LEASE CLAUSES for No-Surface Operations

FOR INFORMATIONAL PURPOSES ONLY

Here are some lease clauses that landowners can talk over with their attorney. These clauses are more favorable toward the landowner and cover a lot of different items that I have not seen mentioned in this forum. Paragraph 2. a. makes sure that you get the full market price of the sale of your minerals and that the company cannot make a "brother-in-law deal" with your minerals.

Remember, these are just samples to discuss. I may have a few typos in there but I hope not.





Attached to and made a part of that certain Oil, Gas and Mineral Lease dated _______, August, 2008, to be effective _______, August, 2008, from ____________________________________, with ____________________________ as Lessee, covering _____________ acres, more or less, ______________ Parish, Louisiana.

SECTION TOWNSHIP RANGE


Special Provisions

1. In the event of a conflict between the language as stated in this Exhibit “A” and the language as stated on the printed lease form, the language in Exhibit “A” shall prevail.

2. The royalties to be paid by Lessee to Lessor in all instances and upon all substances herein leases are “twenty-five percent” (25%). The royalties to be paid Lessor are subject to the following provisions:

(a) Lessee shall from time to time sell to others or purchase for its own account any royalty oil or other liquid hydrocarbons in its possession, obtaining for Lessor, if sold, or paying to Lessor, if purchased, the market value thereof prevailing for the field where produced (or if there be no posted price for the filed, the average price for Gulf Coast Fields of Louisiana for oil, distillate, condensate or other liquid hydrocarbons of same grade and gravity) on the date of each sale or purchase, which value shall not be less than the amount received by Lessee for its share of the production. Lessee shall not enter into any contract or marketing arrangement expressly regarding oil or other hydrocarbons which are produced from wells located on the leased premises or lands pooled with the leased premises which obtain for Lessee any advances, payment or other monetary payment or gain or other commitment that may be of value to Lessee and that may not be of value to Lessor.

(b) The royalty to be paid the Lessor on gas, casinghead gas, and gaseous substances shall be the market value at the wellhead for said gas, casinghead gas, and gaseous substances produced from said land and sold or used off the premises or for the extraction of gasoline or other products therefrom. Notwithstanding anything contained to the contrary in the previous sentence, Lessee shall not sell any gas, casinghead gas, or gaseous substances of Lessor at a price that is less than the price the Lessee receives for the sale of its gas produced in the field and Lessee shall make every effort to sell the gas, casinghead gas, or gaseous substances of Lessor at the best price available in the filed where produced. Lessee shall not sell the gas, casinghead gas, or gaseous substances produced from (a) any wells located on the lands described as the leased premises in this lease, or (b) any wells located on any lands unitized with these lands described as the leased premises in this lease, to a Subsidiary or Affiliate of Lessee unless the value of the gas, casinghead gas, or gaseous substance sold is not less than the market price then current for gas of like character and quality delivered to any other purchaser in the field. “Affiliate” means any Person or Entity (1) which directly or indirectly controls, or is controlled by, or is under common control with the Lessee or a Subsidiary of the Lessee (a “Subsidiary”); (2) which directly or indirectly beneficially owns or holds five percent (5%) or more of any class of voting stock or voting power of the Lessee or any Subsidiary; or (3) five percent (5%) or more of the voting stock or voting power of which is directly or indirectly, of the power to direct or cause the direction of the management policies of a Person or Entity whether through the ownership of voting securities or voting power by contract, or otherwise.

(c) As a condition of Lessor entering into this lease with Lessee, Lessee in computing Lessor’s royalty shall not deduct the cost of treating, gathering, transporting, dehydrating, compressing, extracting, processing, manufacturing, marketing, improving, or any other cost, whether similar or dissimilar to those enumerated. It is clearly understood that Lessor shall be entitle to look only to Lessee for payment of its royalty and shall not be required to deal with purchases of hydrocarbons produced from the leased premises or any other third party. Under no circumstances shall Lessor, in order to obtain payment of the royalties due it hereunder, ever be required to execute a division order or other document that in any way amends, alters or changes any provision of this lease.

