Lease Language for Texas - GoHaynesvilleShale.com2024-03-29T15:06:33Zhttps://gohaynesvilleshale.com/forum/topics/lease-language-for-texas?feed=yes&xn_auth=no"Fair and reasonable" thinkin…tag:gohaynesvilleshale.com,2012-08-07:2117179:Comment:26689812012-08-07T16:46:10.315ZGoshDarnhttps://gohaynesvilleshale.com/profile/GoshDarn
<p><strong>"Fair and reasonable" thinking, Andrew.</strong></p>
<p><strong>And some might call it Contract Negotiation 101.</strong></p>
<p><strong>The real pros, who truly know what they're doing (per proper training and decades of experience), never try to demolish the other party who's sitting across from them at the table.</strong></p>
<p><strong>Both sides should walk away from a negotiation as winners.<br/></strong></p>
<p><strong>"Fair and reasonable" thinking, Andrew.</strong></p>
<p><strong>And some might call it Contract Negotiation 101.</strong></p>
<p><strong>The real pros, who truly know what they're doing (per proper training and decades of experience), never try to demolish the other party who's sitting across from them at the table.</strong></p>
<p><strong>Both sides should walk away from a negotiation as winners.<br/></strong></p> That's right. My point is tha…tag:gohaynesvilleshale.com,2012-08-07:2117179:Comment:26684572012-08-07T13:13:11.135ZAndrewhttps://gohaynesvilleshale.com/profile/Andrew358
<p>That's right. My point is that the best situation for both of you is a contract that allows the incentive/flexibility to drill when commodity prices are favorable. That way your royalty is better and their return is better. The goal of any contract negotiation is to seek scenarios where both parties win.</p>
<p>That's right. My point is that the best situation for both of you is a contract that allows the incentive/flexibility to drill when commodity prices are favorable. That way your royalty is better and their return is better. The goal of any contract negotiation is to seek scenarios where both parties win.</p> Andrew--- yes understand not…tag:gohaynesvilleshale.com,2012-08-03:2117179:Comment:26644662012-08-03T21:44:54.930Zadubuhttps://gohaynesvilleshale.com/profile/adubu
Andrew--- yes understand not reasonable to drill a 8-10 million dollar well with minimum chance to pay profit but speaking when prices are favorable to drill and make 4-5 times return on investment
Andrew--- yes understand not reasonable to drill a 8-10 million dollar well with minimum chance to pay profit but speaking when prices are favorable to drill and make 4-5 times return on investment There have been cases recentl…tag:gohaynesvilleshale.com,2012-08-03:2117179:Comment:26643032012-08-03T21:12:22.284ZAndrewhttps://gohaynesvilleshale.com/profile/Andrew358
<p>There have been cases recently where Lessor's have tried unsuccessfully to get out of old leases on the theory that the original parties to the contract could not have contemplated the type of development required to produce HS, and so did not have a meeting of the minds. Those cases have failed, as far as I know.</p>
<p>As for failure to develop HS where there are multiple offset wells, that sounds like the Romero v. Humble Oil case mentioned in the document I posted under the heading…</p>
<p>There have been cases recently where Lessor's have tried unsuccessfully to get out of old leases on the theory that the original parties to the contract could not have contemplated the type of development required to produce HS, and so did not have a meeting of the minds. Those cases have failed, as far as I know.</p>
<p>As for failure to develop HS where there are multiple offset wells, that sounds like the Romero v. Humble Oil case mentioned in the document I posted under the heading "Further Development." You can't hold deep rights forever without developing them when the have been proved by others nearby. However, I would have a real hard time being convinced that anyone drilling a HS well today that they weren't contractually bound to drill is being "reasonably prudent," considering the low commodity price. I would guess you would be at the mercy of the Lessee's timing (which is probably good for both of you, since he's likely waiting for higher commodity prices).</p>
<p></p> Andrew--- thanks for excellen…tag:gohaynesvilleshale.com,2012-08-03:2117179:Comment:26643622012-08-03T20:47:42.467Zadubuhttps://gohaynesvilleshale.com/profile/adubu
<p>Andrew--- thanks for excellent information. The Carter case in La. and Fox in Olk are good summarys. Good reason to have a good friendly business relationship with your Lessee so can openly talk about developimg property. One twist added to question. Older lease with small operator who leased for vertical wells only for multiple formation down to CV. No plans or ability to drill any deeper or to drill H wells. But denied request for release of deep rights even with proven off set H shale…</p>
<p>Andrew--- thanks for excellent information. The Carter case in La. and Fox in Olk are good summarys. Good reason to have a good friendly business relationship with your Lessee so can openly talk about developimg property. One twist added to question. Older lease with small operator who leased for vertical wells only for multiple formation down to CV. No plans or ability to drill any deeper or to drill H wells. But denied request for release of deep rights even with proven off set H shale wells in area. Old lease without depth clause. Then I guess court only choice in this type case.I assume Texas has case laws similar to Carter in La.I know you are not a attorney but this is just talk and picking your brain based on all your experence in the business. Thanks again to continue my learning of the subject.</pO</p> Adubu,
I have attached a copy…tag:gohaynesvilleshale.com,2012-08-03:2117179:Comment:26639572012-08-03T19:39:35.657ZAndrewhttps://gohaynesvilleshale.com/profile/Andrew358
<p>Adubu,</p>
<p>I have attached a copy of LA Mineral Code article 122. The comments to the article are very illustrative on the topic.</p>
<p>The short answer to your question is that further development does appear to be an implied covenant in Louisiana, but the text of article 122 states that "Parties may stipulate what shall constitute reasonably prudent conduct on the part of the lessee."</p>
<p>Adubu,</p>
<p>I have attached a copy of LA Mineral Code article 122. The comments to the article are very illustrative on the topic.</p>
