Replies to This Discussion

Permalink Reply by Dion Warr, CPL on August 8, 2009 at 16:27

Mac:

Primary terms on leases are limited to ten years by statute.

As long as the lease is maintained by production and/or continuous operations, the effective length of time that lease may continue in force may stretch into many decades. In older fields all over the state with longstanding production, leases from the 1920s, 30s, and 40s have been maintained continuously.

I have no doubt that several of the 'regulars' can cite leases of even greater length than these.

Let's hear it, regulars and pros: What is the longest continuously maintained lease in existence that you know of?

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Permalink Reply by Skip Peel - Mineral Consultant on August 8, 2009 at 16:46

The lease covering Serial #503, Caddo Mineral Lands Co. #1, Caddo Pine Island Field. Spudded 2-21-1918.

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Permalink Reply by Frederick Jackson on August 11, 2009 at 5:54

Our family has a lease that was sign in 1945 in the Caddo Parish area and we have
been
trying to fine out how the oil companies can hold our lease for so long . When I see
what is going on with the Haynesville shale, our fore-parents was not educated in
trying to understand these leases.


Frederick Jackson

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Permalink Reply by Frederick Jackson on August 12, 2009 at 11:19

Our family has a lease that was sign in 1945 in Caddo Parish area
and we have been trying to fine out how the oil companies can hold our
lease for so long with out no reevaluation opportunity,the lease don't
have a escalation clause for inflation and the Royalties have not
increase for many years on our gas and mineral lease.Now we are dealing
with the haynesville shale and the off-spring of our fore-parents feel that
there was know one representing our fore-parents back in 1945 and we believe
was taken advantage of who had a maximal education of fourth or fifth grade.

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Permalink Reply by Mac Davis on August 12, 2009 at 11:30

If there has been "production" on the "unit" for the property, the lease can last forever. Since there have been royalties paid, that indicates that there is production.

The good news is that if they drill for gas on your unit, you should get paid royalties on the new gas. Do you know your royalty percentage?

Can you tell us township, range, and section, or, failing that, an address?

By the way, some leasing companies and production companies will cheat you given a chance. It might be worth checking closely on the terms of the lease. It probably gave them the right to drill for anything at any depth, but it might be worth checking.

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Permalink Reply by srs on August 12, 2009 at 12:08

Mr. Jackson, you should definitely consult an experienced oil and gas attorney who may be able to review your lease and advise you.

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Permalink Reply by Frederick Jackson on August 13, 2009 at 14:54

Thank you

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Permalink Reply by Mac Davis on August 9, 2009 at 0:58

Thanks, it sounds like the answer is, "Ten years." I wonder if it can be "Ten years with a mandatory renewal option."

I'm a little surprised that the original round of lease offers to the uninformed landowner weren't all 10 year terms.

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Permalink Reply by Dion Warr, CPL on August 9, 2009 at 4:37

Mac:

As Caliente has noted, the maximum length is ten years, and parties may not contract to extend the obligation past ten years. Cited from the operative statute, as to oil, gas and minerals (the rules are different for lignite):

R. S. 31:115: Requirement of term; limitation of continuation without drilling or mining operations or production

A. The interest of a mineral lessee is not subject to the prescription of nonuse, but the lease must have a term. Except as provided in this Article, a lease shall not be continued for a period of more than ten years without drilling or mining operations or production. Except as provided in this Article, if a mineral lease permits continuance for a period greater than ten years without drilling or mining operations or production, the period is reduced to ten years.
...

D. Parties may not contract contrary to the provisions of this Article except to the extent of providing for time periods less than those provided herein or otherwise to increase the obligations of the lessee.

Do not be surprised about the lack of 'ten-year' lease offers. The norm in much of the Arklatex prior to the HS lease frenzy had been paid-up leases with primary terms of three to five years. Ten years would not have been generally well received; bonuses of comparable pre-HS amounts was more favorable to O&G than seeking a longer primary term.

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Permalink Reply by Bill Murphy on August 10, 2009 at 9:24

A neighbor showed me a pending lease for land in DeSota Parish with a proposed lease for 3 years and renewable
for one dollar per acre for subsquent years, up to 5 renewable years. This would amount to a 8 year lease for the amount of the original 3 year lease plus 5 dollars per acre.
The original proposed signing bonus was $4,500 per acre.
I advised a change to this provision. I also advised not to sign at all, since it is only a fraction of an acre.

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Permalink Reply by The_Baron on August 10, 2009 at 10:41

I wouldn't want th hassel of going UMI over a fraction of an acre. Wouldn't take the 5 renwable years either. Just shows they are not serious. probally betting on an improvemnt over the long term and not worried about drilling in the short.

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Permalink Reply by Mac Davis on August 12, 2009 at 11:34

OK, round 2:

Are there any legal minimum royalty rates? Could they offer, for instance, 1% royalties?

Of course, buying the mineral rights outright is sort of a 0% royalty.

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