3. Notwithstanding anything to the contrary herein contained, when a pooled unit or units are created, either by governmental authority (compulsory units) or by voluntary action of the parties, or by Lessee pursuant to the terms of this lease, which include all or a portion of the leased premises, drilling operations, payment of shut-in gas royalty or production from the pool, sand or formation for which such unit or units were created, all as defined by said governmental authority, or by said voluntary unitization agreement, or by said pooling unit declaration, shall maintain this lease in force after the expiration of the primary term but only as to that portion of the Leased premises included in said unit or units, regardless of whether said drilling operations or production are on or from the leased premises. As to any portion or portions of the leased premises not included in the pooled unit or units, the is lease shall terminate at the end of the primary term unless otherwise maintained in force and effect as provided for by the provisions of this lease. However, operations for drilling, or reworking operation under the continuous operations or development clauses of this lease, conducted on lands within the boundaries of any unit created, shall maintain this lease in force and effect as to all lands described in this lease until such time as such continuous operations or developments cease. Upon the termination of this lease as to any portion of the lased premises pursuant to the terms of this paragraph, Lessee agrees that it will, within sixty (60) days of the termination of the lease as to the acreage not being held pursuant to the terms of this paragraph, execute and file of record the appropriate Act of Partial Release which will fully release the Lessee’s rights in the lease as to that portion of the leased acreage which has not been maintained in accordance with the provisions of this paragraph.

4. It is agreed and understood that upon the expiration of this primary term of this lease, this lease shall expire as to all rights below 100 feet below the deepest depth drilled, or the stratigraphic equivalent of the deepest depth drilled in any well drilled on the leased premises, or on a unit with which all or a part of the leased premises may be pooled or unitized, during the primary term of this lease. Lessee agrees that it will, within sixty (60) days after the primary term of this lease has expired, execute and file of record the appropriate Act of Partial Release which will fully release the Lessee’s rights in the lease as to all zones, depths and horizons lying below 100 feet below the deepest depth drilled, or the stratigraphic equivalent of the deepest depth drilled on any well drilled on the premises, or on a unit with which all or a part of the leased premises may be pooled or unitized during the primary term of this lease.

5. The royalties as hereinabove provided shall be due and payable without any duty or obligation by the Lessor to sign, execute, or ratify any division orders, transfer orders, unitization agreements or similar instruments. If so requested by Lessor, Lessee agrees to provide Lessor with photocopies of division order title opinions or other documents or instruments relating to Lessor’s interest ownership in any producing well(s) located on the leased premises or on lands unitized therewith. Lessor agrees that it assumes the risk of relying on any information contained in the requested Division Order Title Opinions and other documents and instruments furnished to it by Lessee, and neither Lessee nor any person(s) rendering or preparing such Division Order Title Opinions, documents or instruments that are furnished to Lessor shall be liable to the Lessor should Lessor suffer any loss or expense as a result of its reliance thereon, subject to the provisions of the next sentence. Notwithstanding anything contained in the preceding sentence, Lessor shall not be precluded from asserting any claim or cause of action against Lessee, or the assigns of Lessee, and the language contained in the preceding sentence shall not be applicable in the event the Lessor disagrees with or contests the mineral or royalty interests credited to Lessor by the Lessee pursuant to the terms of this paragraph, it being understood by the parties hereto that the Lessor reserves herein any and all rights (a) to challenge and contest at any time the mineral and royalty interests credited to Lessor in any Division Order Title Opinion, or other document or instrument furnished by Lessee to Lessor pursuant to this paragraph, and (b) to challenge and contest any amounts tendered to Lessor by Lessee pursuant to this paragraph, and (b) to challenge and contest any amounts tendered to Lessor by Lessee as payment of bonus, delay rental, or royalty due the Lessor under the terms of this lease.

6. Notwithstanding any wording in this lease to the contrary, it is hereby agreed between Lessor and Lessee that this lease covers only oil, gas which can or may be produced through the bore of a well. Lessee’s rights to inject gas, water, brine or other fluids into the subsurface strata of the premises shall be restricted to injection for the purposes of facilitating or enhancing hydrocarbon production form the premises or acreage pooled therewith. No other minerals or substances including iron ore, coal, lignite, bentonite and gravel or any other hard minerals shall be covered hereby.