<p>The short answer to your question is that further development does appear to be an implied covenant in Louisiana, but the text of article 122 states that "Parties may stipulate what shall constitute reasonably prudent conduct on the part of the lessee."</p> Andrew--is there a implied co…tag:gohaynesvilleshale.com,2012-08-03:2117179:Comment:26629922012-08-03T11:32:31.264Zadubuhttps://gohaynesvilleshale.com/profile/adubu
Andrew--is there a implied covenant to develop in the lease or does it have to be written wording added to lease that the lessee must drill additional wells to develop the property as a reasonable prudent operator under similar circumstances would as long as it's is best interest of both lessor and lessee plus be profitable
Andrew--is there a implied covenant to develop in the lease or does it have to be written wording added to lease that the lessee must drill additional wells to develop the property as a reasonable prudent operator under similar circumstances would as long as it's is best interest of both lessor and lessee plus be profitable A few things,
As I suggested…tag:gohaynesvilleshale.com,2012-08-03:2117179:Comment:26628882012-08-03T05:58:39.800ZAndrewhttps://gohaynesvilleshale.com/profile/Andrew358
<p>A few things,</p>
<p></p>
<p>As I suggested above, the more acreage you have the more likely you are to be able to command a continuous drilling clause. It's a great clause to have, for sure, which is why the company isn't likely to give it to you unless they really want your lease. For example, I would be shocked if Weyerhauser did not have such a clause in their St. Helena lease, which is why you see so many Weyerhauser wells so early in the play. On a large tract like that (say ~20,000…</p>
<p>A few things,</p>
<p></p>
<p>As I suggested above, the more acreage you have the more likely you are to be able to command a continuous drilling clause. It's a great clause to have, for sure, which is why the company isn't likely to give it to you unless they really want your lease. For example, I would be shocked if Weyerhauser did not have such a clause in their St. Helena lease, which is why you see so many Weyerhauser wells so early in the play. On a large tract like that (say ~20,000 acres hypothetically), the company would likely drill multiple wells on that acreage anyway. When you have that much contiguous land, a pugh clause is less helpful because the operator can drill on your lease without forming a unit.</p>
<p>For the small guy, there's not much you can do in lease negotiation (of which I'm aware anyway) to really motivate the operator to drill after they HBP your lease. I would ask for the continuous drilling clause if I was in that position, but I wouldn't expect to get it. </p>
<p>As to your question about HBP and litigation, I suspect others on this board would be more knowledgeable than me, particularly for states other than Louisiana. I am not an attorney, and my land/legal experience has been more on the leasing than operating side of things. I know that - in Louisiana - you cannot HBP a lease indefinitely by operating a well at a loss every month, and I know that a serious consideration in working interest acquisitions is whether a well is producing enough to "hold the leases." </p>
<p>The obvious first step, often overlooked, is merely to ask for a release of all but the existing well. Often a respectful request is all that is necessary, and many operators do it just to avoid litigation unless they have definite drilling plans in the future. But beyond that, I'm not familiar enough with the jurisprudence yet to know under what circumstances and on what grounds you could get a release or damages. </p> Andrew--- understanding good…tag:gohaynesvilleshale.com,2012-08-03:2117179:Comment:26625812012-08-03T00:24:50.397Zadubuhttps://gohaynesvilleshale.com/profile/adubu
Andrew--- understanding good points, do you see any clauses in leases today that address this issue? So the small mineral owner would just have be lucky if gets in unit that one mineral owner had >50% and got some type clause that alternate wells would be continued to be drilled if the economics (prices) were favorable to the operator. So in general if mineral owner has < 100 acres net minerals just forget attempting to negotiate this in lease agreement. I had just heard coffee house talk…
Andrew--- understanding good points, do you see any clauses in leases today that address this issue? So the small mineral owner would just have be lucky if gets in unit that one mineral owner had >50% and got some type clause that alternate wells would be continued to be drilled if the economics (prices) were favorable to the operator. So in general if mineral owner has < 100 acres net minerals just forget attempting to negotiate this in lease agreement. I had just heard coffee house talk of recommendation that you should attempt to get it in leases so now I understand not sensible thing to push. I bet the attorney that held out on 20 acres was not a OG attorney. Thanks -- one additional question on this subject -- if economic conditions are good and operator does not drill over the years then what can you do to force operator get your minerals to market ? Is only option litigation ? Of course that ugly and costly. Side note - unless you have a…tag:gohaynesvilleshale.com,2012-08-02:2117179:Comment:26626672012-08-02T23:36:25.526ZAndrewhttps://gohaynesvilleshale.com/profile/Andrew358
<p>Side note - unless you have a substantial amount of acreage (I would say multiple whole units, but at least the majority of one), you aren't likely to get this. I had an attorney absolutely refuse to lease without this once, but his client had 20 acres in a potential 640 acre unit. My client didn't lease them, and I doubt anyone other than the operator would be dumb enough to agree to that, so his clients are probably still waiting or force pooled.</p>
<p>Side note - unless you have a substantial amount of acreage (I would say multiple whole units, but at least the majority of one), you aren't likely to get this. I had an attorney absolutely refuse to lease without this once, but his client had 20 acres in a potential 640 acre unit. My client didn't lease them, and I doubt anyone other than the operator would be dumb enough to agree to that, so his clients are probably still waiting or force pooled.</p>