Oil and gas leases can be overwhelming for the average property owner in Oklahoma or Texas. These contracts are full of jargon that can be difficult to navigate. However, these agreements are legally binding and impact your land for years, so it’s important to be aware of the risks.
Without a clear understanding of the terms, you might end up losing money or giving up more control than you intended. By learning about common pitfalls, you can protect yourself and your property.
Fully understand the terms of the lease
All too often, people sign agreements without fully understanding them. As you might expect, many oil and gas leases have language that favors the company. Therefore, make sure you know what the terms mean before agreeing. Many property owners decide it is worthwhile to get assistance from someone familiar with these contracts to explain the finer details. Pay close attention to the length of the lease and any automatic renewals.
You should also carefully review royalty payment details. Some companies may offer low royalty percentages, which can significantly reduce your income from the resources they extract. Know the difference between gross and net royalties to ensure you’re getting fair compensation. If the numbers don’t look right, you can negotiate for a better deal.
Protect your surface rights
Many landowners focus on mineral rights but don’t consider how the company’s activities could impact the land above ground. If you don’t address surface use in the lease, the company could drill or build infrastructure anywhere on your property. This can lead to significant damage or loss of land value.
Be sure the lease includes specific clauses to protect your surface estate. You can negotiate limits on where drilling or other operations can take place, as well as require the company to restore the land after they’re finished.
By carefully reviewing an oil and gas lease and negotiating key points, you can safeguard your land and financial interests. Instead of rushing into signing, take the time to make sure you know exactly what you’re agreeing to.