New lease terms or New tricks?
As you all know I work as a landman. I would like you thoughts and ideas about the lastest tricks I have seen. My daughter recieved a lease, amount agreeded upon (by the way not my company).
The form La Spec. 14-br1--2a-nl rev2/99 has 17 items. This lease has 20, the following are copied and pasted from her lease and they are the changes.
provided that no one operating unit shall, in the case of gas, including condensate, embrace more than six
hundred forty (640) acres [except in the event of a horizontal oil or gas completion, in which event such unit may embrace as much as
one thousand nine hundred twenty (1920) acres], and in the case of oil, including casinghead gas, (other than a horizontal oil or gas
completion) embrace more than forty (40) acres; and provided further, however,
1920 acre unit?
14. It is expressly understood and agreed that the premises leased herein shall, for all the purposes of this lease, be
considered and treated as owned in indivision by the Lessor and shall be developed and operated as one lease, and there shall be no
obligation on the part of Lessee to offset wells on separate tracts into which the land covered by this lease may be now or hereafter divided
by sale, or otherwise, or to furnish separate measuring, or receiving tanks, and all rentals, royalties and other payments accruing hereunder
shall be treated as an entirety and shall be divided among and paid to Lessor in the proportion that the acreage (mineral rights) owned by
each bears to the entire leased acreage. Lessee may at any time or times pay or tender all sums accruing hereunder to the joint credit of
Lessor.
This is not in our lease.
17. Lessee shall pay for actual damages caused by its operations to growing crops and timber on said land leased herein.
Lessor specifically agrees that the obligations and liabilities of the Lessee and its successors and assigns for reclamation, restoration, repair
or maintenance of the surface or subsurface of the leased premises shall never exceed the fair market value (determined as of the effective
date hereof) of the lands covered by this lease, or the portion thereof, for which such reclamation, restoration, repair or maintenance is
required.
The first line is standard.
20. For the same consideration recited above, Lessor hereby grants, assigns and conveys unto Lessee, its successors
and assigns, a perpetual subsurface well bore easement under and through the leased premises for the placement of well bores (along
routes selected by Lessee) from oil or gas wells the surface locations of which are situated on other tracts of land not covered hereby
and which are not intended to develop the leased premises or lands pooled therewith and from which Lessor shall have no right to
royalty or other benefit. Such subsurface well bore easements shall run with the land and survive any termination of this lease.
This one is added on too.
Ok I need someone who can translat mummbo jummbo into English to tell me what these new additions mean.
Seems like you might need to learn how to read between the lines.
The form La Spec. 14-br1--2a-nl rev2/99 has 17 items. This lease has 20, the following are copied and pasted from her lease and they are the changes.
provided that no one operating unit shall, in the case of gas, including condensate, embrace more than six
hundred forty (640) acres [except in the event of a horizontal oil or gas completion, in which event such unit may embrace as much as
one thousand nine hundred twenty (1920) acres], and in the case of oil, including casinghead gas, (other than a horizontal oil or gas
completion) embrace more than forty (40) acres; and provided further, however,
1920 acre unit?
14. It is expressly understood and agreed that the premises leased herein shall, for all the purposes of this lease, be
considered and treated as owned in indivision by the Lessor and shall be developed and operated as one lease, and there shall be no
obligation on the part of Lessee to offset wells on separate tracts into which the land covered by this lease may be now or hereafter divided
by sale, or otherwise, or to furnish separate measuring, or receiving tanks, and all rentals, royalties and other payments accruing hereunder
shall be treated as an entirety and shall be divided among and paid to Lessor in the proportion that the acreage (mineral rights) owned by
each bears to the entire leased acreage. Lessee may at any time or times pay or tender all sums accruing hereunder to the joint credit of
Lessor.
This is not in our lease.
17. Lessee shall pay for actual damages caused by its operations to growing crops and timber on said land leased herein.
Lessor specifically agrees that the obligations and liabilities of the Lessee and its successors and assigns for reclamation, restoration, repair
or maintenance of the surface or subsurface of the leased premises shall never exceed the fair market value (determined as of the effective
date hereof) of the lands covered by this lease, or the portion thereof, for which such reclamation, restoration, repair or maintenance is
required.
The first line is standard.
20. For the same consideration recited above, Lessor hereby grants, assigns and conveys unto Lessee, its successors
and assigns, a perpetual subsurface well bore easement under and through the leased premises for the placement of well bores (along
routes selected by Lessee) from oil or gas wells the surface locations of which are situated on other tracts of land not covered hereby
and which are not intended to develop the leased premises or lands pooled therewith and from which Lessor shall have no right to
royalty or other benefit. Such subsurface well bore easements shall run with the land and survive any termination of this lease.
This one is added on too.
Ok I need someone who can translat mummbo jummbo into English to tell me what these new additions mean.
Seems like you might need to learn how to read between the lines.