7. (a) Lessee shall be solely responsible for all damage to property and injury to persons, including death, by reason of, or in connection with its operations hereunder, and does hereby agree to protect, save harmless, and indemnify Lessor from and against any and all claims and liabilities for damages to property and injuries, including death, to persons, including, but not limited to, Lessee’s employees, agents, and contractors, such damages and injuries arising out of, or in connection with Lessee’s operations hereunder, and Lessee shall, at lessee’s sole expense handle all such claims, defend law suits, or other actions which may be brought against Lessor therein, pay all judgments rendered against Lessor therein and reimburse Lessor for any expenditures which it may make on account thereof, including but not limited to Lessor’s attorney’s fees and costs of defense, unless such damage or injury is caused solely by Lessor’s acts, omissions or negligence.

8. This lease shall inure to the benefit of, and be binding upon, Lessee and its successors and assigns, and shall be a burden running with the land.

9. The rights of the Lessee hereunder shall not be assigned or subleased in whole or in part other than assignments or subleases made to direct affiliates and subsidiaries of Lessee without first obtaining the prior written consent of the Lessor. The Lessor’s consent to any assignment by the Lessee shall not relieve the Lessee herein of any duties, liabilities or obligations owed Lessor. Furthermore, any assignment or sublease of this lease made by Lessee or its assigns shall contain a specific provision providing that the new assignee/subleasee shall personally assume all of the obligations due to the Lessor imposed on the Lessee in this lease.

10. It shall be required of Lessor to correspond only with Lessee at the address shown on this lease until Lessor is advised in writing by Lessee of the change in Lessee’s address.

11. Lessee agrees that it will not utilize any water from any ponds, lakes, streams, rivers or Lessor’s water wells located on the leased premises for its operations without the prior written consent of Lessor.

12. Lessee agrees that it will not use Rowe Road on the leased premises for its operations or use without the prior written consent of Lessor.

13. Anything in this lease to the contrary notwithstanding, the parties further agree that for all purposes of this lease, the rights granted the Lessee are limited to those owned by Lessor, and Lessor makes no representation or warranty to its title, or as to its ownership of the rights or interests in the premises, or as to the existence, quality, or location of oil and gas on the premises either expressed or implied, not even as to return of the bonus money or the return of an other payments made to Lessor by Lessee, including but not limited to revenue overpayments.

14. In the event a well(s) is completed on land or lands pooled therewith, adjacent to the leased premises and procedures oil and/or gas in paying quantities, then it is considered that the leased premises are being drained, and Lessee agrees to protect the leased premises by drilling such offset well(s) as a reasonably prudent operator would drill under the same or similar circumstances or release that portion of the leased premises that would be included in the unit adjacent to the offset well. This provision shall not apply if the area adjacent to the offset well is part of a unit that is then producing in paying quantities.

15. Notwithstanding any provision in this Oil, Gas and Mineral Lease to the contrary, the payment of shut-in royalty hereunder shall maintain this lease for a period of not more than 1 consecutive year after the commencement of each shut-in royalty payment, and at the end of each such consecutive period this lease shall terminate unless such gas is being produced and marketed by pipeline connections or there has been prior interruption of such 1 year consecutive period during which gas was produced and marketed by pipeline connections. Subject to the above limitations the right to hold this lease by payment of shut-in royalty payments shall be a reoccurring right of the Lessee.

16. Upon termination of al or any portion of this lease by its terms, Lessee shall place a recorded instrument(s) to evidence such termination in a timely manner. Any instrument shall be made free of encumbrances created by or under the Lessee, and Lessee shall, within thirty (30) days of execution of such instrument(s), mail or deliver to the Lessor a copy of same.

