Common Mistakes to Avoid Negotiating Mineral Leases

Common Mistakes to Avoid Negotiating Mineral Leases

With hundreds of oil and gas wells dotting the landscape, mineral leases are commonplace in the state of Texas. A mineral lease is a legally binding document that sets the terms of an arrangement between the mineral owner and an individual/business (the leaseholder), granting the latter the right to extract minerals. (The mineral owner may or may not own the parcel of land under which the minerals lie.  For the purposes of this article, we will assume that the mineral owner owns the land as well.) Ensuring a fair mineral lease for both parties takes knowing – and avoiding – a few common mistakes.

Not Reading the Oil and Gas Lease Form

Don’t assume an oil company has a “standard” oil and gas lease form. No such form exists. Each lease is a unique agreement that requires each party’s full attention before signing. Each mineral lease will have unique clauses and characteristics, so read carefully or hire a lawyer to review the lease for you. Signing on the dotted line without reading and fully understanding the terms of the lease could be a crucial mistake – resulting in the landowner forfeiting too many rights.

Forgetting That Everything Is Negotiable

Don’t let an oil or gas company intimidate you or pressure you into signing away your rights without practicing patience. Everything on a mineral lease is negotiable, and you’re in the power seat. You have something the company wants. Use your position of power to your advantage, taking your time to negotiate all its terms and conditions before signing. Remember, mineral proposal packages are legally binding documents. Once you agree to the deal, it can be difficult or impossible to revoke your agreement.

Saying No Before Talking to an Attorney

Most landowners who receive mineral leases are excited about the economic prospects. Some owners, however, might not care about the potential profits. If you’re one of these property owners, don’t respond that you aren’t interested just yet. First, find out if others in your area have also received the lease. If so, the oil company might utilize the Texas state law to “force pool” you into participation. In these cases, it’s in your best interests to negotiate your own lease.

Agreeing to One Lease for Separate Tracts of Land

If you own more than one piece of land in Texas, insist on receiving a separate mineral lease for each tract. Do not let a company convince you into lumping them all into one lease. Separate leases might seem like more work, but it can help you avoid significant problems down the road. Mineral mining is a dynamic process that requires unique oil and gas leases for each tract to safeguard your rights.

For legal assistance negotiating your mineral lease, contact the Texas oil and gas attorneys at Bennett, Weston, LaJone & Turner, P.C.

2018-06-25T12:40:12+00:00 June 26th, 2018|Business Formation, Business Law, Business Planning|

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