By: J. Richard Emens
Emens & Wolper Law Firm
Many landowners in eastern Ohio have been disappointed because they signed an oil and gas lease “too quickly”.
By “too quickly” we mean the lease was signed without a full understanding of the words in the lease, or because nearby landowners got better terms including more lease bonus and higher royalty, or because the landowner did not understand the process that occurs after signing and prior to the landowner receiving payment of the lease bonus.
Therefore, we offer the following “Seven Secrets” to assist landowners who are considering signing an oil and gas lease.
1. There is no such thing as a Standard Form Oil and Gas Lease (although some landmen may say there is).
2. Every paragraph/word of an oil and gas lease (and related documents) is negotiable.
3. The Landowner wants many landowner friendly terms in the lease. These terms should protect the landowner’s surface, sub-surface, water, agriculture and other activities, etc., etc., etc.
4. The Landowner needs to understand every word of an oil and gas lease prior to signing, including the importance of implied covenants; this recommendation also applies to documents which may be related to the lease such as “Order of Payment”, “Amendment to Lease”, “Memorandum of Lease”, and “Easement”. (An Easement is not a lease but a permanent grant of real estate rights.)
5. The Landowner wants the oil and gas lessee to be an oil and gas company (“OGC”) with the technical and financial capability to competently drill, produce, and operate a well or wells. The reputation of the OGC in the oil and gas industry is also important.
6. The Landowner wants the lessee to sign the lease (most oil and gas leases are set up so the lessee does not sign) and the related documents.
7. The Landowner always wants to retain a copy of any signed oil and gas lease and the related documents (with signatures of both the Landowner and the lessee).
Landowners who spend sufficient time to educate themselves generally about the oil and gas business and benefit from these Seven Secrets may end up happier than those landowners who sign an oil and gas lease too quickly.
©2012 Emens & Wolper Law