Views: 380
Replies to This Discussion
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Permalink Reply by Brooks on -
In # 17, what if the Lessee leaves a mess- say contaminated mud, etc and possibly creating a hazardous waste on your property that might cost an exhorbitant amount to clean up? If it's more than the "fair market value", are you stuck having to come up with the money to pay for the cleanup?
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Permalink Reply by louisiana lady on
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Strike the perpetual easement...it is debatable if a "term" lease can have a subordinate clause for longer (forever and ever) than the primary lease term. If they need to access other tracts, it can be dealt with at a later date, and for a reasonable consideration (meaning market $$$ at that time). Time is a very important consideration for the development of this product. In February, lease signers would not have conceived of 30k/30% bonus/royalty.
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Permalink Reply by Jack B2 on
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1920 acre units would dilute the influence of parcel owners in this part of the world in my view. Most of the property parcel left intact run from 320 to 20 acres. This would allow them lessen the controling affects of those that hold the homstead parcels that frequient this area. As to the articles in the above lease, it appears to be an O/G lease of which I would use my own drawn by a competent attorney. Just my thought. As for article 17. no way in H!
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Permalink Reply by Aubrey C. Sanders, Jr. on
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KB,
I guess you are right if you can negotiate 90% royalty.
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Permalink Reply by Johnyd on
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If Petro buzzard and Cheasacheat have all this land and 3 years to drill it in before they loose it or pay a option on it then there just trying to make these sections larger to hold there lease with fewer production sites. Take CHK 500,000 Acres @ 640 Section that is 781 Holes to drill.....it would take 10 Rigs 5-7 Years to drill what they have leased...and that is just one hole per section.....Longer than that when drilling 18000 + Ft on the Horiz wells (11K down and 5K over).....believe me anything these Guys do...its NOT in the Land Owners Favor.....
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You are absolutely right about whose advantage it is. Just like the generic lease they want you to sign with no Pugh clauses.
If they had their way the whole state would have but 1 drilling unit! Maybe next they will ask for each parish to be one drilling unit.
Seriously, I am very familiar with Office of Conservation employees and operations. Before they, operators, get a 1920 acre drilling unit they will have to present lots of scientific evidence to justify that. There will be hearings. I don't believe scientific evidence can ever justify such large acreage. Hey, they do not even know the areal extent of potential production. I say they got that wrong too. That is from 50 years experience as a geologist in area. Mostly in Webster and Claiborne Parishes.
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Permalink Reply by Foxiecajun on
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LOL My thoughts exactly! one hole in three sections makes more sense if you are Petro buzzard or Cheasacheat! They will have the HBP 3 times quicker.
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Permalink Reply by Bobi Carr ("parker") on
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This works as long as you don't forget to have a pugh clause and debth restriction.
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Permalink Reply by Skidmark on
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But would this be enough to prevent one from being HBP if there were a producing well in one's unit (but outside of one's 640 acres)?
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Permalink Reply by Old Man on -
The first lease clause is there because they anticipate getting the state to agree to the creation of 1920 acre units for a larger drainage area. Just a good way to hold more acreage with fewer wells. Agreeing to this in the lease eliminates you ability to object in the future to the large units. Larger units means less interest for the land owner. One acre out of six hundred and forty acres is a larger percentage than one acre out of nineteen hundred and twenty acres.
Number 14 limits their exposure and removes any obligation to drill more than one well to hold all of the acreage under this one lease. Also remove their obligation to drill offset wells to any next to your acreage. A good thing for them if the well next to your acreage belongs to them and is draining gas from your lease. You would not get any revenue from this well but they would still get the gas without having to spend the money to drill another well.
Number 17 limits their exposure to the actual cost of the land. They are not obligate to spend more than the actual cost of the land to reclaim, restore, repair or maintain the land. For example, if there is an environmental spill they are only legally obligate to spend up to the actual cost of the land. Any cost above this is not their responsibility. Does this mean they will buy your land? No, it means they can hand you a check for the actual cost of the land and the rest of the cost is the landowners.
Number 20 is granting them an easement under your land for the same money they are giving you for leasing your minerals. This easement extends beyond the life of the lease. If the only way to get to the gas on the other side of your property is to bore under your property, they can do it and not pay you to get there.
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Permalink Reply by KT on
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For example, if there is an environmental spill they are only legally obligated to spend up to the actual cost of the land. Any cost above this is not their responsibility.
Did I read that right? Everyone got that, right?
If there is an accidental discharge of contaminants onto/into your land by an OG company, and the cleanup is going to be expensive, the OG is not going to pay for it. They will pay the value of the land only - not the cost of cleanup. The damage may be their responsibility but an obligation to restore the land to its original condition is not there. The site will be put on the Superfund list. That is a comforting thought to me.
Since you would be receiving royalties on the gas and since it would have to be an especially nasty spill to make the land unworkable, your compensation would be limited to its value as farmland, timberland - fair market value.
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Permalink Reply by Jack Blake on
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I scratched out the "market value of land" from my lease and changed it to "they will return to prior condition or something to that effect".
Jack Blake has spoken
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