If you are contemplating to enter into oil and gas business, understanding how to go about lease negotiation is quite important. An oil and gas lease is a legal contract that binds the parties involved. Terms in this lease can be difficult to understand. Therefore, you will need legal counsel to help you understand the many clauses as well as stipulations in the contract. Here are some things to help you during the lease negotiation.
How many years does a mineral lease last?
In most cases, the lease remains viable for duration of 2 to 5 years if the leasing company doesn't drill. If the company does drill and the well found is economically viable, the binding contract continues in perpetuity provided the well in the lease remains economically viable. However, if the well is not viable, then the lease or contract expires after 2-5 years depending on the contract terms.
The roles played by a landman and mineral owner in the lease
Entering into a mineral contract with a large company can be quite difficult especially when there is a binding contract. Many large energy companies normally leave initial negotiations between the mineral owner and themselves to a landman to ensure a smooth facilitation of establishing the contract. The landman determines the correct mineral right owners.
The mineral owner, on the other hand, should review the lease in details and ensure that they are comfortable with them. Should there be some items in the oil and gas lease that are unsatisfactory to the mineral owner, then the landman and the owner should have a sitting and negotiate terms that will be acceptable. Some terms may be simply adjusted while others are altered completely.
Reasons a mineral owner should hire an oil and gas lawyer
Due to legal technicalities of an oil and gas lease, mineral owners are encouraged to seek legal advice or counsel. Energy companies have entered into many mineral leases and understand the whole process of lease negotiation very well. A lawyer will help a mineral owner who may be completely unfamiliar with the process of leasing and especially negotiations that create a lease that will be mutually beneficial.
Hiring an experienced lawyer will remove any distrust that a mineral owner might develop either after reviewing the lease or during the negotiation process. The attorney will ensure a smooth running of the process. As the mineral owner, it is also imperative to ask your lawyer explain every lease component in details.