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Permalink Reply by adubu on July 1, 2010 at 0:24

JB---Maybe La. but not in Texas, unless some funny wording in lease activity to extend lease pass expiration date activity to produce minerals requires the well to be spud by drill bit into ground even in the standard 88 lease forms.This will hold lease for 90 days pass any "operation activity" The ironclad definition of "operation" may have to be augument for the courts so best in future leases best to have it spelled out but today it means bit turning into the ground to make hole. Les B--Skip--comments please

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Permalink Reply by DJG on July 1, 2010 at 3:07

It will really depend upon what the wording is in the lease agreement states.

Here's the current wording from one of the major (mostly Texas) O&G's standard boiler plate contracts:

The word "operations" as used herein shall include but not be limited to any of the following: preparing drill site location and/or access road, drilling, testing, completing, reworking, recomplet¬ing, deepening, plugging back or repairing of a well in search for or in an endeavor to obtain production of oil, gas or other minerals and any other actions conducted on said lands associated with or related thereto.

Very loose interpretation of "operations" that is clearly in the O&G's favor and gives them much leeway to argue that operations have commenced well before the drill-bit has hit the ground.

If one were to agree to let above wording stand (and, from looking at the most resent courthouse filings in E.Texas - many/most landowners are not challenging) then the O&G has a pretty good argument to declare that simply preparing an access road has commenced operations.

This is why it is crucially important to not agree to the "standard" O&G contract and to go through these documents and challenge/extricate this type of wording prior to signing off on the agreements.

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Permalink Reply by Skip Peel - Mineral Consultant on July 1, 2010 at 3:18

Agreed DG. However unless Texas mineral or contract law is different from LA., the lease terms can be amended by the Exhibit A page clauses. I find it easier to work from (negotiate) the exhibit page(s) than from the boiler plate of the standard lease forms. And a good exhibit page will protect regardless of the standard lease form used.

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Permalink Reply by DJG on July 1, 2010 at 4:59

Correct. For our own negotiations, we found that the O&G was not amiable to changing much/any of the wording of their boiler plate agreement, but all of the changes and modifications - including the alteration of the agreed upon defination of "operations" - were amply addressed and modified in the (multiple page Exhibit A) addendum that we included in the agreement.

Also important to have your addendum clearly state that in the event of conflicting terms between your addendum and the O&G's contract (there will be many), that it is the wording of your Exhibit A addendum that shall prevail.

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Permalink Reply by adubu on July 1, 2010 at 5:51

Agree--reviewing my leases it was amended by the Exhibit A page with clause and defined operation as stated by D. Garr and Skip Peel---- thanks

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Permalink Reply by adubu on July 1, 2010 at 6:01

D. Garr--on leases that the above wording of "operation" is not changed in addendum how long can they hold lease by "preparing site" do they have to make daily visit with working on site or road or what ever-- any deadline that it then expires with out drilling?

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Permalink Reply by J. Michael Landry on July 1, 2010 at 13:08

Actually, the company has no obligation whatsoever to notify you of it's plans to "drill or drop". If you have a three year primary term lease (with no two year "kicker" or option) then on midnight of the last day your lease simply expires of its own terms. If you do have an option to extend included in the original lease then they will more than likely send you a check or draft to extend the lease. If your lease DOES expire of its own terms you absolutely should request a Release Of Oil, Gas and Mineral Lease from the current lessee. This will let other companies that might be interested know that your acreage is open and available. I suggest you log on to the States Sonris site at dnr.gov. You can check on wells permitted by section, township and range. Hope this is of some help. Mike Landry, Certified Professional Landman #4049

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Permalink Reply by Dan Aaron on July 2, 2010 at 5:23

Thank you for the site addrress. I didn't intend to start such a long discussion but looks like it is turning out to be a very informative one.

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Permalink Reply by The_Baron on July 1, 2010 at 17:31

Red Rider,

What?????

You need to do some reading on this forum before giving bs advice.

As long as the lease is in its primary term, there is no need for notice (unless the lease requires such notice)

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Permalink Reply by red rider on July 2, 2010 at 10:43

Go easy on me. I am unaware of giving any advice, i provided my opinion. I mentioned i am not an attorney, and that i may be wrong. so what bs advice did i give? please support your argument. the bs advice i provide to anyone is to seek an attorney.

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Permalink Reply by WHuguet on July 1, 2010 at 5:03

Don't want misinformation out there. A mineral servitude is interrupted by good faith drilling operations, i.e. the spudding of a well. However, as noted by D. Gaar, a mineral lease is typically maintained at the end of its primary term by "drilling operations" under the continuous operations provision (typically without a gap in operations of more than 30-90 days), which caselaw has broadly interpreted as acts preparatory to drilling, such as building roads, well pads, etc. Further, once a well is shown to be productive, you have the potential application of shut-in royalty payments. In summary, a well may not be completed until several months after the lapse of the primary term of a lease, yet still maintain such lease.

Further, an operator has no obligation to approach anyone at anytime concerning a top lease, it is like any other contractual negotiation and not subject to Louisiana statutory regulation.

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Permalink Reply by Lloyd on July 2, 2010 at 5:25

In my situation, the contractor drilled before the end of the lease and during fracturing the well sanded up. The lease has expired and I know it's in the best interest of the driller to finish the well, but there is no activity that we have seen. The lease ended in June and we were told we were on the list for the workover rig. How long do they have to move on this?

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