Negotiating an Oil and Gas Lease?
Written By Blake Hayes
Many individuals make the mistake of believing they do not need an attorney to negotiate an oil and gas lease on their property, believing instead, that they will be negotiating with professionals willing to pay them a fair price.
While this may be true in an extremely limited number of cases, why would you risk the possibility that you will lose a great deal of money if you do not understand all the legalese of the documents you are being asked to sign?
Oil and Gas/ Mineral Rights Terms
It’s imperative to understand the unique terminology used in oil and gas negotiations. Some terms are listed below:
- The habendum clause states specific rights that are being granted to the lessee, including the placement of all equipment, etc. It is also part of the first paragraph of the lease, and should be examined carefully to ensure a clear understanding of access roads, seismic testing, operations of the injection well, gas storage, etc.
- The primary term is an explanation of the amount of time you are allowing for the oil and gas company to begin production. This may be anywhere from one to ten years as a rule.
- The delay rental clause allows the lessee to pay out a specified amount for extending the term agreements of the lease.
- The secondary term is used after a producing-oil and gas well has been drilled, and payments are being made to the land owner. As a caveat, it’s important to have a written and clear agreement as to what constitutes a producing and paying well.
- The royalty agreement provides for the amount of payment based upon the gross production and is a percentage that is normally based upon 12.5% to 16% of the gross production of the well.
Mineral Rights Attorney to Protect Your Rights
Blake Hayes advises his clients to always protect themselves by asking their attorney to review all oil and gas lease documents, in addition to assisting them with negotiations. Contact our Tulsa mineral rights attorney, Blake Hayes, today to discuss your oil and gas lease agreement before you sign it.