Allowing an oil or gas company on your property and giving them the right to extract natural resources therein can be intimidating but also lucrative for property owners. To protect their interests, these individuals must fully understand the agreements they’re entering into and their implications before signing a contract.
Oil and gas leasing explained
Essentially, oil and gas leasing is an agreement between a property owner and an oil or gas company. In these agreements, property owners permit the oil or gas company to explore their property for oil and gas deposits. If present, the company has the right to extract the deposits. The property owner receives royalty payments in exchange for the right to use their mineral deposits. Royalty payments are a portion of the proceeds from the sale of the minerals, usually hovering between 1/8 and 1/4.
What is an oil and gas contract?
An oil and gas contract is a legal document formalizing the lease agreement between a property owner and oil and gas companies. They outline the terms of the agreement, including the type of lease, the lease length, royalty percentages or fractions, and other clauses that protect both the lessor and the lessee’s rights.
Energy companies often host events inviting landowners to look at contracts and answer their questions. If you’ve been invited to such an event or someone from an oil or gas company has contacted you, it’s best to get an attorney’s opinion before agreeing to anything.
Seek legal guidance before moving forward
Ceding access to your property and use of its natural resources can be risky if you aren’t adequately informed. Having an energy law attorney review your oil and gas leasing contract before signing helps ensure you aren’t exposing yourself to liability. They can review the terms of the contract in-depth and request revisions if they aren’t in your favor. If you are navigating an oil or gas leasing agreement with an energy company, our attorneys are here to guide you.