What do landowners need to look for in an oil and gas lease?
There are key words and phrases landowners should be aware of in an oil and gas lease. This is the first of a series of articles discussing these in layman’s terms.
Landowners who have never dealt with leasing their mineral rights for oil and gas production may find that they have difficulty understanding the lease language in layman’s terms upon reading a lease. Are there key words or phrases that someone should be aware of? This article will discuss language from leases utilized by the oil and gas industry that are offered to landowners. When the word “company” is stated, it is referring to the oil and gas company that is interested in leasing a landowner’s mineral rights.
Let’s look at some of the key phrases or terms that landowners have asked about.
Phrases or terms related to Geophysical Testing may read similar to:
“Exploring by geophysical and other methods.” This allows the company to conduct seismographic studies to determine if drilling an oil and gas well should be considered. If the lease does not specifically call for the payment of surface damages for this activity, the landowner may not receive any surface damage payments when seismic work is conducted.
Phrases or terms related to Useful or Convenient Easements may read similar to:
“Together with all rights, privileges or easements useful or convenient.” This denotes unpaid usage of the land surface and allows the company to place roadways, pipelines and have other unnamed “privileges” wherever it is convenient for the company. The landowner can limit the activities that are unpaid and require payment for, or not allow certain activities.
Phrases or terms related to Mother Hubbard Clause may read similar to:
“Or any other land adjacent or appurtenant thereto.” This is called the Mother Hubbard clause. This permits the company to obtain the right to develop all contiguous or “appurtenant” lands owned by the landowner or that the landowner may own in the future. These can be adjacent, or they can be located in another township. Sometimes, landowners prefer to not lease all of their land. If the landowner accepts this provision, he is not reserving the right to negotiate a separate lease to the additional property in the future.
For more information regarding oil and gas leasing you can contact Curtis Talley Jr. at 231-873-2129. Michigan State University Extension also has a website www.msue.msu.edu/oilandgas that has additional information to assist landowners in understanding and negotiating oil and gas leases and the oil and gas industry in general.
This article is one part of a three article series regarding oil and gas leases. You can learn more about disposition of brine or other chemicals, construction of support facilities and pooling by visiting What do landowners need to look for in an oil and gas lease? Part 2 or about expiration of primary term, royalty and negotiation by visiting What do landowners need to look for in an oil and gas lease? Part 3.