The question which FHOA most frequently hears from freehold mineral owners who have been approached to lease is “What’s the going rate in my area?” If you knew that a nearby quarter section of freehold mineral rights had recently been leased for $75/acre and a 17% royalty, would you accept $50/acre and 15% royalty. Not likely! You would probably want the same or perhaps a little more – say $80/acre and an 18% royalty. And if your neighbour knew that you had negotiated an 18% royalty rate and an $80/acre lease bonus consideration, he or she would probably try to negotiate a little better deal!
The prices paid by industry for provincial government-owned Crown leases have historically been substantially higher than the prices paid for technically equivalent freehold leases. One of the main reasons for this is that the prices paid for Crown leases are publicly available. An energy company bidding on a particular Crown lease knows the prices paid for offsetting Crown leases and tends to bid higher than the offsetting price.
Making freehold lease information (primary term of the lease, lease bonus consideration, royalty rate and cap on deductions) publicly available can be expected to substantially improve freehold lease terms over time. With the assistance of FHOA members, the association is assembling a database of freehold lease information. This information is being made available to FHOA members through an interactive map on our website (please log in to view map). If you are interested in learning more about the going rate in your area, become a member today.
But don’t stop there! The concept will only work if a substantial number of freehold mineral owners agree to make their lease information publicly available. Currently we only have enough information for an Alberta map. Help us to help you by making your freehold lease information available to other members (see “Lease Information Consent Form”). If you wish us to include your lease terms in the database of information available to other members, simply sign and return the form.
FHOA’s receives hundreds of calls and e-mails each month from freehold owners. Most of these calls involve questions about freehold lease agreements. To help us provide more meaningful responses to any questions you may have, we urge you to send us a copy of your actual lease agreement. FHOA will scan the document and include it in our confidential membership database under your name. Access to both your lease agreement and our technical database will enable us to respond in a more timely and accurate manner to your queries.
To find out more about the Going Rate, join FHOA today.