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Texas Oil & Gas Leases for Mineral Owners - Lawyers Wharton Fort Bend El Campo - YouTube
Channel: Wadler Perches Hundl & Kerlick
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- Hello. My name is Ray Kerlick. I'm a
partner in the law firm at Wadler,
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Perches, Hundl & Kerlick in Wharton,
Texas. Today I wanted to discuss with you
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a little bit about oil and gas leases and
production in Texas. As many of you may
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know, oil and gas is a part of real
property or real estate that you as a real
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estate owner may or may not have an
interest in. For those of you that do have
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interests in the minerals or oil and gas
under your property, it's important to
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know that legal, very legal documents are
required to lease this oil and gas, and
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actually extract it or produce it from the
ground. So I want to talk a little bit
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about some of the terms that you'll
probably come across in dealing with a
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situation involving the leasing of your
oil and gas or other minerals of your
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property. The first thing is the term
"Lease." Now, a lease in this setting, an
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oil and gas lease is a different kind of
lease than those that most of us are
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familiar with being a residential lease or
an apartment lease. In this setting, a
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lease actually involves removing something
from the property, and that is your oil
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and gas. The term lease is a term of art.
It's a legal term, and the way it works is
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that, essentially, instead of paying rent,
the oil company as the lessor actually
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pays you a royalty or a percentage of the
oil and gas that they produce. Most of
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these ideas are pretty familiar, but the
terms themselves may not be. Every oil and
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gas lease has a term. That term is in a
number of years. It could be anything from
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a number of days or months to a number of
years. So long as the lease is in place,
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meaning it's within the term of the lease,
the oil and gas company has the right to
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come out and remove oil and gas from your
property typically by drilling wells.
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The other important term that most people
are familiar with is bonus. So
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bonus is just what it sounds like they
have with professional football players,
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you sign a contract, and you are paid a
bonus for signing that contract. So in
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this setting, when an oil and gas company
approaches you about signing a lease, they
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will typically offer a bonus for you to
sign a lease with them that allows them to
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extract oil and gas and other minerals.
This is on top of the royalty or
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percentage that they will pay you after
those oil and gas and other minerals are
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removed and sold. So, important idea to
keep in mind and the reason it's probably
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always best to contact an attorney before
considering or certainly signing an oil
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and gas lease is that there are numerous
provisions dealing with how your oil and
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gas is extracted, and how long the oil and
gas company can keep your property held or
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under the lease. There are a variety of
ways that oil and gas company can hold
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your property, and keep you from leasing
it to another oil and gas company, but
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typically it's done by drilling some well.
So long as there is a well on your
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property, there is at least an argument
unless you have drafted the lease
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appropriately or properly that they are
holding all of your property with just
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that one well. So anyone who say faced
with this situation or been approached by
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an oil and gas company about leasing their
property needs to discuss these issues
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with an attorney. Again, other issues that
come into play had to do with pooling. And
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pooling is just another way of saying, I'm
going to add your property to a property
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of one of your adjacent or neighbors,
adjacent landowners and neighbors, and
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we're going to make a larger pool of land
under which we're going
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to drill some wells.
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A typical oil and gas lease, there is
some provision for pooling, but this must
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be agreed to and all of these terms are
negotiable. How much of your property has
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to be in a pool? How much of your property
can be in a pool? These are items that you
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should negotiate with the oil and gas
company. Each oil and gas lease also
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includes provisions related to how long
and under what circumstances the lease
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will end. Normally, a lease ends when the
oil and gas goes away, when there's no
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longer production. However, there are also
provisions that deal with limiting how
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much of the property can be held by one
well so either by acreage or another way
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of dealing with that is with a vertical
severance clauses. And what that means is
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we only hold or the oil and gas company
can only hold the property down to the
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level where they drilled. They can't hold
below that so as most of you are familiar,
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there are different levels of oil and gas
in Texas in different place or shales or
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sands in which the oil and gas is found.
The oil and gas company, if properly
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negotiated, cannot hold more than the area
that they're actually producing. And
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obviously, as landowner, that would be the
provision that you would be looking for.
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Other items have to do with surface land
in use, and we will discuss those in a
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separate video. But typically, there are
provisions in each oil and gas lease that
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deal with how the oil company has to treat
the surface of your property while they
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have your property under lease. Similarly,
items dealing with roadways, fences,
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gates, things of that nature are all
handled typically in this oil and gas
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lease. This oil and gas lease is a legal
document. If it's not in the oil and gas
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lease, what I can tell you is you
absolutely do not have
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a legal right to enforce it.
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Whatever you may be told by the
land man or the oil and gas company
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representative that approaches you, if it
doesn't end up in the final lease, it's
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not a legal right that I can enforce as an
attorney. So, again, best bet is don't do
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it on your own. What you should do? Have
your lease examined by the attorney of
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your choosing. Go through what the options
are. That doesn't mean you're always going
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to get everything you asked for, but you
should know what the different terms
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available are so that you can negotiate
the best deal for you.
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Good luck to you and thanks for your time.
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