What happens when you sign an oil and gas lease?

Many leases include a provision that the company’s right to keep these pipelines in place remains even after the lease you signed has terminated and you are no longer receiving royalties. Often a lease will state that no additional money is paid to the landowner for use of their land for pipelines.

How are taxes paid on oil and gas leases?

Under the lease agreement, the taxpayers received an upfront payment (the lease bonus payment) to induce them to enter into the lease agreement. Additionally, the lease agreement entitled them to a royalty payment equal to 16 percent of the net profits of any oil and gas extracted from the property.

How long does an oil and gas lease last?

This is a short paragraph in the typical oil and gas lease, but it is arguably one of the most important. Oil and gas exploration companies generally want to hold the leased mineral rights for a period of years until they actually begin drilling.

What is the royalty on oil and gas?

Additionally, the lease agreement entitled them to a royalty payment equal to 16 percent of the net profits of any oil and gas extracted from the property. The lease bonus payment was not dependent on any extraction or production of oil or gas.

What to look for at the end of your oil and gas lease?

What to Look for at the End of the Primary Term of Your Gas Lease. Many oil and gas leases are approaching their 5 and 10 year primary terms, and landowners in Pennsylvania and Ohio [1] may find themselves confused about the duration of their lease once the primary term expires.

When does an oil and gas lease expire in Pennsylvania?

Many oil and gas leases are approaching their 5 and 10 year primary terms, and landowners in Pennsylvania and Ohio [1] may find themselves confused about the duration of their lease once the primary term expires. The habendum clause of an oil and gas lease separates the duration of the lease into a primary term and a secondary term.

Can a mineral owner sign an oil and gas lease?

Accepting a Proposed Oil and Gas Lease Without Any Negotiation. A mineral owner could be so elated to receive a cash payment in exchange for signing an oil and gas lease that it signs the first offered Oil and Gas Lease document submitted. The Western Landowners’ Alliance strongly encourages its landowner members not to do this.

How does an oil and gas lease in Texas work?

Because the execution of an oil and gas lease creates an interest in land, it is subject to the formalities of the Texas laws of conveyancing which are found in Sections 5.001 to 5.043 of the Texas Property Code. Thus, the lease must be in writing, and acknowledged or sworn to in order to be filed of record.

How are landowners compensated for oil and gas leases?

In addition to a bonus and royalty, you can be compensated for such things as the location of a well pad on your property, the number of wells on your property, and right-of-ways for pipelines. There are many other questions that a landowner may have about an oil and gas lease and the leasing process.

Can a landman represent an oil and gas company?

If the landman represents a broker, you may not want to consider a lease with this company as the probabilities may be that the company will not actually develop your land for oil and gas production. This company may only be interested in selling or assigning your lease to an oil and gas company.

Who is an oil and gas lease in Texas?

In Texas, the term “lease” is in some ways a misnomer. In fact, an oil and gas lease is a conveyance by the Lessor of the fee mineral estate to the Lessee, for a term. As long as the lease is in force, the Lessee is the owner of the minerals covered by the lease, and the Lessor is the owner of a royalty interest only.

What is a royalty in an oil and gas lease?

The Lessor of an oil and gas lease reserves a royalty interest in all production from the lease. It is called a royalty interest because it is paid to the Lessor without deduction for the costs of drilling or production. It is typically expressed as a fraction or a percentage.

Is there such thing as a Standard Oil and gas lease?

Most negotiation over the terms of an oil and gas lease centers on these two differing concepts. There is no such thing as a standard or statutory oil and gas lease. However, a typical producer oriented lease is known as the Producers 88 form.