thing about you. If you are too business-like and not caring enough, you can’t close the deal. A landman is under pressure to get the deal.”
One person Smith called was a representative for Elizabeth Arden makeup. It wasn’t hard for the Permian Landgirl to show interest in the product. “Is the makeup really good?” she asked.
If Burns or McKim had asked the question, it’s not likely they would have been taken seriously. But it helped Smith develop a sincere relationship with the rep—an occasion when being a woman gave her an edge. It’s the sort of edge Smith likes to mention on the radio to let the world know that women can be successful in the world of oil and gas—an industry with room for both genders.
And as long as things are booming, it’s a business that’s welcomes all sorts of people with all sorts of skills. It’s a time for all kinds of mineral owners to get a piece of the action. too. If they’re lucky, they’ll work with landmen of the caliber of McKim, Burns, and Smith, and everyone will come out smiling.
Freelance writer Hanaba Munn Welch writes regularly for PBOG. She can be contacted at hanaba@copper.net and she maintains a website at www.hanaba.net.