Oklahoma is a hotbed of oil and gas production. There are thousands of wells in our state. Landowners often use oil and gas leases to earn income from their property. These legal documents involve complex obligations and legal rights. Understanding them is very important, and an attorney can help. Knowing how they work and what they can do for you is essential.
At Prado Law Offices, our Oklahoma City oil and gas lease lawyers are here to help. Whether you are negotiating a new lease or need help enforcing a current one, you have rights that deserve protection.
Oil and Gas Leases: What Are They?
If you are thinking about an oil and gas lease, you may want to learn more about it. It is a contract between the owner of the mineral rights and some energy company. The owner of the mineral rights is usually also the owner of the land itself, but not always.
It grants a company the right to drill or extract gas and oil from your property. The landowner then usually receives compensation. This compensation is often in the form of:
- Bonus payments
- Royalties
- Rental payments
Unlike other types of rental agreements, oil and gas companies get a property interest in the minerals beneath your land. Even if they don’t use it right away, these rights likely exist, as do your rights under the contract.
Key Lease Terms in Oklahoma
Most of these leases involve two timeframes that are important to understand. The primary term is the first period during which the company has to begin drilling. If they don’t start drilling in that time, the lease might expire. In many cases, the company will ask to renew in a separate contract.
The secondary term extends the lease as long as there is oil and gas being produced in an amount that pays out under the contract. This will depend on how the agreement is structured and the language you choose.
Contract Clauses You Need to Understand
When reviewing an oil and gas lease in Oklahoma, you need to know about certain clauses in your contract:
- Royalty Clause: This lays out the percentage of production revenue you get from any oil and gas extracted.
- Habendum Clause: This sets the primary and secondary terms.
- Pooling Clause: This contract clause lets the company combine your land with other contiguous properties for purposes of drilling.
- Surface Use Clause: This tells the company how they can use the surface land for their purposes.
- Assignment Clause: This lets the company give their rights under the contract to someone else.
How Oil & Gas Leases Work in Oklahoma
Here is how most oil and gas leases occur in Oklahoma:
- Negotiation: A landman or company representative approaches the landowner with a lease offer.
- Signing the Lease: The landowner agrees to terms, often receiving a bonus payment upfront.
- Exploration and Drilling: The company conducts seismic studies and begins drilling.
- Production: If oil or gas is found, royalties are paid to the landowner based on production revenue.
- Lease Continuation: As long as production continues, the lease remains in effect under the secondary term.
Oklahoma-Specific Considerations
Oil and gas leases are real property interests. This means they can be transferred, divided, and assigned like most other property rights. However, they are also regulated by the Oklahoma Corporation Commission, which can affect things somewhat differently.
Leases are very common because of the amounts of oil and gas in the state. Competition by companies can often benefit you as the landowner, especially if you have an attorney to help protect your rights.
Get Help with Oil and Gas Leases in Oklahoma
An attorney is ready to help with any oil and gas lease issues you face. These are not simple contracts. They are property interests with big money involved. By knowing how they work and Oklahoma law, you can protect your rights and make good decisions about your land.
Our team at Prado Law Offices can assist you with your oil and gas lease needs. We offer comprehensive services that best fit your requirements. Contact us today for a consultation.