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Comment by keb on September 9, 2008 at 11:06pm
As always, thanks Kassi for all you do.
Comment by dj V & A1 on September 4, 2008 at 2:49pm
Hey I,
I have your Exhibit A and list of clauses that you posted, but wanted to know if these include no surface rights as well?
Comment by Kassi on July 29, 2008 at 9:50pm
Hey, This is what I am negotiating regarding water wells in the leases I working on:
Surface owner’s water. The company will not disturb, interfere with, fill, or block any creek, reservoir, spring, or other source of water on the owner’s land or any land within 1 mile of the company’s well. Before conducting any drilling operations, the company, at its sole cost and expense, will measure or cause to be measured the static water level and productive capacity of all water wells and springs located on the owner’s land or any property within one mile of the company’s wells, and will test the water wells for the presence of methane. The company will also provide the owner(s) of each water well a chemical analysis of all wells and springs within one mile of the company wells, which analysis will measure, at a minimum, the following:
PH Hydroxide
Hardness (ppm and grains/gallon) Chloride
Conductivity (mmhos/cm) Sulfur as SO4
Sodium Absorption Ratio Salt Concentration (TDS)
Adjusted Sodium Absorption Ratio Boron
Cation/Anion Ratio Nitrate
PPM of Calcuim, Magnesium, Potassium, Sodium, Iron Nitrite
Total Alkalinity (CaCO3) Ammonia Nitrogen
Carbonate Phosphorus
Bicarbonate Methane
Barium Total Petroleum Hydrocarbons
BTEX (Benzene, tolvene, ethylbenzene, xylenes)

The owner of each well and spring will be notified prior to such testing and measuring and the owner or its agents or representatives will have the right to be present during such testing and measuring. The results of these tests and measurements will be immediately provided to the owners of the wells and springs. The company will establish a continuing water well monitoring program to identify changes in the capacity of any water wells located on the owner’s land and within 1 mile of the company’s well and in the methane content of the wells, and the company will immediately provide that monitoring data to the owners of the wells and springs.
Loss or Impairment of Water Wells or Springs. In the event that any water well or spring located within a mile of the company’s well is lost or materially diminished in productivity, or the quality of water produced by such well or spring is reduced so that the water is unusable by livestock or humans (as the case may be), as a result of production of oil, gas, or water by the company, the company will, at its expense, immediately repair or replace any water well or spring which is lost or diminished in productivity with a new water well or spring at least equal in productivity and quality of water to the lost or diminished well or spring, using a water well drilling contractor acceptable to the owner. If successful water well replacement us unable to be obtained the company will provide for potable water to be piped in to affected households.
Comment by insomniacnla on July 28, 2008 at 9:00pm
sfd971,

I will take a look and see if I can get some really good language posted. I have not posted any Clauses for Surface Rights yet but I will have it in a day or so. I will have the water well language posted by tomorrow afternoon as it is kind of late tonight. I know that it isn't even 9:00 p.m. yet. LOL Also, I think I remember seeing something Kassi Fitzgerald recommended for water wells. I will try and find that also. Good luck in your lease negotiations. I will either post what I have here tomorrow and I will leave it on your Comment section of your page on this site.
Comment by sfd971 on July 28, 2008 at 8:33pm
On 11 it addresses water wells and I am concerned about mine and how safe it will be even if they drill their own. The information I have read says that it takes millions of gallons of water to hydrofrac. I don't understand too much about it but I do have a concern for our drinking water. How could I word it to hold the OG companies responsible for assuring safe drinking water equilvilant to what I have now.
Comment by insomniacnla on July 26, 2008 at 10:54am
Yes, I do have clauses for surface operations. My scanner is not working so I will have to re-type it today or tomorrow. If you are in a hurry, if you have access to a fax machine, I can fax the pages to you.
Comment by Skidmark on July 26, 2008 at 10:00am
Thank you for posting this. Do you (or does anyone else) have specimen provisions of a Surface Use and Damages Agreement that could be posted as well?
Comment by insomniacnla on July 24, 2008 at 11:19am
It is just a draft but Chesapeake has agreed to it.
Comment by Will Barron on July 24, 2008 at 11:15am
Thank you for this information. Where did you get this? Is this a part of your own leases?

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